The Luxury Strategy: Break the Rules of Marketing to Build Luxury Brands by Jean-Noël Kapferer and Vincent Bastien

Summary

  1. Luxury is about elevation, social stratification, the object must be handmade, the service rendered by a human, hedonistic more than utilitarian, timeless, have both a social and personal component, elicit dreams but not envy, be superlative and not comparative.

Key Takeaways

  1. Luxury items share a common core made of six criteria:
    1. A very qualitative hedonistic experience or product made to last
    2. Offered at a price that far exceeds what their mere functional value would command
    3. Tied to a heritage, unique know-how and culture attached to the brand
    4. Available in purposefully restricted and controlled distribution
    5. Offered with personalized accompanying services
    6. Representing a social marker, making the owner or beneficiary feel special, with a sense of privilege.
  2. A luxury product is rooted in a culture. In buying a Chinese luxury product (silk, let’s say), you are buying not just a piece of material but a little bit of China as well – a luxury product comes along with a small fragment of its native soil. This does of course mean that a luxury brand has to stay absolutely true to its roots and be produced in a place that holds some legitimacy for it: by remaining faithful to its origins, the luxury product offers an anchor point in a world of cultural drift, trivialization and deracination. A luxury brand should not yield to the temptation of relocation, which effectively means dislocation: a relocated product is a soulless product (it has lost its identity), even if it is not actually anonymous (it still bears a brand name); it no longer has any business in the world of luxury. We shall be returning to this later and in greater detail, but we need to understand one thing right away: a product whose production centre has been relocated loses its right to be called a luxury product.
  3. A luxury brand that cannot go global finishes up disappearing; it is better to have a small nucleus of clients in every country – because there is every chance that it will grow – than a large nucleus in just one country, which could disappear overnight. That’s the law of globalization.
  4. In addition to this key social function, luxury is an access to pleasure: it should have a very strong personal and hedonistic component, otherwise it is no longer a luxury but simple snobbery
  5. When it comes to luxury, hedonism takes precedence over functionality.
  6. Luxury has to be multisensory: it is not only the appearance of a Porsche that matters but also the sound of it, not only the scent of a perfume but also the beauty of the bottle it comes in. It is multisensory compression.
  7. It immediately follows from this analysis that if one wants a luxury product or service to be a lasting financial success (which is the point of this book) it absolutely must possess the following two aspects: a social aspect (luxury as a social statement in relation to other products or services – connecting luxury, brand status); a personal aspect (luxury as an individual pleasure – cocooning luxury, customer experience).
  8. a luxury item is both timeless and of the here and now. Put another way, a luxury item has to appear both perfectly modern to the society of the day and at the same time laden with history.
  9. Now we come back to what we said at the outset: price, and therefore money, is not a determinant of luxury. It is quite obvious that price on its own does not make something a luxury; an ordinary car will cost more than a luxury bag, and it is a common error to believe that to turn any product into a luxury product all it takes is to raise its price, which will soon bring about financial failure – a product that is more expensive can often turn into a product that is too expensive, one that nobody wants, rather than a luxury product that people long for. For anyone looking for financial success (which is the point of this book), things are even more clear-cut: within a given range, the most expensive products are never the most profitable, and a company that makes only very expensive products does not generally have any financial success (as in the case of Rolls-Royce, for example), or is likely to find it outside of its core production (designer jewellery and haute couture, for example). Too narrow a client base would entail crippling costs; Volkswagen has publicly admitted that each Bugatti Veyron costs the company over €4 million to produce, whereas it is sold for (only!) €1 million.
  10. Money fuels the luxury engine but is not the engine; the engine is the recreation of vertical hierarchy or social stratification. Luxury converts the raw material that is money into a culturally sophisticated product that is social stratification.
  11. In placing ourselves in the territory of value, so dear to economists, we could say that luxury introduces a new notion of value that goes beyond the classic dialectic of use-value and exchange-value: symbolic value.
  12. the extent to which luxury and fashion differ from each other in two fundamental respects: relationship to time (durability versus ephemerality); and relationship to self (luxury is for oneself, fashion is not).
  13. The parallelism between religion, art and luxury is striking: all three are concerned with eternity, or at least timelessness. We call what survived through the ages art, religion promises eternal happiness after death and luxury is about timeless objects of extra quality and beauty. But the comparison extends to luxury brands behaviour per se: luxury brands start small, with few clients acting as a sect of believers. Later the brand wishes to enlarge this sect, building a real community of faithful. Structurally, like religions, most luxury brands have the following: They have a creator. They have a founding myth and legend. Storytelling will maintain mystery about them. There will be a holy land, or holy place where it all started. There will be a chest of symbols ( logos, numbers, signs, etc) whose signification is known only by those who have been initiated. Luxury brands will have icons (products endowed with a sacred history). Flagship stores for these brands will be seen as new urban cathedrals. There will be regular moments of communion (called ‘community management’). Sacrifices will be involved. The most important is price. One should recall the Latin etymology of sacrifice (‘making sacred’). It is the ability to sacrifice a high sum that seals the sacred dimension of the object. A nice jewel is only nice: once you pay a lot for it, far beyond what reason or function commands, only then does it become fascinating. The sacrifice is the right to wear the object, as one has to pay a fee to enter a club. We are also close to the initiation rituals involving a physical sacrifice or at least deprivation, as described by anthropologist Mauss (1950).
  14. He reminds us also that it is only by spending on non-productive items that people signal their rank. Here lies the difference between luxury and premium. People buying premium or even super-premium cars like to justify every dollar by a return on investment. Premium means pay more, get more in functional benefits. Luxury is elsewhere: it signals the capacity of the buyer to transcend needs, functions, or objective benefits.
  15. Luxury is superlative, never comparative. Comparisons must be avoided at all costs. Upper-premium brands remain comparative, whereas luxury is superlative. The price of any upper-premium car must be justifiable by its utility curve.
  16. Two observations need to be made at this point. First, the history need not necessarily be a long one: new genuine luxury brands will be born tomorrow. Second, history alone is not enough: it is necessary to create a myth, a legendary discourse that gives birth to the dream. This is what distinguishes luxury from the brand, even from the upper-premium brand.
  17. In this chapter we shall be putting forward 24 management principles, which we call anti-laws of marketing peculiar to luxury, as they are at the opposite extreme of what marketing doctrine normally preaches – and rightly so – concerning products and brands, even premium ones.
    1. Forget about ‘positioning’, luxury is not comparative
    2. When it comes to luxury, being unique is what counts, not any comparison with a competitor. Luxury is the expression of a taste, of a creative identity, of the intrinsic passion of a creator; luxury makes the bald statement ‘this is what I am’, not ‘that depends’ – which is what positioning implies.
    3. Does your product have enough flaws? Their ‘flaw’ is a source of emotion. In the world of luxury, the models and the products must have character or personality.
    4. Do not pander to your customers’ wishes
    5. There are two ways to go bankrupt: not listening to the client, but also listening to the client too much.
    6. Keep non-enthusiasts out
    7. When it comes to luxury, trying to make a brand more relevant is to dilute its value, because not only does the brand lose some of its unique features, but also its wider availability erodes the dream potential among the elite, among leaders of opinion.
    8. Do not respond to rising demand
    9. ‘When a product sells too much we stop producing it,’ says Hermès CEO.
    10. a luxury brand must have far more people who know it and dream of it than people who buy it.
    11. Dominate the client
    12. The luxury brand should be ready to play this role of adviser, educator and sociological guide. On this account it simply has to dominate.
    13. Make it difficult for clients to buy
    14. People do eventually get to enjoy the luxury after passing through a series of obstacles – financial obstacles, needless to say, but more particularly cultural (they have to know how to appreciate the product, wear it, consume it), logistical (find the shops) and time obstacles (wait two years for a Ferrari or a Mikimoto pearl necklace).
    15. To create this obstacle to immediate consumption, it should always be necessary to wait for a luxury product – time is a key dimension of luxury,
    16. Protect clients from non-clients, the big from the small
    17. In practice that means that the brand must be segregationist and forget all society’s democratic principles. In stores, for example, it is necessary subtly to introduce a measure of social segregation: ground floor for some, first floor for others.
    18. The role of advertising is not to sell
    19. Advertising feeds on a sustained myth, mystery, magic, racing, highly people-centred but private shows, product placement, and art – as we saw above, an extremely important element for any luxury brand.
    20. Communicate to those you are not targeting
    21. Luxury has two value facets – luxury for oneself and luxury for others. To sustain the latter facet it is essential that there should be many more people who are familiar with the brand than those who could possibly afford to buy it for themselves.
    22. The presumed price should always seem higher than the actual price
    23. Luxury sets the price, price does not set luxury
  18. Raise your prices as time goes on in order to increase demand
  19. Keep raising the average price of the product range
  20. Do not sell
  21. You tell customers the story of the product, the facts, but you do not pressure them into making a purchase there and then.
  22. Keep stars out of your advertising. If celebrities are used to promote the luxury product, the status of the latter is reduced to that of a mere accessory.
  23. However, it is legitimate for a luxury brand to test new products with a selection of existing good customers of the brand, and especially on the shop floor, where a real face-to-face discussion is possible. Not only is the opinion of these brand-lovers good to collect, as they share the dream of the brand, but also it helps them to feel more ‘part of the club’, enhancing their brand loyalty.
  24. Do not look for consensus
  25. Do not look after group synergies
  26. Do not look for cost reduction
  27. Just sell marginally on the internet
  28. This marker conserves in its genes this first function: maintaining rank, and the visibility of rank. This is why it must be highly visible: like a social seal.
  29. The five types of rarity
    1. Ingredients, components limited capacity, eg: diamonds, rings, rare human expertise, fur
    2. Techno-rarity, innovations, new products and features
    3. Limited editions, custom-made orders, one-to-one relationships
    4. Distribution-based rarity Good
    5. 5. Information-based rarity, marketing, brand, secrecy  (best)
  30. It is noticeable that the brands themselves diminish the size and visibility of their logos for their products in the more expensive price ranges. It is obvious for the accessories
  31. The internet is a fabulous place to sell fashion or premium products, but a very dangerous one to sell luxury ones.
  32. Today you can reach the masses, but you have to do it through communities.
  33. In order for a luxury product to succeed, it is important to master three concepts: the separation of the dream aspect from the functional aspect, the holistic understanding of the competitive universe, and management of the time relationship.
  34. The conclusion is that initially it is necessary to expend all your energies and resources on fine-tuning the product and conquering a first core group of clients who will be the brand’s advocates. Once critical mass has been attained, it is then better to stabilize the offer and no longer invest heavily in the product, but reorientate your financial investments towards distribution and communication.
  35. The luxury product is not a perfect product, but a sacred product
  36. Extraordinary customer care needs extending to boundaries beyond the company’s natural expertise, to an individual and customized approach, and finally surprise and delight.
  37. More than empathy, anticipation of desires is also required.
  38. the true role of the salesperson is not to sell the product – it is to sell the price.
  39. The sales personnel should never earn direct sales commission
  40. The second challenge linked to globalization can be summarized by the statement: one brand, one world.
  41. An own brand store makes it possible, in particular, to know exactly and in real time which products are selling, leading to a very precise steering of the logistical chain. On this point, the system is very effective: we calculated at the time that a competitor, not having integrated its production and not selling through its own network, would have had to sell a bag at twice the price that Louis Vuitton sold it in order to make ends meet. In fact, the exceptional (sometimes criticized) margins at Louis Vuitton did not arise from excessively high prices, but from the removal of all costs and damages due to intermediaries. Louis Vuitton’s competitiveness was therefore structural.
  42. You need to sponsor an event – since you can then control all its parameters – but not a competitor (Louis Vuitton sponsors the LV Cup, not a boat; Hermès sponsors the Grand Prix de Diane, not a horse). You must choose an event that is coherent with the universe of the brand’s core, its roots (Hermès and horses; Louis Vuitton and travel, therefore boats), and concentrate on the most prestigious events.
  43. One last point: the luxury brand should not disperse itself across multiple events in multiple sectors but concentrate fully on a single universe, in which you can develop a very strong image by devoting all your available means to it. For instance, Royal Salute has chosen Polo only.
  44. Premium and luxury differ in their use of these strategies: premium uses an ambassador, luxury shows testimonial users.
  45. The black and white ball organized by Truman Capote on 28 November 1966 at the Plaza Hotel in New York remains a model of the genre. The dress code was dinner jackets and long dresses, with a mask: even the journalists and bodyguards had to wear masks. Truman Capote invited 540 friends, only the rich, powerful or famous. But he made 15,000 enemies that evening: in fact, he organized a leak of information and the New York Times published the list of invitees. All those who had not been invited therefore knew that they were not members of the club, and would do anything to be invited next time.
  46. There are nine systematic and necessary elements of the signature of a luxury brand:
    1. The figure of the brand’s creator, the individual who made the brand a work and not a production.
    2. The typographical logos, generally short and very visual, such as Chanel’s double
    3. A visual symbol that accompanies the typographical signature: Aston Martin’s wings, Mercedes’ circle.
    4. A brand colour: Tiffany’s blue, Veuve Clicquot’s orange.
    5. A favourite material, such as silk for Hermès or python skin and ostrich leather for Prada.
    6. The cult of detail, to the point of obsession, which is expressed visually, for example through close-ups on the seams and the lock details at Louis Vuitton. The constant hymns to the manual work, to the excellence of the artisans who have contributed to each object, to the know-how.
    7. A way of doing things that is typical of the brand: whether it is the ‘Chanel style’ so visible in the woman’s suit – an icon of the brand – or the quilting of the Chanel bag, or the typical driving experience at the wheel of a BMW.
    8. The creator–manager tandem is a characteristic of luxury. In contrast, Pierre Cardin’s solitude was the cause for his decline, despite his immense talent.
    9. There are few real synergies within a group. In fact, groups that work well, such as LVMH, are associations of companies each with its own brand, teams, CEO, and considerable freedom of management, with just a small central holding activity, limited to the management of only part of the finances and human resources, and not rigid, heavy structures managing subsidiaries dependent on an all-powerful headquarters.
  47. This is a major characteristic of this business model: you need entry products, that is, ‘budget’ products, but you need as few of these as possible, since they are not there to ‘meet a quota’ or ‘make money’.
  48. You need to begin local and specific (one place, one product) in order to ensure coherence and the personal link to the clients from the start, and then become regional, and finally national. We have seen that the luxury product always carries the marks of its birthplace, which forms part of the client dream. Wine is French, silk is Chinese, caviar is Russian, Rolls-Royce is British.
  49. This step is crucial, and requires skilful steering. In particular, you should not launch ‘in all directions’, nor choose markets according to their size. You must begin with those whose clients are most receptive to the brand, and who will accept the product as it stands, without modifications, as a luxury product.
  50. Scarcity is painful, but rarity, if well managed, can become a dream.
  51. The essence of luxury strategy is to never sacrifice long term to short term.

What I got out of it

  1. A really thorough book on the ins and outs of luxury. Luxury is superlative, not comparative. It has to have personal and social ramifications