#62 The Luxury Business: Part III
Rules of luxury brands: marketing, brand, organisational and digitial strategy
As we journey further into the luxury industry, we transition from the tangible assets to the more ethereal ones - the narratives, the allure, and the digital footprints that define luxury brands in our contemporary era. The strategy behind a luxury brand isn't merely about crafting the perfect product or setting the ideal price point; it's about curating an experience, creating a legend, and cultivating an insatiable desire.
In this installment, we'll unpack the strategic decisions behind luxury branding, marketing in a world where less is often more, explore the unique organizational structures that power these giants, and finally, confront the digital conundrum: How does luxury, an entity so rooted in exclusivity, navigate the democratizing force of the digital channel?
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For those who might have missed the first post of the luxury rules, I invite you to journey back in our exploration of product, price, and distribution within the luxury landscape. Before diving into the intricacies of branding and marketing strategies, it's important to understand the foundational pillars that define the industry.
The Luxury business: Part II Rules of luxury brands: the product, price and distribution strategy
If you are already done, let’s continue!
Part 4: Marketing and Brand Image
Marketing in the luxury sector is a nuanced craft that follows its own set of unwritten rules, often contrary to general practices in other industries. Whereas conventional businesses use advertising as a direct channel for sales and aim to be as inclusive as possible, luxury brands play by a different set of guidelines. They don't just market a product; they should carefully curate an experience and an image.
Rule 15: Advertising is for Storytelling, Not Selling
In luxury, advertising serves as a tool for brand building rather than a mechanism for direct sales. The primary objective is to communicate the brand's essence, narrative, and unique attributes.
Tiffany & Co. rarely, if ever, includes price tags in its print ads or commercials. The focus is on the brand's storied history and the emotional value of its jewelry, not on promoting a sale.
The essence here is that luxury brands use advertising to build a universe around them, one filled with stories, emotions, and an unspoken promise of exceptional quality and exclusivity. It’s a whisper of an invitation into a world of timeless elegance, not a shout of a sale price or a bargain deal. The allure is in the narrative, the elegance, and the distinctive essence of the brand, not in a push to make a quick sale.
Rule 16: Keep Non-Enthusiasts Out
Luxury brands target a select, discerning audience. Their communication aims to deepen the relationship with the true enthusiasts and isn't designed to appeal to a mass market.
Goyard is less known than other luxury luggage brands like Louis Vuitton, and that's by design. With almost no advertising, the brand keeps a low profile, appealing only to those 'in the know.'
Rule 17: Take Command Over the Client
Dominance in this context doesn't refer to overpowering the customer but rather to guiding them through the brand's universe. It's about educating the customer on the brand’s unique codes and language.
Rolex's showrooms and advertisements often include detailed backstories of their watches, aiming to educate customers about their craftsmanship and engineering.
Rule 18: Shield Core Clients from Outsiders
The exclusivity of a luxury brand is maintained not only by the product but also by the clientele. The brand ensures that the "true" clients feel set apart from casual shoppers.
The purchase of a Rolls-Royce is not just about obtaining a vehicle; it's about becoming a part of an exclusive club. Clients are often invited to the company’s home in Goodwood, England, for a personal tour. Here, they can witness firsthand the meticulous craftsmanship that goes into each vehicle and even tailor specific details of their car. This experience isn’t about the car alone—it’s about the exclusivity, the personal touch, and the intimate engagement that regular car buyers might never experience.
Rule 19: Do Not Communicate Only to the Target Audience
Interestingly, luxury brands often communicate messages that are heard by those who will never buy the product. This adds to the product’s mystique and allure for those who can actually afford it.
Bugatti produces content around its million-dollar supercars that is consumed by a wide audience, most of whom will never own a Bugatti. This larger audience adds to the allure for the select few who can.
Now, one might ponder, doesn’t this widespread communication contradict the idea of shielding core clients from outsiders or keeping non-enthusiasts at bay? In essence, it seems a paradox, but in practice, it serves as a complement.
Speaking beyond your buyer does not dilute exclusivity; rather, it elevates it. The voices of admiration from the many intensify the sense of exclusivity for the few. It’s like a masterpiece in a museum, the gazes of the crowd only intensify the prestige of the piece for the collector who owns it.
It’s a balancing act between maintaining an air of secrecy and exclusivity while still allowing the allure of the brand to radiate far and wide. It’s not about opening the gates to the inner sanctum but about letting the whispers of its grandeur escape, fueling the desires of both the initiates and the uninitiated.
Rule 20: Keep Stars Out of Advertising
While celebrities can bring immediate attention, they often overshadow the brand. True luxury stands apart, creating its own orbit of aspiration and desire. When a brand aligns too closely with a star, it risks diluting its intrinsic value and appeal. Luxury brands are coveted, not just by the everyday consumer but also by the elite and the famous. By leaning on a celebrity's status to promote itself, a brand unintentionally conveys a need for external validation, signaling that it might lack inherent worth.
The essence of luxury is to rise above, to be an entity so grand and timeless that it transcends mere mortal affiliations. When a luxury brand becomes tethered to a celebrity, it repositions itself as a mere prop in the celebrity's life, rather than the other way around.
Consider the timeless elegance of Patek Philippe's advertising: "You never actually own a Patek Philippe. You merely look after it for the next generation." The ad beautifully captures the emotion between a parent and child, epitomizing the watch's transcendent value and legacy.
Comparatively, Burberry's decision to use Emma Watson as their face might seem misplaced to some. While Watson has her own merits and fanbase, linking a luxury brand too closely with a particular celebrity might alienate potential consumers who may not resonate with that star's image. In this case, if someone views Emma Watson unfavorably, Burberry risks being seen through that same lens, potentially losing customers due to a subjective association. True luxury doesn’t need the spotlight of a star; it shines brilliantly on its own.
While maintaining the essence of luxury brands often means keeping celebrities out of direct advertising to prevent overshadowing the brand’s unique allure, establishing thoughtfully chosen ambassadors can harmoniously enhance a brand's narrative and appeal. The key is to form authentic alignments with individuals whose values and aura resonate with the brand, serving as living embodiments of its ethos rather than mere promotional entities.
Rule 21: Foster Affinity with Arts
Engaging with the arts isn’t just a marketing tactic for luxury brands; it’s a strategic alignment that speaks volumes to those who truly understand and appreciate both the arts and the brand.
The Louis Vuitton Foundation, a separate entity but aligned closely with the brand, is a patron of the arts. The foundation's activities in the artistic sphere echo the brand's commitment to creativity and craftsmanship.
By adhering to these seemingly unconventional rules, luxury brands are able to maintain an aspirational image that sets them apart from other sectors. They don't just sell products; they sell dreams.
Part 5: Organizational Strategy
While the external image of a luxury brand is vital, the backbone of any brand's success lies in its organizational strategy. At first glance, some of the practices followed by luxury brands might appear counterintuitive or even financially imprudent. However, they are part of a carefully crafted strategy to maintain exclusivity, quality, and brand value.
Rule 22: Don’t Relocate Your Factories
The location of a brand's craftsmanship isn’t a mere logistical consideration; it's a chapter in the brand’s story, a seal of authenticity, and a testament to its commitment to heritage and quality.
A Ferrari, for instance, loses a bit of its soul if it’s not assembled in Maranello; it’s the Italian craftsmanship, the connection to its birthplace, that imbues it with unparalleled value. The allure of an Hermès bag is intertwined with the meticulous craftsmanship of French artisans.
Relocating factories seems like trading a brand’s soul for logistical convenience—it may yield short-term gains but risks eroding the brand’s essence and the timeless allure derived from its geographical roots. To wear, drive, or own a piece of luxury is to possess a fragment of its origin, to experience the culture and tradition that have shaped it.
Rule 23: Do Not Bring in External Consultants
Consultants, with their propensity to generalize and transfer best practices uniformly across sectors, often blur the distinct characteristics and strengths intrinsic to the luxury business model. They often purport to voice the collective demands of the new-age consumer, advocating for increased online presence and discounts. However, adhering strictly to consumer desires contradicts the fundamental rule of luxury—never completely satiate the customer’s wishes.
No consumer possesses the appropriate long-term vision to discern what will uphold the prestige and pricing power of a luxury brand. Portraying brands like Mauboussin as heralds of luxury evolution illustrates a fundamental misunderstanding—conflating luxury as a sector with luxury as a business model.
Rule 24: Do Not Get Swayed by Group Synergies
In luxury, group synergies can dilute the brand’s unique value proposition. Brands should resist the temptation to integrate too closely with a parent company or sister brands.
Ford’s acquisition of Jaguar led to attempts at implementing group synergies, which subsequently diluted Jaguar's brand value. The pursuit of cost-efficiency over brand integrity was a lesson in the misapplication of standard business principles in the luxury sector.
Rule 25: Sidestep the Temptation of Cost-Cutting
Cost-cutting measures, aimed at increasing profitability in the short term, can compromise the quality and exclusivity that are fundamental to luxury brands. The focus should always be on adding value, not reducing costs.
Louis Vuitton invests in high-quality materials and artisan craftsmanship, never compromising quality for cost. This approach is integral to its reputation as a luxury leader.
By adhering to these organizational strategies, luxury brands are not just maintaining a business; they are sustaining a dream, an aspiration. They sell not just products, but also a promise of timeless value and relentless quality.
Part 6: Navigating the Digital Age
The digital age has profoundly changed how brands interact with their audience. However, for luxury brands, this widespread access poses a unique set of challenges. While the internet offers unparalleled reach and the potential for e-commerce, luxury brands tread carefully in the digital world, as their core tenets of exclusivity and personalized service may be at risk.
Rule 26: The Digital Paradox
The internet is all about accessibility, immediacy, and wide reach—all antithetical to the tenets of luxury. It might seem like a missed opportunity not to fully embrace the power of online sales, but luxury brands have their reasons to hold back. By selling only marginally on the internet, they preserve the essence of the brand and ensure that the shopping experience aligns with their values of exclusivity and personal service.
Rolex watches are pieces of craftsmanship that are often passed down through generations. While there are authorized online dealers, the brand itself puts a clear emphasis on customers visiting physical stores to experience the product and receive personalized service. This helps Rolex maintain its aura of exclusivity and luxury.
Luxury brands walk a tightrope in the digital age, balancing the benefits of global reach with the need to maintain their unique brand essence.
When we take a step back and assess the landscape, it's evident that very few companies rigorously adhere to all these principles of luxury. Being a publicly-traded company further complicates this, as the constant pressure from shareholders to continually grow often goes against the grain of luxury’s innate exclusivity and selectiveness.
Furthermore, many brands we often label as "luxury" present a mixed bag. While they may offer certain products or lines that exude genuine luxury, a significant portion of their offerings might not meet the stringent criteria. A case in point is Ferrari. While the brand is synonymous with luxury cars, it also ventures into merchandising, which dilutes its exclusivity to some extent. Similarly, Hermès, while renowned for its Birkin bags that can often require long waitlists, also offers more accessible products.
This brings us to a defining question: When you think of luxury brands, how many truly live up to these standards? And a litmus test for you: If there's a specific luxury brand product you have your eye on, ask yourself, can you simply walk into the store and purchase it off the shelf? If the answer is 'yes,' then what you're eyeing might not be genuine luxury. Authentic luxury is not always about accessibility, but often about the journey, the wait, and the exclusivity that makes the acquisition all the more special.
To delve deeper into this fascinating world, in our upcoming article, we will explore the distinction within the luxury industry itself. It's crucial to understand that there are two vastly different business models at play within the luxury domain. While some companies place genuine luxury at the core of their ethos, others adopt a more blended approach. The nuances between these models, their strategic implications, and their influence on consumer perception will be our focus in the subsequent pieces.
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References & bibliography
Kapferer, J.N., Bastien, V. (2009). The Luxury Strategy: Break the rules of marketing to build luxury brands.
Pierre-Yves, D., Fujioka, R. (2017). Global Luxury: Organizational Change and Emerging Markets since the 1970s
Pierre-Yves, D. (2014). A Business History of the Swatch Group: The Rebirth of Swiss Watchmaking and the Globalization of the Luxury Industry
Rambourg, E. (2020). Future Luxe: What's Ahead for the Business of Luxury
Sky Documentaries. (2022). Kingdom of Dreams.
Luxury coverage on the luxury business, I will take it hehe ;), thank you, have a good weekend!
Thank you for these articles, it helps a lot to understand this interesting industry. And to detect red flags when a company is not sticking to guiding principles of true luxury.