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.
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.
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 is provided in preceding parts of this series (find Part I, Part II, and Part III here) …
1. Forget about positioning; luxury is not comparative.
2. Does your product have enough flaws to give it soul?
This is a provocative statement. For most people, luxury is the last word in hand-crafted or craftsman-built products. It is true that in surveys into the perception of luxury, consumers from all over the world were interviewed and the consensus was that ‘product excellence’ is the primary prerequisite of luxury. It would suffice to imagine a bisecting line between two axes – price and functional quality: at the very top right would be luxury. Now, in our view, nothing could be further from reality.
The aim of an upper-premium brand is to deliver a perfect product, to relentlessly pursue perfection. But it would take a touch of madness for it to be counted a luxury. Functionally, a Seiko watch is superior to many luxury watches – it is more accurate (because it’s a quartz watch) and shows the time directly and in a perfectly legible manner (because it is displayed on a digital face). If you were to buy some of the famous brands of a luxury watch, you would probably be warned that it loses two minutes every year. The flaw is not only known, it is assumed – one could say that that is both its charm and its guarantee of authenticity. It is the specific and singular nature of their movement that is responsible for that. For luxury watchmakers like adding complications, indeed seek them out in their endless quest of art for art’s sake. This is the ‘madness’ touch that goes beyond perfection and makes people collect them.
Let us look at some of the watches that Hermès has to offer, where the time is indicated by just four figures: 12, 3, 6 and 9. So you have to guess the time – as if knowing the time accurately was somehow unimportant, even pleasure-killing and dehumanizing. They are certainly far removed from those state-of-the-art precision chronograph watches, for luxury brands are not interested in being the leader in utilitarian or functional comparisons – primarily they are hedonistic and symbolic.
In the world of luxury, the models and the products must have character or personality. In the world of automobiles, a Ferrari is anything but a perfect car if you like easy, smooth and silent driving; that is why people would do anything to own one. Every model forces its owner to accept its flaws.
Of course, if a luxury product is not a flawless product, the reverse is not true: adding flaws does not turn a regular product into to a luxury product…
3. Don’t pander to your customers’ wishes.
4. Keep non-enthusiasts out.
5. Don’t respond to rising demand.
6. Dominate the client.
Luxury is a consequence of meritocracy. Once the exclusive privilege of the aristocracy, luxury today is what restratifies our so-called classless societies, but on the basis of merit, no longer simply on birth. So everyone is looking for ways to pull themselves up – luxury brands are at the same time a reward and a token of gradual elevation. To preserve this status, the brand must always dominate its client. This is not the same as saying don’t respect them: parents dominate their children, but that does not mean that they don’t respect them; on the other hand, if they treat them as ‘best friends’, making themselves out to be their equals, they lose their aura and profoundly disturb their offspring. This relationship between parents and their children is very close to that between brand and client.
As a result, a certain distance is preserved that is not supercilious or aloof, but nevertheless maintains an aura of mystery.
Luxury is the domain of culture and taste. Even if many well-off buyers do not actually have the codes themselves, they deduce from the limitless consumption of a luxury brand the fact that it must be coded as a luxury. The luxury brand should be ready to play this role of advisor, educator and sociological guide. On this account it simply has to dominate.
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.
11. The presumed price should always seem higher than the actual price.
It is a telling fact that advertisements for luxury products often show only the product, without any descriptive copy, and certainly no prices. In the luxury world, price is something not to be mentioned. When you are dining in a top-class restaurant, do you select your dishes on the basis of price? Besides, in many such restaurants the guests’ menus do not show prices.
As a general rule, the imagined price should be higher than it really is. It’s the opposite in traditional marketing. Renault announced its Logan model as starting at $8500, but with the full set of options this would bring it up to $11,000. Every seller tries to attract consumers with a low price, a so-called introductory price, then tries to persuade the consumer to go up-range. EasyJet offers the prospect of round-trip tickets from London to Paris at around $45, but the number of seats available at that price are quickly sold.
In luxury, when an imagined price is higher than the actual price, that creates value and this result:
When someone is wearing a Cartier Pasha watch, everyone around them more or less knows its price, but tends to overestimate it (on account of its aura of luxury). This increases the wearer’s standing.
When offering someone a luxury gift, the gesture is all the more appreciated for the price being overestimated.
And lastly, when advertised, the price is that of the top of the range.
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.
15. Do not sell.
16. Keep stars out of your advertising.
17. Cultivate closeness to the arts for initiate.
In traditional marketing, the brand seeks to appeal and to create an affective relationship. For that it often uses music, music that is as popular as possible, or at least appreciated by its target audience. The brand follows people’s tastes. The luxury brand is a promoter of taste, like art. As we explored in earlier posts, it maintains close links with art. But luxury is not a follower: it is creative, it is bold. That is why it is best for luxury to remain close to the unpopular arts – or rather the non-popular arts – those that are emerging and have yet to appeal to the majority, if they ever will. Louis Vuitton has long been sponsoring concerts of contemporary music, for example bringing the pianist Maurizio Pollini to the Abbaye de Royaumont to perform music by the little-known composer Luigi Nono, rather than by a great such as Mozart or Chopin. Similarly, following the pioneering work done by Cartier, the Fondations d’Art Contemporain are now flourishing in all the great luxury groups. In this way they are making themselves patrons of emerging trends, where they are forming symbiotic relationships that serve their purposes – making luxury-brand objects that are themselves works of contemporary art.
That is why it is so important to develop this curiosity about the here and now among those working in the luxury business and to encourage them to visit art galleries, biennales, and exhibitions of modern art.
18. Do not relocate your factories.
19. Do not hire consultants.
20. Do not test.
21. Do not look for consensus.
22. Do not look after group synergies.
Implementing group synergies is one of the most obvious ways to improve the net financial result of a brand. But, as Ford discovered with Jaguar and GM with Saab, in luxury, it is the best way to destroy the dream of the brand. For some pennies saved, you lose your pricing power – one of the strongest points of a luxury strategy.
This is well known in the luxury market – as proven by the number of luxury brands that have been almost eliminated by group synergies implementation — where improving the net financial result is the ultimate goal.
Luxury brands face this threat each time one is acquired by an organization who does not understand luxury strategy. One example is Dell’s acquisition of Alienware in 2006. Founded in 1996 in Miami, Alienware was the success story of luxury gaming laptop and desktop computers. In 2005, Alienware had a net profit of $170 million. To improve on already strong profits, Dell decided to reduce production costs. This was counter to Alienware’s business strategy which had built its success on using the best elements among all suppliers – whatever the cost.
A strategy which earned the brand thousands of passionate and loyal customers. Discounts were never offered nor needed. Willing to implement ‘group synergies’, Dell cancelled all of the agreements with top-end suppliers, relocated production to Poland, created new distribution agreements and offered discounts on the corporate website. The result: Alienware remains a premium brand, but has lost its aura – and its pricing power. This is why luxury groups such as LVMH maintain the independence of their brands as much as they can.
23. Do not look for cost reduction.
Creating value is the motto in luxury marketing. But this value creation must not come from cost reduction. It must come from added value. Being creative is not enough to sustain a systematic price increase – which is the key issue in luxury. For example, brands need lots of creativity in a low-cost industry to reduce costs and invent new business models, sell at a significant lower price than competition, and be profitable – but this is the job of the CEO. Luxury brands need lots of creativity in the fashion industry to keep selling at the same price point – but this is the job of the designer. In luxury, you must install the whole 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:
Production people: lots of new ideas originate on the workshop floor. This is the reason why a luxury company must make its products and not relocate production – creation teams live in symbiosis with artisans.
Sales staff: new ideas come from customers – not by pandering to their wishes, but by understanding their dream. This is why you must have your own sales staff (they are fully part of the company) and why they must be local – the customer must be able to talk in his or her language with sales people sharing his or her culture.
And, of course, top managers must lead the value creation process.
24. Do not sell openly on the Internet.