image: Chanel

image: Chanel

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 Part IV of this series (find Part I and Part II here) …

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. 

5. Don’t respond to rising demand. 

The prime objective of traditional marketing is volume growth. It sets its sights at achieving leadership in market share to gain muscle with mass distributors, department stores and superstores, and presents itself as a force to be reckoned with in some of its lines. This ensures wide distribution and broad visibility and provides the justification for a national television advertising campaign.

With sufficient volume, the business can work with small margins and still make money. This is the essence of the mass marketing model. Product managers are then judged on just one criterion – growth in annual results. At Ferrero (Kinder, Nutella, Tic Tac) it is not allowed to fall below double figures. The job of each product manager is to increase the penetration be it of Kinder Surprise, be it of Kinder Bueno, and then to push up per capita volume (consumption frequency). If the demand goes up, there have to be supplies to match it – that’s the key to this economic model.

Not to satisfy rising demand is to annoy the distributor because unhappy customers will not wait and will always hold it against the company. They will take their revenge by gossiping over dinner about their bad experience with the brand. What an absolute scandal having to wait! Sheer mismanagement!

At Ferrari, production is deliberately kept to fewer than 6,000 vehicles a year – rarity value sells. So long, that is, as the customer understands why the product is rare and is prepared to wait. Rarity can be managed just like the relationship with the clientele; so it is not a matter here of poor sales forecasting but of a deliberate strategy of resisting demand in order to be master of it.

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. 

Look at Tag Heuer’s advertising. One side features the endorsing celebrity, the other the model of watch. No commentary, no description of the watch, no sales pitch – just the cryptic line: ‘What are you made of?’

Nothing is more alien to traditional marketing than this declaration; in traditional marketing the first step is to discover a sales proposal, to have a unique selling proposition – the text is there to make the sales pitch. In luxury, the dream comes first. The explanations of the salesmen are simply post-rationalizations. If you go to a Tag Heuer shop you are handed a thick brochure the size of a book, which says everything there is to say about the Tag Heuer brand, its origins, its finely tuned processes, respectful of a unique design, etc. Then it goes on to describe the various models, one by one…

If you go to a Porsche dealer they will talk to you about racetracks, about road-holding, about everything that feeds the myth of the hero, after which they will tell you about reliability, etc – by way of post-rationalization. American society being what it is essentially compels people to justify spending dollars by adducing qualities that can be presented publicly by the owner of a luxury item, even if it is the dream that is the major selling point. The purchaser of an impressionist masterpiece could say that it’s a good investment.

The dream must always be recreated and sustained, for reality kills the dream. Every time a flesh-and-blood human being buys a luxury product they destroy a little bit of the equity, they increase the product’s visibility – and contribute to its vulgarization by putting it in the public eye. The opposite applies when marketing everyday goods: there is an advantage for the market leader, for the dominant market share, and therefore for maximum visibility – it becomes a reassuring purchase.

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. 

13. Raise your prices as time goes on, in order to increase demand. 

In the standard market model, when the price falls, demand rises. With luxury, the relationship is reversed. To live in luxury you have to be above others, not be ‘reasonable’, in both senses of the word. A reasonable price is a price that appeals to reason, and therefore to comparison. Now, recalling our anti-law no. 1, luxury is ‘superlative’, not ‘comparative’. To be reasonable is also to reduce the object to its tangible dimension and to deny the intangible.

By increasing prices you lose the bad customers, but now you suddenly become dazzlingly attractive to people who would previously not have given you a second glance.

The final point of this policy of systematically raising prices is that it gives the whole company a sense of responsibility. Price is a decisive factor in bringing about a change in mentality; indeed, we see quite profound internal changes in mentality, as every person in the company in their own way is constantly trying to find new ways of creating more value for the customer. It’s all a matter of living up to the price.

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. 

18.  Do not relocate your factories.

Reducing cost prices is vital in the mass consumer markets, and this often means relocating factories. Luxury management does not apply this strategy. When someone buys a luxury item, they are buying a product steeped in a culture or in a country. Having local roots increases the perceived value of the luxury item.

BMW, which is successfully pursuing a luxury strategy, builds all of its automobiles in Germany – apart from the entry line: the 3 Series – and is keeping production of the Mini in the United Kingdom. Keeping production of its models and engines in Germany is at the heart of its brand identity: every BMW is an authentic product of German culture – apart from which, producing them in Germany is perfectly viable, there being no difficulty in passing any such additional costs on to the client.

In addition, BMW has a factory in the USA for its current models (3 Series), and also produces some of the 3 Series models in Thailand and elsewhere; these relocated models are no longer true luxury products, but they do serve as access products – products designed to initiate customers into the brand – like the small leather goods at Louis Vuitton: as soon as they can, every purchaser of one of these locally produced 3 Series will want to buy a ‘real’ BMW ‘made in Germany’.

Not relocating factories is as much a question of creativity as of production. When you no longer have a manufacturing workshop near you, creativity takes a nose-dive, because you lose the contact with the raw material and the way of working to be able to sublimate it into a luxury product. Once prêt-à-porter’s production facilities were moved abroad, French haute couture gradually went into decline; but, on the other hand, locating manufacture in China is going to lead to the emergence of haute couture in that country, especially as China has a history of luxury clothing – for the emperor’s court – going back several thousand years, and of producing very high-quality fabrics, silk in particular.

19.  Do not hire consultants. 

20.  Do not test.

21. Do not look for consensus. 

Testing implies looking for consensus: any option could be chosen as long as it is elected by the majority of common consumers. In fact, intimacy with luxury decision makers teaches us that big success as a rule creates a lot of discussion within the company itself. This can be held as a working principle of luxury brand management.

The key questions are: How to lead? Are consensual decisions the sign that it will be a lasting success or a temporary fad? Interestingly, in the perfume business – which is dominated by mass strategies – the most successful fragrance launch of the past 20 years, Angel, was chosen despite poor test results. Its success was driven by a minority of respondents that rallied around the product’s new and completely original scent. Religions start the same way: they succeed in creating a sect of militants and advocates.

22. Do not look after group synergies. 

23. Do not look for cost reduction. 

24. Do not sell openly on the Internet.