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 will be provided in Parts III and IV of this series …
1. Forget about positioning; luxury is not comparative.
2. Does your product have enough flaws to give it soul?
3. Don’t pander to your customers’ wishes.
4. Keep non-enthusiasts out.
In traditional marketing there is this obsession with poaching clients from other brands: sales growth is management’s principal measure of success and of the performance of its managers. This leads companies to come up with new products that will help extend market penetration and thus steal a march on competitive brands. To increase the relevance of the brand – the number of people who would say that the brand was of interest to them – it is necessary to avoid being too exclusive or too different.
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. BMW is typical of a brand that is able to grow without cutting back on its rugged features, which are in any event highly exclusive. The Bavarian management has calculated that BMW’s target accounts for 20 percent of the premium segment of the population – only one person in five.
This means that 80 per cent are not at all attracted by BMW’s values. The brand has preferred to exclude these 80 percent and base its growth on its true target, those who wholeheartedly share its values. Brand growth is achieved by penetrating new countries, not new customer segments. In order to grow, the BMW Group preferred to buy two other brands which on their own, like BMW, define a segment – Mini and Rolls-Royce; having taken good care to keep Rolls-Royce’s identity separate from BMW’s.
5. Don’t respond to rising demand.
6. Dominate the client.
7. Make it difficult for clients to buy.
The luxury brand is something that has to be earned. The greater the inaccessibility – whether actual or virtual – the greater the desire. As everyone knows, with luxury there is a built-in time factor: it’s the time spent searching, waiting, longing…so far removed from traditional marketing logic, which does everything to facilitate quick access to the product through mass distribution, with its self-service stores, self-checkout systems, the internet, call centers and introductory offers. Luxury has to know how to set up the necessary obstacles to the straining of desire, and keep them in place. 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).
Luxury needs to excel in the practice of distributing rarity, so long as there are no real shortages. It’s quite natural: just as actual shortages stand in the way of growth, so the absence of rarity leads to the immediate dissipation of desire, and so to the disappearance of the very waiting time that sustains luxury.
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, as with all desire for anything even remotely sophisticated.
8. Protect clients from non-clients, the big from the small.
Modern luxury works on the open–close principle. Too much ‘open’ is harmful to the brand’s social function – Ralph Lauren’s success undermined one of the foundations of his success with professionals in Europe: sporting the polo shirt enabled them to be different from Crocodile, the other great casual wear premium brand, from whom Ralph Lauren got his inspiration when he was starting out in the United States. On the other hand, too much ‘closed’ is too confining and leads to financial suffocation.
In practice that meant that the brand became segregationist and forgot 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. Armani set up specialist stores for each of his product lines. Advertising and promotion is for all, but public relations are ultra-carefully targeted, like the CRM for the privileged (personal invitations to meet the designer, the brand perfume nose, or the head wine buyer).
In aviation, these days everything is done to ensure that clients of the new first class (Emirates offering pictured above) never have to meet other passengers, whether from business class or (heaven forbid!) from economy class, and this is not just on boarding, but right from leaving their office until their arrival in the office at their destination – just like being in a private jet. A truly superior private club depends on how successful staff are in preventing ‘other clients’ from imposing on their own clients.
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.
12. Luxury sets the price; price does not set luxury.
Money does not do a worthy job of categorizing objects or stratifying them unless they have been culturally coded. This ‘anti-law’ means that luxury is what could be called ‘supply-based marketing’. That is why traditional marketing is in a state of confusion here: it is fully ‘demand-based’. In luxury, you first come up with a product, then you see at what price you can sell it; the more it is perceived by the client to be a luxury, the higher the price should be. This is the opposite to what applies in the case of a classic product or trading up, where the marketer tries to find out at what price level there is room for a new product.
There is one key consequence for selling: sales staff in a store help people understand, share the mystery, the spirit of places and objects, and the time invested in each item – which explains the price. Customers will be free to buy later.
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.
This isn’t arrogance, not at all. The luxury strategy is the very opposite of the volume strategy.
If you pursue the strategy of systematically raising all your prices, you have to be prepared to lose sales and to lose customers. Most brands don’t dare risk it, or else go running after customers; when you get to that point you’re no longer talking luxury but mass consumption – which of course can be extremely profitable as everyone knows.
Krug – the famed champagne company – did lose some accounts, some importers, it is true. If not supported by the Rémy Cointreau management in the steps it took, Krug’s change in strategy would have been stopped as soon as the first big client walked away. In luxury, not trying too hard to sell is a fundamental principle in relations with customers. You tell the customer the story of the product, the facts, but you do not pressure them into making a purchase there and then.
We said a few words earlier about the campaign BMW had conducted on the internet in the US; a number of the most prominent film directors each made a short-length film around BMW, having been given completely free rein – not a commercial, but free expression. These films were made available on the internet and they very quickly did the rounds in the United States. Commenting on this decision, the marketing director at BMW USA said: ‘When it comes to luxury, the best way of reaching the very well-off is to let them come to you.’
16. Keep stars out of your advertising.
17. Cultivate closeness to the arts for initiate.
18. Do not relocate your factories.
19. Do not hire consultants.
Management Consultants sell ‘do like others’. This is called benchmarking or also ‘best practices’. Using management consultants, formed in global MBAs to the universals of management, in this way would erode the specific characteristics of a luxury brand – and its ability to maintain its pricing power to this specificity.Let’s take a dramatic example: any non-luxury automobile manufacturer should be obsessed by reducing costs. This is why industrial platforms strategies, sharing all back-office costs, are so widely spread. By the same token, relocations are nothing but normal for a mass brand and even a premium or super-premium one. When one buys an Audi every single dollar paid is to bring a return on investment: you pay for what you get (more functionalities, that is all).Now, the same rules should not apply to a brand considered as luxury, such as Jaguar.
Luxury pricing power is not based on cost reduction but on added value and feelings of uniqueness.
Certainly Hermès has to buy the crocodile skins at the best price it can. But, in any case, it will never buy anything but the best skins. A similar risk is taken when luxury companies hire advertising methods coming from Fast Moving Consumer Goods sectors. In FMCG / CPG, the marketing of demand is the rule. All the concepts, methods, skills and frameworks are based on the idea that one should be led by consumers’ wishes. How many advertising agencies’ recommendations to luxury companies start with a chapter called ‘Understanding your target’, a deep analysis of the motivations and declarations of the so-called target.
The natural consequence is to think of the luxury brand as a brand trying to please these consumers, answering their needs, proposing consumer benefits, having a brand positioning strategy.
20. Do not test.
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.