In the mid-1970's, a group of famed European luxury brands decided to tap into the resurging globalization of the post-World War I and World War II economy to grow significantly beyond the pool of their existing customers. In order to do so, they implemented a new marketing strategy, one that aimed to enable them to expand their consumer base but also allow them to remain firmly within the luxury sector.
The strategy that they adopted was a largely novel one, with Louis Vuitton leading the way. Then still largely viewed as a luxury trunk-maker (as opposed to an international luxury and fashion brand), Louis Vuitton was just beginning to attract a noteworthy amount of interest among consumers in the U.S. Developed, at least in part, by Vincent Bastien, and titled, “the luxury strategy,” (Bastien has since authored a book bearing this title), the goal of the strategy was to transform small family businesses into profitable global giants without the widespread dilution that often comes hand-in-hand with such large scale expansion.
The luxury strategy aims to do so by creating long-selling products, as opposed to best-selling products. Two examples set forth by Bastien: The Porsche 911, which debuted in 1964, and Chanel’s N°5 perfume, launched in 1921, both of which are still very much in demand today. This growth strategy also focuses heavily on one-to-one direct relationships with the clients and emphasizes the importance of directly operated, brand-owned stores.
Moreover, the luxury strategy model – which Bastien cites as an invention of brands that include Louis Vuitton, Chanel, Hermès, Tiffany & Co., BMW, Ferrari, and Ritz Carlton – intends to create the highest pricing power by leveraging all of a brand’s intangible elements (think: time, heritage, craftsmanship, handmade products, small series ranges, and prestigious clients, etc.). By mobilizing all of these intangible assets, a brand may be positioned as largely incomparable to any other, even its rivals. Or that is the goal, at least.
Originally developed for the broadly defined “luxury market” – which its originators view much more narrowly than the market currently does, with its various versions of “luxury,” such as affordable luxury or the synonymization of high fashion with luxury fashion – the luxury strategy has only mildly permeated into other sectors since its initial use in the 1970’s. Although, Bastien has long held that it is capable of extending beyond the most traditional luxury sector.
It differs from the “fashion strategy,” which, according to Bastien, comprises a totally different business model. In accordance with the fashion strategy – which sees its appeal and value dependent on season-specific offerings – heritage, time, are not important; fashion sells by being fashionable, which is a difficult-to-preserve value once said season has come to a close.
Still yet, the luxury strategy differs from the premium strategy, which can be summarized as “pay more, get more.” Within this category, the goal is to prove – through comparisons and benchmarking – that a brand/products presents the best value within its category. According to Bastien, this strategy is, at its core, comparative, relying on the tangible dimensions of value – those that can be objectively measured. On the other hand, in accordance with a luxury strategy, one will rely on intangible assets to bolster its brand and offerings.
The 24 anti-laws of marketing, which are labeled as such “to designate the counterintuitive managerial principles, empirically carved through time by the founders and owners of these brands, which made these brand command their incredible pricing power and margins,” are as follows. Select rules are accompanied by notes from Bastien, additional commentary on the specific rules will be provided in Parts II, III, and IV of this series …
1. Forget about positioning; luxury is not comparative.
In consumer marketing, at the heart of every brand strategy, you will find the concept of positioning, of the unique selling proposition and the unique and convincing competitive advantage. Every classic brand has to specify its positioning, and then convey it through its products, its services, its price, its distribution and its communication. Positioning is the difference that creates the preference for a given brand, over the one that it has decided to target as a source of new business and whose clients it is going to try to win over.
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; luxury makes the bold statement “this is what I am,” not “that depends”– which is what positioning implies. It is identity that gives a brand that particularly powerful feeling of uniqueness, timelessness, and the necessary authenticity that helps give an impression of permanence. Chanel has an identity, but not a positioning. Identity is not divisible, it is not negotiable– it simply is. Luxury is superlative, and not comparative. It prefers to be faithful to an identity rather than be always worrying about where it stands in relation to a competitor.
2. Does your product have enough flaws to give it soul?
3. Don’t pander to your customers’ wishes.
Luxury is a non-necessity made desirable on the basis of emotional values (surprise, beau- ty, elevation of self through hedonism and elitism): asking people what they want is by definition a contradiction in this respect. They will answer something that generally de- stroys the dream – that is to say the lever of pricing power ... When one asks consumers what luxury brands should do to please them, they generally do not understand the long-term interest of these brands, which is to preserve their attractivity based on prestige, creativity, surprise and high pricing power.
4. Keep non-enthusiasts out.
5. Don’t respond to rising demand.
6. Dominate the client.
7. Make it difficult for clients to buy.
8. Protect clients from non-clients, the big from the small.
9. The role of advertising is not to sell.
10. Communicate to those whom you are not targeting.
Luxury has two value facets – luxury for oneself and luxury for others. To sustain the latter facet, it’s essential that there should be many more people that are familiar with the brand than those who could possibly afford to buy it for themselves. In traditional marketing, the keyword is return on investment. In advertising for example, the media plan must concentrate on the target consumers and nothing but the target consumers– every person reached beyond the target is a waste of investment money. In luxury, if someone is looking at someone else and fails to recognize the brand, part of its value is lost. It is essential to spread brand awareness beyond the target group, but in a very positive way– brand awareness is not enough in luxury; it has to be prestigious.
11. The presumed price should always seem higher than the actual price.
12. Luxury sets the price; price does not set luxury.
13. Raise your prices as time goes on, in order to increase demand.
14. Keep raising the average price of the product range.
One of the key principles of the luxury strategy is to keep raising the average price of the brand. This does not mean having one or two alibi products, exceptionally high priced, and created just to launch the buzz: this is a classic PR game. Not a real luxury strategy … Systematically increasing price point is a real challenge, as it goes against all the legitimate habits of company management.
More: luxury customers are educated customers. They are ready to pay more... but for getting much more. So, just increasing price without adding significant value leads to disaster – as ‘luxury brands’ relying purely on Veblen effect have quickly discovered at their expense. You need lots of creativity in the fashion industry to keep on selling at the same price point – but it is the job of the designer. In luxury, you must install the whole the company in the creating value process: luxury value creation does not rely only on the talent of a creator, but on each employee of the company.
Louis Vuitton’s huge success in luxury leather goods is a good example of this management. New products are not introduced to replace an exiting one – they keep their standing – but to add value to the whole range. They are sold at a higher price, but this higher price is always explained and justified in the shop by the sales people. And never by saying “this new product is better or more fashionable than this old one”, but by saying “we have added this new product to our line to bring a new idea.” In fact, the increasing price point is not due to the price increase of existing products – which price stays the same – but to the introduction of new complementary lines.
15. Do not sell.
16. Keep stars out of your advertising.
Using celebrities to promote luxury products is extremely dangerous. A luxury brand is courted by the stars, in the same way as those stars are courted by journalists and paparazzi. As we mentioned earlier about a luxury brand’s typical relationship with its customers, it must respect them, but it also has to dominate them. Even the most famous ones. Calling on the services of a star is tantamount to saying that the brand needs some of this star’s status just to survive, and admitting that it has none of its own.
For the luxury brand, this is a gross error of strategy, for it turns the relationship on its head. Only brand domination, standing above everything like a god, is acceptable, not simply behaving like any ordinary mortal. If celebrities are used to promote the luxury product, the status of the latter is reduced to that of a mere accessory. Louis Vuitton advertising with Mikhail Gorbachev, former USSR President avoids this: First, the celebrity is not a fashion symbol but a man who changed the world; and second, his Louis Vuitton is not the hero, but only the witness of an exceptional moment (a strategic negotiation).
Celebrities are to be used with caution in the luxury strategy, if the brand wants to build its pricing power, distinction, style and sustained appeal. They are not used as selling agents, for new customers to buy the product through an imitation model (“I want to buy the bag because this celebrity has it”) – this is the fashion business model. They must be used, when used, as a testimonial (“this famous person is also using my bag, staying in the hotel I went last year”) for existing customers.
However, although brand ambassadors cannot be used fully in luxury, they can be used locally – as a nation have one ambassador in a specific country. The goal, especially when the brand is not well known in a specific country or if its dream seems too exotic, is to give a relevant incarnation to the dream.
17. Cultivate closeness to the arts for initiate.
18. Do not relocate your factories.
19. Do not hire consultants.
20. Do not test.
Luxury companies do not test among consumers. If you test, you are a mass prestige company. Coach does use a lot of tests, as any traditional marketing company: In fact, 80 percent of its new products are tested. Louis Vuitton, Chanel, or Hermès never test. Testing means that the decisions of the luxury brand are subject to the taste of the consumers. Fast moving consumer goods companies thrive by trying to solve a consumer problem: they need to ask what is the current problem and does the advertising show effectively how much the product solves the problem. Mass-prestige brands such as Chivas or SK2 do tests. It is normal: the goal of their advertising is to build sales, with fast returns.
Luxury is a taste educator. It builds the classics of tomorrow not the hits of today, soon forgotten. To do so, one cannot rely on today’s preferences. Luxury’s avant-garde status is reinforced by the fact that its messages are mysterious, not easily grasped. The same holds true for art: a mass-prestige brand would always check if the music it chooses is liked by the target. Luxury brands aim at pricing power based on the status of the brand itself as an emitter, shaping the taste of elites.
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.
You can even go further. By asking its customers, through the internet, their opinion on a new television campaign – more precisely, by asking them to vote between two campaigns – Nespresso made an excellent move both in its relationship with its customers and in the validation of the final decision.
21. Do not look for consensus.
22. Do not look after group synergies.
23. Do not look for cost reduction.
24. Do not sell openly on the Internet.
Selling on the Internet is strictly hype in luxury marketing. Many marketers seem to think that if you do not sell on the Internet, you are ‘out’. There, the distinction between luxury, fashion and premium strategy of prestige brands operating on the luxury market is crucial. Internet sales are extremely well adapted tofashion and premium, but not to luxury. Self-proclaimed ‘web specialists’ fault the luxury companies for not selling online, forgetting – or ignoring – that all the ‘plusses’ of digital trade (instantaneity, permanent change and actualization, availability, accessibility, price reductions, automation of service, crowdsourcing, etc.) are huge ‘minuses’ for luxury.
Luxury purchase needs time and effort to be deserved, true price and no discounts on excessive prices, one-to-one relationships with the salespeople and not with a machine, feeling of belonging to a ‘club’ of selected people and not being part of an anonymous crowd. The Internet can be used as a complementary service for existing customers, or as initiation to the brand story or to the product for potential and selected new customers. It cannot be used as a selling tool, except for products that are not part of the luxury strategy of the brand, such as fashion lines or entry products.