JN Kapferer - The Luxury Strategy
JN Kapferer - The Luxury Strategy
JN Kapferer - The Luxury Strategy
THE
LUXURY
STRATEGY
ii
THE
LUXURY
STRATEGY
BREAK THE RULES OF MARKETING
TO BUILD LUXURY BRANDS
Publisher’s note
Every possible effort has been made to ensure that the information contained in this
book is accurate at the time of going to press, and the publishers and authors cannot
accept responsibility for any errors or omissions, however caused. No responsibility for
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the material in this publication can be accepted by the editor, the publisher or any of
the authors.
First published in Great Britain and the United States in 2009 by Kogan Page Limited
Apart from any fair dealing for the purposes of research or private study, or criticism or
review, as permitted under the Copyright, Designs and Patents Act 1988, this publica-
tion may only be reproduced, stored or transmitted, in any form or by any means, with
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undermentioned addresses:
The right of Jean-Noël Kapferer and Vincent Bastien to be identified as the authors of
this work has been asserted by them in accordance with the Copyright, Designs and
Patents Act 1988.
Contents
Stretching: brand coherence, but also the creative and unexpected 149
Should extensions have a name? 152
The risk factors of brand stretching 153
Controlling the boomerang effect of extension 156
8. Qualifying a product as luxury 158
No product without service 158
The luxury product and the dream 159
Functionality and dreams do not follow the same economic
models 161
The luxury product is not a perfect product, but an
affecting product 162
Luxury product and competitive universe 163
Luxury product and time 164
Occasion of use and perception of value 164
Lasting a lifetime… and beyond 164
Prolonging the ecstasy of a privileged moment 165
Adapting to its time 166
Structuring the luxury range: how is the range of a luxury
brand organized? 167
Innovating through a new product range 169
Don’t sacrifice the past to the future 172
A mode of production as a lever of the imaginary 173
The opposition between luxury and relocation 175
Licences signal the departure from luxury 176
9. Pricing luxury 177
What about price elasticity? 178
Increase the price to increase demand and recreate the distance 180
What price premium? 183
Fixing the price in luxury 184
Managing the price over time 185
No sales in luxury 189
Price reductions? 189
The price and its communication 190
The price is not publicly advertised 191
The price must be sold 191
10. Distribution and the internet dilemma 193
Luxury is in the distribution 193
You sell to someone before you sell something 194
It is the price, not the product, that is sold to the client 195
The sales personnel should never earn direct sales commission 196
Contents ix
Bibliography 300
Index 305
xi
This unique book on luxury strategy could only be written by two comple-
mentary authors, both experts in the field at the highest level, each with a very
specific angle.
Introduction: To be or not
to be luxury
Luxury is in fashion, and the fashion is for luxury. To be ‘in’, just as you must
be young, you must be ‘luxury’. Moreover, eternal youth is the luxury of those
who are able to frequent the most sublime spas, the famous cosmetic surgeons,
and purchase the fruit of the latest scientific research from prestige cosmetics
brands, with the rarest ingredients.
Today, luxury is everywhere. Managers and marketing people regularly
invent new terms to qualify luxury: true luxury, masstige, premium, ultra-
premium, opuluxe, hyperluxe. Instead of clarifying the concept of luxury, this
semantic creativity only adds to the confusion: if everything is luxury, then the
term ‘luxury’ no longer has any meaning. What, therefore, constitutes a
luxury product, a luxury brand or a luxury company?
The current confusion masks a profound reality: luxury does exist, it is not
just a trade, restricted to some cars or fashion accessories, but a different and
global way of understanding a customer and of managing a business. The
concept of luxury is as old as humanity; a discriminating understanding of it
makes it possible to define the rigorous rules for its effective management.
Such is the goal of this book.
2 Introduction
PART 1
Back to luxury
fundamentals
4
Let us come back to this vital aspect to human beings, that is, the certainty
that sooner or later they will die, and the question of life after death, because it
tells us a great deal about the fundamental (and eternal) mechanisms at work
behind the whole concept of luxury in humankind, both ancient and modern.
The moment we become aware of our own mortality, the ultimate in luxury,
well beyond any notion of possessions or status, is to be able to live on – and
live on comfortably at that – after death. Every great civilization has come up
with its own and often remarkable way of answering this craving for immor-
tality – metempsychosis (a transmigration of the soul to some other human or
animal body), the idea of Nirvana, and suchlike – but it is the Egyptian ‘way of
death’ that interests us most in the context of this book.
The case of Ancient Egypt is in fact the most spectacular, for the desert
climate of the Nile Valley has miraculously preserved everything for the
benefit of future generations. And what do we find? We find the remains of a
highly hierarchical and stable society, with its own very precise and extremely
sophisticated codes and rules for living; Egypt clearly practised all the codes of
luxury, and apparently invented many new techniques for doing this, the best-
known being the discovery of glass to protect perfumes.
Two aspects of this luxury are ever-present: great pomp and splendour during
life and a highly ritualistic approach to the afterlife. During life, as in all human
society, this splendour was expressed by every available means and spurred the
invention of exclusive products such as perfumes, which were reserved for the
gods, the Pharaoh, the High Priest and those around them. After death every-
thing became even more spectacular: the pyramids, the tombs in the Valley of
the Kings and the Valley of the Queens… the most sophisticated means, both
artistically and technically (the building of the pyramids) were invented and then
applied to ensure that this pomp and splendour lived on in the afterlife.
According to Egyptian beliefs, it was the survival of the body that guaran-
teed the survival of the soul, and this survival called for some amazing
expertise: highly sophisticated techniques had to be developed (embalming of
mummies, erection of the pyramids or excavation of tombs), which were very
costly. For obvious economic reasons this great luxury was reserved for a very
small elite: the Pharaoh, his wife or wives, the High Priest and a select few
important dignitaries.
Based on archaeological discoveries in the Nile Valley and on deciphered
hieroglyphics, it seems fairly certain that the evolution of this ‘luxury industry’
followed much the same path as that which we have today: democratization.
What the unearthed mummies and tombs tell us is that this luxury gradually
spread downward to other more ordinary mortals and a few ‘sacred’ animals,
and later, during the Low Period, to all Egyptians and even to domestic
animals. This ‘dispersion of luxury’ would be a feature of all societies that had
the time and resources for it.
8 Back to luxury fundamentals
By the same token, it might be supposed that the debate about the useful-
ness of luxury was already raging in those far-off days: while some looked
upon such things as a pointless extravagance (the lives of peasants were
undoubtedly extremely hard), others saw in it a powerful driver of artistic and
technical discoveries that gradually spread throughout society and eventually
benefited everyone. Besides, the recent discoveries around the Giza plateau
have forced us to exchange the conventional image of the pyramids built by
slaves subjected to ceaseless lashing for one in which they were in fact raised by
resourceful engineers and a skilful workforce: the luxury of the Pharaohs was
not built on slavery but on the expertise of those who were not only capable
but also free.
• In Ancient Greece it was the secular conflict between Athens and Sparta
that perhaps best illustrated this contrast between social concepts. The
rivalry between these two city states went on for centuries and has been
thoroughly explored by numerous historians.
• In classical Italy, when the military might of Rome was able to shield the
city from its external enemies, it was the conflict between the supporters of
the Republic, its austerity and its belief in Virtus (Cato the Elder being the
principal evangelist of this position, with the famous sumptuary law, the
Lex Oppia, passed in 215 BC and repealed in 195 BC), on one side, and
on the other those advocating a more elegant and sophisticated Republic.
It was the latter group that eventually emerged victorious, and Imperial
Rome will forever be remembered for its refinement and luxury. The
bitterness and the recurrence of this conflict between two fundamentally
different kinds of society (one warlike, masculine and austere, the other
pacifist, feminine and sophisticated), with a definite taking of sides for or
against luxury even culminating in civil war, shows just how important is
the idea of luxury.
And these conflicts were not confined just to classical antiquity – not even to
the Western world: sumptuary laws have been around for thousands of years,
both in periods of (relative) social stability (the Tokugawa shogunate in Japan,
1603–1868, or the reign of Elizabeth I of England) and in periods of serious
In the beginning there was luxury 9
social unrest (for example, the French Wars of Religion in the latter half of the
16th century). However, we shall not be elaborating any further on this period
of history (those interested are referred to the outstanding book by
Christopher J Berry entitled The Idea of Luxury (1994)).
Without ever reaching quite the same degree of violence, whether actual or
legal, this conflict has been going on for all time in human society everywhere
(see also p. 77 on court etiquette), and continues to this day in our Western
societies, and especially in France: the debate between luxury as an insult to
the poor and luxury as a source of skilled and steady jobs; somehow it is all
right to produce luxury goods, but certainly not all right to buy them.
The thing to remember is that luxury is – and always has been – a major
sociological issue in any society, because it has to do, at one and the same
time, with:
• social stratification;
• the notion of practical utility and waste;
• decisions relating to the distribution of wealth.
In other words, the concept of luxury is not a socially neutral one; quite the
contrary as, in a manner of speaking, it is society that defines what luxury is.
This is true of all societies, even contemporary ones: in addition to the time-
honoured methods of deterrence, we have a veritable arsenal of taxes to deter-
mine whether a product is a luxury item or not… in fact, this is often the best
way of arriving at such a definition!
It is hardly surprising therefore that the fundamental shake-up of Western
society in the 18th century, the ‘Age of Enlightenment’, which contributed to
both the French and American revolutions, should have had such a profound
impact on luxury, on both a philosophical and an economic level.
• Liberalism (Adam Smith) was very favourable to trade and to luxury as the
driver of economic growth, provided the first true economic rationale for
luxury as the means to creating wealth for all.
• In parallel with this growing liberalism, English philosophers of the 18th
century, and especially David Hume (his essay titled Of Luxury was
published in 1752) were to separate ‘luxury’ and ‘morality’, until then
considered mutually irreconcilable in Christian Europe, and would
provide a philosophical justification for luxury.
10 Back to luxury fundamentals
• The general democratization towards the end of the 18th century gradu-
ally made luxury accessible to all.
• Following the Industrial Revolution, which brought about a considerable
rise in living standards, more and more individuals found themselves with
the financial means to afford luxuries.
• The beginnings of female emancipation, which would not percolate all
strata of society until the middle of the 20th century, could already be seen
at work in the 19th.
We have already seen that it was the pacifist, feminine societies that most
readily and completely accepted luxury. As the 20th century progressed, the
situation gradually turned in favour of the social legitimization of luxury.
Today, this process of legitimization is not yet complete, even in developed
societies, but it is irreversible.
We are now going to look more closely at this sociological evolution and its
consequences, and in particular at what we shall call the driving forces
behind luxury.
own economic rules, has gradually developed and, over the centuries,
acquired a truly idiosyncratic character.
From the 20th century onward, this world of luxury gradually ceases to be a
world apart. An ever-growing slice of the population is beginning to have access
to it, partially at least: an ever-widening spit of land now connects Luxury Island
to the continent of the industrial and consumer society. Luxury can now set out
to conquer the world, but at the same time it must overcome fierce competition
from industrial products and their sophisticated marketing. It is equally true to
say that luxury has to set out to conquer the world as it cannot remain holed up
on its small island, otherwise it would disappear, as almost all the endemic South
American species have disappeared, failing to adapt to the new situation that
resulted from the joining of North America with South America, or as the
Australian marsupial fauna are in the process of disappearing following the
arrival of the Europeans accompanied by placental mammals.
As it sets out to conquer the world, even though its idiosyncratic nature does
not at first really prepare it for such a venture, and even though it has to over-
come some powerful adversaries along the way, luxury does hold some major
trump cards, with many drivers of social and economic change taking place in
the second half of the 20th century working in its favor.
Democratization
This is the most important driver of luxury and the one that explains its
current success, for democratization implies two things:
• First, that everyone has access to the world of luxury, which is why the
client base has grown exponentially. Having said that, clearly this fabulous
opportunity for luxury carries with it a major risk: that of vulgarization,
which is a major trap to be avoided in the process of democratizing luxury
(we will have occasion to come back to this point quite frequently, espe-
cially in the chapters on setting up a luxury strategy). Staying in the
12 Back to luxury fundamentals
The offspring of social stratification in inegalitarian societies, luxury has become its
father in democratic societies.
Logically, the democratic process, which favours transparency and levelling
out (not so much economic as cultural), should have signalled the demise of
luxury by bringing about the disappearance of ‘transcendent’ leading classes.
However, paradoxically, the very opposite has happened: luxury, the
offspring of the ‘transcendent’ stratification of society, does not die just
because this stratification has disappeared; instead, it has become its creator
and driver.
There is something very important that needs to be said at this stage: in a
democratic society, luxury may lead to social stratification, but it also encour-
ages humanity, something that is often lacking in our modern cities. We shall
be reverting frequently to the systematic and very important affective rela-
tionship that tends to form between a luxury brand, a luxury product and a
client; if no such affective relationship exists, that is because in the client’s eyes
the product is not a luxury product. It’s an absolute given.
There is one final important point to make in this context: architecture, a
particularly social and ostentatious form of art, quite clearly has very much to
do with luxury – you need only think of the pyramids of long ago, the French
palaces of the more recent past, and today’s flagship stores! The more or less
free access to luxury, which we can readily see from architecture, is a measure
of democracy: the extravagant splendour of Ceaucescu’s palace in Bucharest,
standing right in the centre of a wretchedly poor city, was a far more eloquent
testimonial to the true state of democracy in Eastern Europe’s ‘people’s
democracies’ than any political treatise ever could be. And it was no less true of
medieval villages in Europe, which existed in the shadows of the all-powerful
church (or cathedral) on one side, and of the mansion (or palace) of the local
ruling classes on the other: both symbolic of the total absence of democracy.
In the beginning there was luxury 13
Globalization
In addition to its role in accelerating the rise in spending power, through wage
increases and falling prices of most manufactured products, globalization
plays a dual role as a driver of luxury:
Here we come across the same problem as the one discussed in the context
of democratization – and therefore the same social utility of luxury – but
this time at the level of an entire culture, rather than of a single individual;
in this context, it will no longer be just social stratification but also the roots,
a cultural and precise geographic localization in an undifferentiated world,
that people are going to look for in a luxury product – it would have to
show evidence not only of social stratification, but also of being rooted in a
particular culture.
A luxury product is rooted in a culture. In buying a Chinese luxury product
(silk, let us 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.
And there we have another major difference between a luxury product and
a premium product: it is perfectly legitimate for a ‘premium’ product to seek
out the most suitable and most economical manufacturing location possible, so
long as quality and service levels can be maintained.
A luxury product, which carries a whole world with it, has to be produced in
a place that is consistent with its world. Products by Chanel or Hermès, being
manufactured in France, truly are luxury products; products bearing a Dior
or Burberry label, on the other hand, being manufactured in countries where
labour costs are low and not in France (Dior’s place of origin) or in the UK
(Burberry’s place of origin), are no longer entitled to be called luxury prod-
ucts: this kind of relocation for cost-cutting reasons is proof that these brands
do not have (or no longer have) a sufficiently high level of quality or creativity
– as regards the products concerned, at any rate – to justify a price level that
would allow them to continue to be produced in their country of origin. The
public outcry that arose when Burberry announced that it was closing down
one of its production facilities in the UK and moving it to an area with low
labour costs in China certainly left its mark!
Interestingly, this relationship between luxury and local production does
not only apply to ‘fashion accessories’ but to all products: one of the reasons
In the beginning there was luxury 15
behind BMW’s success with the Mini is that it managed to continue building it
in the UK. And that is also true of Rolls-Royce, of course.
All of that holds especially true when the luxury brand sets out to conquer
the world. Now, as we have seen previously this is something it has to do: 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 disap-
pear overnight. That’s the law of globalization.
If this globalization does bring a luxury brand financial success and dura-
bility, the major risk then is that it forgets its roots – like some people who,
their own success having gone to their heads, forget or even reject their
parents; once separated from its roots, the brand ceases to be a luxury
brand and is immediately relegated to the category of just another
competitor in consumer goods brands – a battleground for which it is
particularly unsuited.
Communications
This is the last of the great present-day drivers of change that has an impact on
luxury. The development of global mass media – television in particular – and
the growth in international travel have made everyone aware of the cultural
richness and diversity of our planet and of the many other possible ways of
living, even in our own society; everyone can vicariously live the high life
along with the great and the good whom they have ‘met’ through television or
read about in celebrity magazines.
What this means is that, before each and every one of us, there opens up a
vast so-called ‘field of possibilities’, where we can pick and choose what best
suits us personally to come up with our very own social stratification. Looking
at the flip side of the coin, the wealth of possibilities available to us is now so
great that anxiety of choice, a favourite theme of Jean-Paul Sartre’s, weighs so
heavily on some individuals that it ends up alienating their freedom, very
often to the point where they prefer the power of decision to be taken from
them, thereby abdicating their free will.
We shall be coming back later to discuss one of the key consequences of this
situation: where the luxury brand becomes the be-all-and-end-all for some
individuals, guiding them in their social choices, so much so that sometimes
they behave as if they belonged to a sect. The annual Steve Jobs show at Apple
is just like some ancient religious ceremony conducted by a High Priest – just
as the purpose behind the sacrificial ceremonies of the Aztecs was to keep the
sun in orbit for another cycle, so the Apple Show is designed to reassure its
worshippers that revolutionary new products are going to be able to sustain
them for one more year.
16 Back to luxury fundamentals
Now, at the start of the 21st century, luxury has become so popular that
everyone (or almost everyone) wants to be in on it. Luxury is very much in
fashion, and almost every economic player is claiming to offer it.
If we want a sound basis from which to start defining effective operating
strategies, we need to go back to the origins of the concept to find, behind all
the claptrap spouted about it, the true signifiers of luxury and what it is all
about. At the most profound level, this ‘invasion’ is the consequence of what
earlier we referred to as the paradigm of luxury, or the luxury paradox: the
offspring of social stratification, in our present-day societies luxury has
become its father.
18 Back to luxury fundamentals
What we might call ‘luxury among friends’, which falls somewhere between
‘luxury for oneself ’, which we shall be looking at next, and ‘public luxury’,
which we were talking about just now, also comes under this heading of
affirmative logic:
• the bottle of champagne that you take along to a party, even though you
don’t particularly like drinking champagne, and which was selected in
accordance with very specific codes that depend on the social status of
both sets of individuals;
• the art collections that are shown to the fortunate few, and in particular
‘difficult’ arts, reserved for the initiated (very modern or very primitive art).
luxury brand is a cultural thing and as such it has to proclaim its profound truth,
the truth that brings us into resonance with it.
Put another way, although snobs do constitute a not inconsiderable
proportion of a luxury brand’s clientele, they could never be its bedrock; a
luxury brand relies on as large as possible a core of faithful clients thoroughly
imbued with the brand’s culture and appreciating its world, its identity, and
its philosophy.
There are several key points to emerge from this and we shall be returning
to them in due course:
It is revealing in this respect that the Luxury Institute in the USA produces
two barometers of luxury in every sector:
• The first is called the Luxury Customer Experience Index (LCEI), which is
a measure of the satisfaction felt with a service. It is an expression of the
perceived quality in all its facets, including reliability, fragility or flimsiness,
ease of access, etc, but also the human aspect, the service.
• The second, called the Luxury Brand Status Index (LBSI), is more
concerned with the intangible, the prestige associated with the given
brand, its dream potential and therefore the distinction conferred on the
possessor. The items in the index have to do with a feeling of exclusivity
and uniqueness, the feeling of having one’s social standing reinforced
through the brand, the feeling of being a special person.
This duality and this ambivalence makes the concept of luxury extremely
subjective and variable, both between individuals and between societies; this
is the more glaring the better-known the brand and the more visible the
product. Let us take the case of Louis Vuitton, for example. It is far and
away the world’s most valued luxury brand, which does not stop thousands
of people – some of them from genuine feeling, but most of them from pure
snobbery – considering it to be a vulgar brand that can no longer be counted
a luxury brand at all, declaring that they wouldn’t dream of buying anything
of theirs, let alone be seen with it; yet this doesn’t stop the very same people
gladly accepting the gift of a product bearing the LV monogram and of
using it ostentatiously.
One should therefore never say ‘This is luxury and that isn’t’ without pref-
acing the remark with ‘For me’, ‘To my way of thinking’, or ‘In my opinion’,
just as one should never say ‘This is beautiful’ or ‘This is ugly’ without pref-
acing it with ‘I find that’ – there again, luxury and art are closely related, and
success in both can never be absolute.
have the stamp of timelessness while the product has every appearance of
being modern or vice versa.
Relationship to people
The consumer society is a child of the Industrial Revolution, whose success is
essentially due to mechanization, that is to say the replacement of people by
machine; its ideal, however noble, is a society of robots to relieve people
completely from the tasks of production.
Conversely, luxury being primarily social in nature, and society being made
up of human beings, every luxury product should bear a person’s imprint. We
shall be reverting to this point at greater length in Chapter 8 on the luxury
product, but we can cite here the German sociologist Georg Simmel: ‘A
product has the less soul, the more people participate in its manufacture.’
If the standard consumer product is a product mass-manufactured by
machine and sold in self-convenience stores and department stores, through
catalogues or on the internet, a luxury product on the other hand is hand-made
26 Back to luxury fundamentals
and sold by one individual to another individual. You could scarcely find a
greater contrast!
Relationship to desire
This is the most subtle point and the most difficult to handle on account of the
total subjectivity and the lack of lucidity when faced with this subject:
profound and complete treatise ever written on the subject of money as seen
from the conceptual point of view.
The objectivity of money and the subjectivity, both personal and social,
of luxury
Let us 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 automobile will cost more than a luxury purse, 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 N4 million to
produce, whereas it is sold for (only!) N1 million.
30 Back to luxury fundamentals
• that have shorter histories – in such a case, some form of social stratification
has to be invented. In the USA, it was in the beginning that the Founding
Fathers, having a core of shared values centered on the Bible, were able to
structure North American society on clear foundations; but this society has
not had the time to establish firm roots or create a powerful history. The
mass immigration of the 19th century has buried this too recent and too
feeble a structure, and money, with its ‘dream machine’ that is Hollywood,
has gradually (and hopefully only temporarily) taken control of the society.
• that have been completely torn apart by one political or economic
upheaval after another (Communist countries like the former USSR or,
right now, China), for that is the only common reference point in this case;
• that have not yet succeeded in uniting around common cultural and polit-
ical concepts (the global and multipolar society of today).
In the beginning there was luxury 31
But this stage does not last for ever: gradually society becomes civilized and
‘luxury’ becomes its grammar (cf The Idea of Luxury, by C Berry).
Let us sum up this relationship between money and luxury in a couple of
sentences:
• Money fuels the luxury engine but is not the engine; the engine is the
recreation of vertical hierarchy / social stratification.
• Luxury converts the raw material that is money into a culturally sophisti-
cated product that is social stratification.
As we saw earlier, our Western societies had need of luxury to make them suit-
able to be lived in by us primates; as they are also urban societies, they also
need fashion to be livable. In fact, they need both luxury and fashion:
On the other hand, if luxury and fashion both play a key role in our social life
– and therefore in the economy – for all that, there should not be any confu-
sion between them. Fashion is no more a luxury than is money, and vice versa.
It is interesting to note on this point that civilizations that are still living in an
isolated natural environment and in small communities (on Pacific islands, like
present-day Vanuatu for example) have a social stratification (chiefs), luxury
objects (jewels), but no fashion.
Looking at the evidence before us – that they have in common the need to
appear different and be differentiated socially – it would be easy to rush to
34 Back to luxury fundamentals
wrong conclusions, not realizing the extent to which luxury and fashion differ
from each other in two fundamental respects:
Hence the temptation of those large houses that are on the stock exchange to
get out (successful leveraged buy-outs) or to hide themselves within a large
group (like Louis Vuitton Malletier in LVMH).
To be more explicit on the differences between luxury and fashion today,
and introduce the world ‘premium’ whose relation with luxury will be
discussed in depth in the next chapter, we can place luxury, fashion and
premium on the three points of a triangle in which any brand with a minimal
status has to be positioned (see Figure 1.1).
In the beginning there was luxury 35
Luxury
Social elevation Priceless
Timelessness Gift
Dream
Quality/Price ratio
Social imitation
Investment
Instant Seduction Realism Performance
But there are differences between them of which one could scarcely be
unaware. Even if the use-value of a luxury product is small, especially when
compared to its symbolic value, it is never zero, in contrast to that of a ‘pure’
objet d’art – the luxury object has nevertheless to have some usefulness. This
usefulness of the luxury article is expressed as a use-value, but also as a real
exchange-value. Luxury is rooted in the real economy – it must quickly find
a solid market, otherwise it will disappear. On the other hand, the myth of
the artist as an accursed genius, who only lives after death, is a perennial one
in the art world… even if, these days, to be unknown and poor is no longer
any guarantee of talent! Picasso showed the way, and many have rushed to
follow. The fact nevertheless remains that there is still a very wide gulf
between luxury and art in this domain: the creator of luxury lives off their
trade throughout their lifetime, while the artist seeks eternal survival
through their work.
When it comes to certain aspects, it is no longer a question of differences,
but of a conflict between luxury and art:
2 The end of a
confusion: premium is
not luxury
• The fourth route is empirical. This means using the word ‘luxury’ to refer
only to the circumscribed group of so-called luxury brands. Is not the brand
the basic unit of all analysis of the luxury industry? The question then arises
as to whether certain brands should or should not be included within this
perimeter. For example, is Lacoste a luxury brand? Yes, for the Chinese,
according to Time magazine (October 2007), it currently is: they rate it
among the three best-known luxury brands, having discovered it through
the new Shanghai Tennis Masters, in department stores and its few exclu-
sive boutiques. But this is not the case for the Spanish or the Italians, since
distribution of the brand is very extensive in their countries.
• The fifth route is corporatist. It consists of calling luxury those things that
are luxuries, or ‘the’ luxury, seen by a country that produces luxury. In
France, this is what the Colbert Committee does; but this route has little
value on a global scale.
• A sixth route is to ask the creators of luxury themselves what they do,
according to which criteria, concepts, and values. Here, again, who should
be interviewed?
others would be no more than small, admittedly prestigious, but local and
family companies.
This is simply not the case: neither L’Oréal, despite its acquisition of Lanvin
in the 1990s, nor P&G or Unilever have succeeded in the luxury field, and, as
its name implies, the book Trading Up (Silverstein and Fiske, 2005) is a (more-
over excellent) summary of the methods to use in order to successfully move a
brand upwards, not a guide to a successful luxury strategy.
The financial markets, furthermore, make no mistake: in 2008 Millward
Brown valued the Louis Vuitton brand at US$26 billion, whereas the L’Oréal
brand was valued at $16.5 billion, almost two times less for a turnover that is
around five times higher. The same study valued the Toyota brand at $35
billion and BMW at $28 billion, although the number of vehicles sold was
eight times smaller for BMW than for Toyota.
The financial markets, therefore, recognize the specificity of luxury. We can
therefore legitimately go further, and examine the fundamental differences
between ‘luxury’ and ‘premium’ in the everyday management of a brand, and
the reasons why it is impossible to simply ‘trade up’ from ‘premium’ to
‘luxury’; and that in particular, raising the prices of a ‘premium’ brand is not
sufficient to turn it into a luxury brand.
subsidiary’ in 2007. While Aston Martin was sold at a good price (around $1
billion) to a fan of the brand, Jaguar – losing money heavily – had to seek out
the Indian Tata group as a purchaser.
In contrast, the Volvo and Land Rover brands (LR was bought for N2.4
billion in 2000) suffered less: pompously renamed ‘luxury brands’ upon their
acquisition by Ford, they are in fact ‘premium’ brands; a ‘Ford’ management
strategy was therefore able to improve their results, whereas Jaguar and Aston
Martin, being genuine luxury brands, could only be seriously damaged by this
kind of strategy. Luxury is not ‘premium at its best’.
At the beginning of 2008, Ford sold Jaguar and Land Rover to Tata for N1.4
billion; those two brands had been bought for N4.6 billion.
As the systematic failure of this type of strategy is that of large, well-managed
groups, it cannot be attributed to simple management errors, but to a failure
to comprehend what luxury is. We can, however, deduce from it that to
succeed in luxury it is necessary to add other things, and in particular pres-
tige, which Ford lacked, and all would have been well. If this analysis is
correct, the inverse strategy, moving downwards away from luxury, should
work very well, since luxury would mean a little ‘more’ everywhere; it would
be enough to put in less, to reduce prices, and the job would be done.
As in the previous case of ‘trading up’, the companies that tried this down-
wards extension strategy were generally good, well-managed brands; their
failure was therefore not one of incompetence, but of an incorrect under-
standing of what luxury is. There is only one conclusion, therefore: if
‘premium’ is the ‘upwards’ extension of classical marketing strategies, luxury
obeys other laws.
Price
ange
y to p of r
Luxur
Overlapping
Luxury entry products zone
g up
Tradin Growth of
purchasing power
FMCG prices
goods have followed the ‘trading up’, premiumization approach, which has
raised their prices to the point that they have caught up with entry level
luxury products (see page169).
Therefore nowadays there is a zone of price overlap between premium
and luxury, which may be found in many sectors (Lancome vs Guerlain in
perfumes, Lexus vs BMW in cars, etc) confirming that price, by itself, is no
longer today a characteristic of luxury. It is clear that, in settling for
analysing things from the one-dimensional aspect of price, total confusion
has been created.
• a luxury griffe when Mr Yves Saint-Laurent was creating his haute couture
gowns, unique models manufactured by seamstresses in the workshop on
Avenue Marceau in Paris;
• a luxury brand, Yves Saint-Laurent Rive Gauche, a variation on haute
couture, created by Yves Saint-Laurent himself, and sold only in Yves
Saint-Laurent shops;
• an upper-range brand, Yves Saint-Laurent Variations, manufactured in
France by the Mendès company under the remote supervision of the creator;
• an upper-range brand once again for perfumes and make-up;
• a mid-range brand for fashion accessories.
Likewise, Chanel is a griffe under the hand of Karl Lagerfeld, and a luxury
brand for its watches or handbags. Its glasses sold at Optic 2000, however,
hark back to a brand that is barely even premium, either in price or in style
and distribution.
retaining the American Express name, the same as that of the basic card, sold
with the classic promotional tools. H&M called on Karl Lagerfeld to create
limited editions. Lacoste organizes fashion shows in New York and Shanghai.
The upshot of all this is a blending of frontiers, of genres, and a multiplica-
tion of concepts, all incorporating the term ‘luxury’ to a greater or lesser
extent, to attempt to classify this profusion.
mechanical geniuses (such as Enzo Ferrari) and newly minted ones, such as the
Swedish Koenigsegg, or the Japanese Lexus, created from scratch and
launched in the USA in 1989 by Toyota.
Finally, in addition to the link with history, the car makes it possible to
deepen the relationship between luxury and high-tech: we are too prone to
link luxury with artisanship, tradition. How is this relevant in the highly mech-
anized and now electronic world of cars? Would they resist the examination of
a modern Aston Martin or Bentley?
Lexus quickly moved to the fore on all these criteria. Buoyed by these successes
relayed by the media, the brand is building a reputation little by little, carried
by the word of mouth of enthusiastic new adherents. It did not win its spurs
through F1 Grand Prix or mythical Indianapolis speedways, but through the
prizes of institutions dedicated to surveying satisfaction and market perception.
Its reputation-creating approach is summed up in its slogan: ‘The relentless
The end of a confusion 47
The extra price of a Jaguar thus paid for an intangible that was itself in
decline, accession to an ever less selective club and a non-revitalized brand
myth (typically British luxury), signified only by its appearances (the elm burr
dashboard and Connolly leather).
• it carries the brand’s name, and therefore its image. From this point of
view, not all upper ranges are created equal.
The upper range is judged by the famous price–quality ratio: do you get
enough for your money? It signals a progression of the purchaser through the
range, to its extremity, and therefore their personal progression in terms of
income, standing and status. To this end the upper range should receive more
than its fair share of advertising investment, since it must be socially recog-
nized as the upper range by all (the eyes of others must be able to perceive this
social progression), and at the same time lend its aura to the rest of the range
of stock cars under the brand’s aegis.
The upper range is measured and compared, both with the lower level of
the range, and with the tops of other ranges, but also with downward exten-
sions of so-called ‘luxury’ brands, which are weakening themselves through
this extension. Luxury is superlative, not comparative. Comparisons must be
avoided at all costs. Measured against the entry levels of prestige brands, the
upper range is now brandished with pride, since it proclaims a rational legiti-
macy, an implicit criticism of luxury. What is the point of paying a higher
price, when the upper-range car gives you a high performance for a lower
price, and with a greater distribution?
Upper-premium
In order to signal a more clear-cut change in one’s life, it is therefore necessary
to change brands. Car brands, through their known average price and their
recognized prestige, are the social milestones of their owner’s income progres-
sion. Two modalities now enter into the equation, two car categories: luxury,
and what we must call ‘upper-premium’: Aston Martin or Lexus. We must
learn to distinguish between them even if the latter do everything in their
power to dissipate the distinction and borrow the codes of the former. Luxury
and upper-premium are not differences in level of the same quest. In reality
the quest is different.
In a super-premium car (Audi, Lexus, etc) the first question remains that of
the usage value, even if it is crossbred with intangibles: you buy an Audi A6 for
everyday use, in all weathers, on all roads, for all kinds of travel. This is not the
first expectation of someone buying an Aston Martin, still less a Lamborghini.
The upper-premium is recompense for hard work and remains ontologically
on the side of work: hence it is counted among the bourgeois, in its structural
and symbolic opposition to the aristocracy, which was prohibited from
working and could only enjoy its wealth and show off its rank, be entertained,
hunt and fight. This doesn’t prevent the City golden boy from buying a
Ferrari: we are talking about the semiotic power of luxury brands.
50 Back to luxury fundamentals
For their part, Ferrari, like Porsche, embody the line of thoroughbreds. It
has built its prestige in deadly mechanical jousts, where these elegant hyper-
technological chargers clash, ridden by heroes in the service of their country:
Ferrari is the standard-bearer for Italy, Porsche for Germany, Aston Martin for
Great Britain.
These two sources for the sacralization of the brand also explain why the
upper-premium brand divides its range into two groups, in order to mimic
the codes of luxury and yet offer a rational progression to the potential client,
compared to the upper range:
• Some cars offer the apogee of functional pleasure: they are therefore a
reasonable Rolls-Royce.
• The upper-premium brand also offers coupés, tamed versions of the
luxury-brand coupés.
• The history need not necessarily be a long one: new genuine luxury
brands will be born tomorrow.
52 Back to luxury fundamentals
Lexus has a history, admittedly a recent one, but a true history created of
technological flawlessness. Little by little, over time, year after year, it is
building a reputation, benefiting from what Reicheld (2006) calls ‘the ulti-
mate question: its clients would strongly recommend it to others around
them. This is moving beyond loyalty, and into engagement with the brand
(Kapferer, 2008). Lexus clients are highly satisfied with the provisions of their
Lexus: it delights them in all aspects of quality and service. However, Lexus
suffers from two handicaps:
The problem is that this history of Lexus says nothing else. It does not build
an idealization of the brand beyond the functional; the models are not myths,
but very good cars. The upper-premium, like the top-of-range, aims at the
market share and must round off its edges to do so. Luxury goes beyond func-
tionality. Being creative, it takes the risk of not being liked.
These facts show the true nature of Lexus, and indirectly the true nature of
luxury itself. In the USA, the Luxury Institute produces two hierarchies of
luxury in all sectors, particularly the automobile sector:
The end of a confusion 53
Porsche maximizes the three levers that make for a strong brand:
There are niche car brands, which maintain tradition and artisanship to the
letter: Morgan continues to build its 4×4s with wooden chassis. But it is not a
luxury brand. The link with tradition, or at least with traditional values, is a
necessary but not a sufficient condition of luxury. Modern luxury is not like
antiques or collectable cars alone. It is also creative and technological, but it
sublimates the technology through an excess and a finality that are not osten-
sibly in the order of strict functionality: we are serving pleasure, a life
aesthetic, ‘art for art’s sake’. To appreciate it fully, it is also necessary to be a
true lover of the product, that is, capable of appreciating the tangible or intan-
gible facets. Luxury presupposes a product culture in its admirers. Otherwise,
the purchaser is merely in search of emotions linked with seeming, not with
feeling. This audience is volatile.
How does luxury use technology? In luxury, technology contributes to
creating a separate world, beyond all constraints. It creates both objective
rarity through the high price that it legitimates, and also a qualitative rarity
through the extremization of technology’s consequences:
As we see it, in luxury the technology serves only to maintain the objective
distance, but on condition that it keeps the dream: there is a potential of imag-
inary and sublimation of the world running through the technology.
Enlightened fanatics will discourse all night on the excess of the latest 6.75 litre,
V12 engine of the Rolls Phantom, unique in the world (see also page 263).
The end of a confusion 55
• The creator, who is more of an enthusiast and a creative genius than a pure
engineer. Dr Porsche and Enzo Ferrari are the equivalents of the great
names of former haute couture, or the great starred chefs of haute cuisine.
• The creations themselves, which demand respect and admiration: hi-tech
and high touch. Luxury builds its myth through models that are them-
selves mythical. Remember the Ferrari Daytona, Testarossa, Dino... Each
model has made a name for itself at the same time as being a hymn to the
brand myth. These models have first names, because they must be identi-
fiable one by one in this saga. They are almost works of art, since they
must be beautiful and rare: a Lamborghini Countach parked in the street
causes passers-by to stop. This beauty is not purely aesthetic, but incorpo-
rates humility before the beauty of the technological gesture beyond pure
rationality – that which governs our daily life, made up of decisions made
under money and time pressures, etc. It is revealing that this type of car is
less graffitied and scratched than a BMW. Something sacred seems to
emanate from it.
• The myth is nurtured by inaccessibility. This is linked to the above-normal
price of the models, which deepens the distance from ordinary standards,
even those of the top-of-the-range. From this point of view, the price of
luxury is not on a continuum with that of the upper premium: it is else-
where, it measures a dimension beyond quality and reveals the
exceedance of money in the service of passion.
• The brand myth is thus built by the yardstick of the wealth of its owners,
but beyond this wealth, their glory, their symbolic power, their passion,
and their ability to discount everything in service of that passion. Let us
remember that Rolls-Royce is aiming at only 85,400 people in the world:
the UHNWI or ultra-high net worth individuals, each possessing capital
of $30 million. This market segment represented in 2007 more than
30,000 cars sold at over N100,000. Rolls-Royce sells one in two cars at over
N300,000, worldwide.
• Rolls-Royce and Bentley drew their prestige from being the official cars of
the crowned heads of the planet. This was also the cause of their decline:
there were fewer and fewer kings and queens, or they were very elderly,
almost from another age, or they were a simulacra of royalty (for example
Idi Amin Dada). Rolls-Royce fell from its status as the best car in the world
(do we not still say ‘The Rolls-Royce of...’?) to a shadow of itself, devoid of
56 Back to luxury fundamentals
In fact the previous developments on luxury cars show that luxury loves
time: it sees itself as timeless. Whereas the upper premium or the top-of-the-
range models are regularly outdone by new technology and their value as
second-hand cars decreases over time, second-hand luxury cars scale the
heights at auction sales. In these models of the past, there is admittedly
outdated technology, but their potential for dreaming is increased: a 1971
Ferrari Daytona Spider is worth $1,395,000. Rarity and mythology make it
necessary: luxury likes short series, traditional values, while remaking them to
the tastes and the newest technology of the day, and the renewed inspiration
of the creator of the moment.
We can therefore organize the car world along two axes (see Figure 2.2): the
vertical runs from the purely functional at the bottom to the highly aesthetic at
the top. The horizontal runs from the highly traditional on the left to the thor-
oughly innovative and modern on the right.
These axes recall the tangible/intangible dimension of the added value of
brands (vertical axis) and the classic Western representation of time, which
places the past to the left and progress rightwards along a horizontal axis. In
the centre we find point zero, the car with no irregularities, average in every
way, a simple mobility object and therefore sold at the cheapest possible price,
like the Renault Logan, designed to cost N5,000, while awaiting the $2,500
Nano manufactured by Tata for emerging markets.
LAMBORGHINI
No French car brands FERRARI
ASTON-MARTIN
MASERATI
BMW
‘automobile made in France’ brand rings hollow, and the French luxury car
brands (Delage, Bugatti) have disappeared... a development that runs counter
to that of French luxury in fashion, in accessories, at the table, which have
conquered the world, and that of French aeronautical technology, which is
universally recognized. The alchemy of luxury is a complex subject!
These were all actions, details, concerns and attentions that were unknown in
a BMW or Mercedes dealership.
The sense of privilege, however, goes beyond the dealership. In the great
sporting demonstrations of which the Americans are so fond, and to which
they travel by car (Flushing Meadow for the tennis, the baseball World Series,
etc), there was a car park reserved for Lexus drivers. Likewise, during the two
years of prior observation of luxury mores in California, Toyota’s analysts had
noticed the parking order of cars outside hotel exits: in general, the first are
the jewels, the vehicles outside the norm, those that define luxury:
Lamborghini, Ferrari, Rolls and Bentley. It would not be insignificant to
ensure that all new Lexuses also enjoyed a high position. Not only would this
offer the owner an honorific privilege, but in addition it would confirm the
symbolic superiority of their choice, since it was recognized by the valets who
only park luxury cars.
60 Back to luxury fundamentals
Finally, let us talk about the CRM, which in traditional marketing means
customer relationship management. In that context, it is typically associated with
client databases, with fine behavioural segmentation, targeted offers, person-
alized relational activities, and customer magazines.
In terms of luxury, we should instead be talking about community recognition
management: recognizing and honouring the community of believers, the
followers. Thus at Ferrari the community of 38,000 owners of old Ferraris are
honoured and cajoled. They are encouraged to send their jewel for an in-
depth maintenance check, at the holy of holies, at Maranello. This is the
opportunity to possibly come to the very heart of the religion and collect it. At
Rolls-Royce, 200,000 enthusiasts visit the site, where there is also a museum, in
July and August, on the occasion of two special events.
At Lexus, exclusive local events are organized, not linked to the car, but to
the owners’ tastes and lifestyles. Priority seats at operas and theatres are
offered, to cultivate the brand’s cultural dimension.
3 Anti-laws of marketing
The two previous chapters have shown that traditional marketing could not
readily be applied to luxury, and drew attention to the anthropological, socio-
logical and historical bases of luxury. The purpose behind this was to help
understand that luxury is above all a social dynamic. It should also be clear by
now that when managing a luxury brand, it is necessary to forget a fair
number of laws of marketing, which may very well apply to brands, to
premium brands, and even to trading up, but not to luxury.
‘Trading up’ (see the book under that title by Silverstein and Fiske, 2005) –
or persuading a client to choose an item from further up the range, to go ‘up-
market’ – essentially plays on the many excuses people can always find for
treating themselves by buying something better and more expensive: a
marketing logic is fine here. Trading up is very different from luxury, for it
does not have the latter’s sociological dimension – its function is not so much
social stratification as improving brand profitability.
Not only are traditional marketing techniques not suited to luxury, they can
in fact be positively harmful to it. The truth is that traditional marketing is
only concerned with the bottom of the luxury pyramid, where they are no
longer selling luxury products, but products derived from luxury brands.
62 Back to luxury fundamentals
One also comes across traditional marketing in brands whose business model
has to rely on licensing arrangements and the sale of accessories and perfumes
as their sole means of remaining viable.
In the course of this chapter we shall be putting forward 18 management
suggestions, 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.
BMW sells unequalled driving pleasure to people who know how to appre-
ciate it. It has never built cars that were boring to drive. BMW has become an
icon of standing and performance; in the 1990s it was the ‘official’ car of every
yuppie or successful young executive eager to show off their success. What is
less well known, however, is that despite its success, the brand has remained
true to itself thanks to its willingness to resist client demands when these did
not correspond to the company’s very precise vision as to what made for a true
BMW. This does not mean the luxury brand should not care about its clients
nor listen to them. However, it should do nothing that threatens its identity.
An example that says a great deal about BMW is that consumers regularly
curse each time a new 5 Series car is released, because it is certainly a fact that
this model does not give rear passengers enough legroom. According to them,
such stubbornness defies reason and good sense. But the makers object that to
meet client demands would be to spoil the purity of design of this car, its
proportions having been meticulously calculated, as indeed were its aerody-
namics! Some may remember the loss of aesthetics that the Jaguar E-type
suffered following the addition of two full-size rear seats.
BMW is a good illustration of this principle according to which a luxury
brand has to maintain a consistency over time and across its entire range,
which guarantees its authenticity, and therefore its attraction, its mystique
and its spark. In traditional marketing, the customer is king. Procter &
Gamble’s corporate identity relies not on one man, or even on one category
of product, but on a methodology that puts the customers’ desires at the
Anti-laws of marketing 65
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.
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 socio-
logical guide. On this account it simply has to dominate.
respectful of a unique design, etc. Then it goes on to talk about 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.
Of course, advertising as such is not the lever for the BMW dream, merely
its ally. 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.
In 2004 BMW asked several great Hollywood directors to each make a film
about BMW, not a commercial for screening on different television channels,
but a real film lasting several minutes, for which they were given completely
free rein. These films were to be broadcast exclusively on the internet. They
were an instant hit – these so-called viral films did the rounds of everyone who
dreamed about, loved or was interested in BMW. What is more, all this height-
ened the buzz, gave the brand a fresh and modern look, something that even
the most classic brand needs to have.
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.
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.
The brilliant stroke – or perhaps one should call it Krug’s strategic daring –
lay not in producing an exceptional vintage, a very top-of-the-range cham-
pagne that would justify the price put on it, but to hoist its prices substan-
tially across the range, starting from the lowest; within 10 years it went up
from $19 to $100 a bottle. At the same time, in a move to create a product of
great rarity from one small corner of the vineyard, Clos du Mesnil was born.
72 Back to luxury fundamentals
This champagne takes 10 years to come to fruition, taking into account the
time it takes to prepare the land, bring in the harvest and allow for a period
of ageing; nowadays, a bottle of Clos du Mesnil fetches a cool N800.
Krug’s revival is an excellent illustration of the following anti-law of
marketing: when it comes to luxury, price is a mere technical detail. As soon as
price becomes an issue again in the classic price–demand relationship, we’re
no longer dealing with luxury, even if the product bears the name of a luxury
brand. Examples abound in every sector: it is by raising prices – and, of
course, by reinvesting these additional profits in quality and in advertising –
that a brand can stay in the world of luxury.
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 ‘superla-
tive’, 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.
This means that, while it may be necessary to have a few introductory products
for the benefit of a new clientele, having a luxury brand signifies a permanent
shift in vision. Its growth does not rely on running after a less well-heeled clien-
tele but on taking advantage of the global economic growth that is creating thou-
sands of new rich and very rich people throughout the world. These people are
looking for a way to reward themselves (through the products) and for a symbol
(being the brand) of their accession to the ‘Club’, having made sure that it is a
closed ‘Club’ – they wouldn’t want to mix too much with the wrong kind of
people, after all! That is why the average price needs to keep going up – while of
course at the same time increasing the value element of the product or service.
• first, the celebrity is not a fashion symbol but a man who changed the world;
• second, his Louis Vuitton is not the hero, but only the witness of an excep-
tional moment (a strategic negotiation).
Luxury attracts clients from all over the world, but also entrepreneurs eager
to apply a business model that, when successful, is so profitable. It is the latter
that we are addressing here.
Everyone knows the keywords of luxury: price, rarity, exclusivity, perfec-
tion, history, art, time, dreams, etc. It is important to revisit each of them in
depth if we are not to fall either into a mechanical conception of luxury, made
up of very high prices and Hollywood celebrities, or into an excessively clas-
sical and historical acceptance of luxury. This latter, worshipped in Europe,
admittedly has the effect of excluding new pretenders, but conversely also of
fixing in time those brands that devote themselves to it, since it prohibits all
evolution on their part. It is not a coincidence, for example, if for very wealthy
clients the world over, the notion of ‘premium’ alcohol appears more modern
than the classic notion of ‘luxury’, which is associated too much with images of
old alcohol, drunk with a big cigar, by the fireside, a Labrador curled at one’s
feet, a mode of expression that then immobilizes it. The new wealthy buyers
are young and eager for powerful impressions.
New luxury brands, or at least aspirants to that title, will always appear.
They will come from emerging countries: India, China, Russia, but also from
Facets of luxury today 77
the USA and Europe. The goal of this chapter aimed at luxury brand execu-
tives and those who would like to be so is to pursue the exploration begun in
the first historical chapter of what constitutes the specificity of luxury, by
examining the exact nature of the links that luxury maintains with the notions
that are so spontaneously associated with it (label, rarity, exclusivity, relation-
ship with time, tradition, history, handiwork and complexity) and by revisiting
its links to fashion and creation, to art... in today’s context.
In a traditional society, the social order cannot be questioned. This is still the
case with castes in India. In monarchical France, luxury was the obligation of
power: ‘étiquette’ was formal rules that regulated visible consumption and
expenses, visible to the court, in order to maintain one’s position there. Under
the Ancien Régime, in the context of this ‘étiquette’, the ‘sumptuary laws’ were
promulgated ‘so that none can dress like a gentleman if he is not’: it was neces-
sary to regulate appearances (Sapori, 2005, page 39).
‘Étiquette’, however, fell into abeyance towards the end of the Ancien Régime,
and with it the sumptuary laws that regulated the usage linked to clothing in
society, reminding each to remain within their position, their rank. In the
absence of laws, clothing quickly became a field of competition, of rivalry for
social recognition, some will say of coquetry and vanity. The merchants and
the bourgeois could finally rival the nobles, the class in power. These rules
therefore officially disappeared, but not the rivalry or the need to express a
scale of recognition of a form of social hierarchy. In our democratic, egali-
tarian, even presumed classless societies, luxury is linked to meritocracy: it
represents the medals thereof. It is, moreover, revealing that we have moved
from ‘étiquette’ to the luxury brand, which is written on ostentatious labels
(the French word ‘étiquette’ is the exact translation of the English word
‘label’). 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. Admittedly, nowadays a certain fringe clientele asks for more discreet
signs from today’s brands: but this is to distinguish themselves from buyers of
access products, to signal their distance from those who show off their logos.
The French Revolution brought the abolition of privileges, a new ruling
class – elected this time – and egalitarian ideology. More importantly, the
British Industrial Revolution brought mass production. Automatically, prices
could fall if demand was high. It was therefore necessary to stimulate demand.
The emerging capitalism created new fortunes, as did the globalization of
exchanges linked to colonization. Economic power was no longer an inheri-
tance, a right, but something acquired. Through enrichment linked to work,
we could buy better-quality, manufactured products. The imitation of power
was the lever for more costly acquisitions, but also for the appearance on the
market of imitations of the objects of power: the growing importance of acces-
sories in the so-called luxury market is etymologically ‘access via series’. This
imitation of power made it possible for anyone to rise above their condition, to
accede to pleasures and sensations, finally to become someone, to cease to be
just one of ‘the people’ by imitating ‘those people’, the ones who really have
power. In order to exist, you must be elevated; you must raise yourself up.
This is why the luxury market and its appearances were born: to provide
everyone with the means for a provisory, even fictitious elevation, a fleeting
pleasure. We can imitate the signs of wealth, without being wealthy: this is the
Facets of luxury today 79
case with clothing in particular, and accessories, if they exhibit the requisite
seal, the brand.
The Asiatic countries’ penchant for luxury is thus easily explained. These
countries have moved from caste to ‘class’, not so much the sociological
concept as the evaluation of yourself and your position relative to others. To
have or not to have class, without, however, differentiating yourself to excess.
The popular saying is ‘vox populi, vox Dei’. In luxury, it is the reverse. In
order to become a grand master of taste, it is certainly necessary to have talent
and inspiration, but also the recognition of a clientele whose choices shape the
public opinion that will follow them. Under Louis XIV, it was said that to
please a countess opened up the region, but to please the Queen opened up
France. The Prince of Wales, the future King Edward VII, used to say of
Cartier that he was the jeweller of kings and the king of jewellers. The only
thing that changed is the countesses and the kings and queens. It is no longer
the nobility, but the billionaires’ wives, the captains of industry, the great fami-
lies of the economy, or yet the young, successful CEOs of the new economy, or
the cultural stars, foremost among them those of the dream factory that
Hollywood is.
It is therefore the union of the two factors above that creates success, not the
product alone. It is not insignificant from this viewpoint that an internet site
reveals who are the famous buyers of new brands: for the new Swiss luxury
watch brand, Richard Mille, born in 1999, whose models are priced above
N450,000, they mention Juan Carlos I, the current King of Spain. Many
brands in vogue today in Moscow are those that already had access to the court
of the Tsars, like the champagne house Veuve Clicquot: although dismissed by
the Soviets, the tsars have not lost their cachet in the eyes of the Russians.
their needs (usage value); it does not present a Ferrari in terms of its ability to
enable the client to travel to the office, but as the incarnation of unique, succes-
sive know-hows, expressing a unique design, and therefore a sign of a product
culture, which can be best shared and explored through its successful expres-
sion in the product. There is therefore a wise and mysterious mixture of intan-
gibles (a lineage, a heritage, a single concept of the product drawn from a
founder and which must be respected to the letter), added to implementation
processes that contain something of the miraculous: the miracle of rare ingre-
dients, mixed with preserved know-how, golden-fingered artisans, according
to codes and procedures that are unique to the brand...
The luxury of the product is demonstrated through the guarantee of the
means implemented upstream, by an imaginary attached to the production
process that speaks of excellence, non-substitutability and rarity. Krug’s Le
Clos Du Mesnil (N800) comes from a single site with limited area, has been
matured over time, and respects the requirements of the Krug house, itself
forged over time. Its harvesting and its elaboration derive from knowledge,
and each time the cellarmaster produces a miracle. Luxury watches for men
are characterized by an incessant search for greater complexity, without
complicating the usage of these watches.
This is why luxury needs an expert and passionate sales force. It is necessary
to take the time to explain all these qualification processes so that the incom-
parable value of the object can be appreciated: a value that does not depend
on the client, but exists prior to the client.
The luxury of an object is also demonstrated through the renown and taste
of the people who have appreciated it: by qualifying these followers, we also
qualify the object of their passion, and at the same cause it to benefit from an
additional halo of desirability.
number of daily prayers, the length of religious services, etc? This is why
Lexus, the brand of the Toyota group, is not luxury despite its name: its first
advertising campaign in the USA claimed that, for the first time, it was possible
to buy a cheaper car than a Mercedes E-Class, while in reality buying a more
advanced vehicle.
It is important not to underestimate the ‘non-comparative’ dimension of
luxury: it explains its commercialization and communication. These require it
to be placed at a distance from all competition:
• Via exclusive distribution where the brand is 100 per cent in charge of the
location and can make its identity felt, organizing the sensory and
theatrical staging (‘living the brand’).
• Via a selective distribution where great care is taken that other compa-
rable brands are not present, side by side.
• Through the need for a discourse on the origins (Where does the product
come from? Where does its form of design come from?), which in itself
requires an exclusive seller through the filial respect for founding, inherited
values, a veritable religion internal to the brand that makes it equal to no
other, incomparable, and makes the product almost a communion wafer.
• Via advertising communication that loves the almost-empty double page
spread, with the goal of creating empty space around the object
fashion clothes have become a porous means for signifying distance. They
have become widely accessible to all, even that of creators and couturiers.
Every young Chinese manager wants to wear Boss or Armani; it is the new
armour of these conquerors of the new world. This is why the distance
requires a quantitative dimension: the most expensive objects place the
distance beyond the reach of its pursuers. They signal a greater success
(Pannekoucke, 2005, p. 67).
The CEO of Yves Saint-Laurent, Pierre Bergé, used to say that it was the
obligation of luxury to offer objects and not products, to be a space for enjoy-
ment, not consumption. In fact, the object needs to be learned to be appreci-
ated. It therefore distinguishes those able to appreciate it. Haute cuisine exists
only because we have at the same time both great chefs and true lovers of food.
Gastronomy implies a penchant for hedonism: haute cuisine is not only the
empire of the senses: it claims to be an art, an idea, inspired creation that you
either do, or do not partake of.
Some cultural baggage is therefore necessary to appreciate luxury. In fact,
the two individual factors that do most to explain the consumption rate of
luxury products are firstly cultural capital, and secondly income (see again
Chapter 5). It is certainly no accident that Louis Vuitton was successful in
Japan. This success is due to numerous causes, but one of them is little-
known. In Japan, ‘LV’ had the obvious legitimacy of being a source of valu-
able objects in the eyes of the elite. The monogram canvas created in 1892
carried small geometric signs that had no meaning for the average
Westerner. In fact, they are Mon signs, linked to Japanese heraldry; in 1892
Europe was in the grip of a Japanizing current, whose aesthetics influenced
the design of the canvas. This was immediately decoded by the Japanese eye
as a sign of intrinsic value. The Relais & Châteaux chain carries the word
‘Châteaux’ in its name, directly evoking old, historic buildings. This positions
the brand and anchors it in history, although this type of product in fact
represents only 20 per cent of its offer.
it, nor proudly reclaimed it as their own, not in order to replicate the past, but
to reclaim an ancient, noble tradition, which would of course be embodied
today in contemporary works and objects.
Once China has recovered confidence in itself and its culture, there is no
doubt that great Chinese luxury brands will appear, recreating the link with
the past; Shanghai Tang is showing the way, via bi-cultural management
(Joanne Ooi was born in Singapore, but grew up in Cincinnati, and the
company was acquired in 1998 by the Richemont group) and not yet purely
Chinese, but how disappointing to find in Shanghai itself only the Western
luxury and mass-prestige brands: Boss, Burberry, Prada, Armani... To borrow
Chadha and Husband’s expression (2006), the new Chinese do not know
Mozart or Beethoven, but they know Vuitton and Prada.
There can be no luxury brand without roots, without a history to provide
the brand with a non-commercial aspect: it constitutes a fabulous treasure
through the mythologization that it enables, by creating a sanctum of unique-
ness, of non-comparability, while being the origin of an authentic lineage to
which each new product can lay claim.
The European brands, born with history, draw great self-confidence from it,
a great uniqueness and a cult of inherited values that translate into products
that religiously respect these values. Thus, what fascinates rich Chinese
seeking to invest their fortunes are the seven generations of bankers of the
Maison Rothschild, even though it does not advertise in their country.
Note that what is important is not simply the history, but the myth that can be
created around it, the source of the brand’s social idealization. Writing
‘Established 1884’ does not make you luxury: it makes you old. You must still
signal some additional qualities about both objects and people. Madame Cliquot
might have remained an inconsolable widow upon her husband’s death: in vari-
ance to the customs of the day, she assumed the reins of the company and
continued delivery of champagnes to the tsar’s court. An epic saga was born.
If there is no history, it must be invented. This is what modern American or
Italian brands do, since history inverts the relationship with the object and
with the client: it is not a case of immediacy, but of lineage, of inheritance.
Visiting any Ralph Lauren shop, you are struck by all the black-and-white
photos outlining the American way of life of the 1950s. Ralph Lifschitz was a
teenager at that time. Moreover, this lifestyle, these characters, these cars,
these houses, these pastimes (polo) are themselves highly typified: a pure
emanation of the closed world of the WASP (white Anglo-Saxon Protestant),
far removed from that of Ralph Lifschitz, but from which he borrowed the
mythology in order to create a brand and change his own name. At the begin-
ning of its very new life, Tod’s, makers of designer footwear, also flirted with
advertising evocations of stars such as Cary Grant, Audrey Hepburn and
David Niven, as if they could have worn its shoes. The brand also allowed a
86 Back to luxury fundamentals
• The first Panthère jewel dates from 1949: it is true that in Paris, the wild
cat had been in fashion since the 1930s. Sarah Bernhardt welcomed visi-
tors to her home while holding a panther on a leash. It became a line, and
25 designers work continually to renew it.
• The Trinity ring was inspired by Jean Cocteau, in 1924: it is regularly
reinvented.
• The Love bracelet with its screws dates from 1969.
• Cartier innovated by producing the first watch on a leather wrist strap, a
gift for the pioneer of aviation Santos Dumont so that he could check the
time without letting go of the controls.
• Tank, one of the most famous Cartier watches, is 90 years old: it was a
homage to the Allied tanks in the First World War.
How then can you create luxury if you are a recent brand, and therefore without
the history of a brand such as Mellerio dits Meller, the jeweller whose house
dates back to 1613, or Krug, which is 160 years old, or the Chanel house born at
the beginning of the 20th century (No 5 was launched in 1921)? One thing is
certain: the most dynamic brands have, among other things, a patrimonial
historical element: a true, authentic history, which gives them hindsight, depth
and consistency both internally and in the eyes of clients. At this stage we should
however distinguish three types of history, all levers of the imaginary:
founded in 1886 is not enough: you need a founding myth, such as that of
Veuve Clicquot, regularly updated by the Veuve Clicquot Prize for the
female entrepreneur of the year.
• The reappropriation of true historical elements in the service of a recent
brand. Thus, the character ‘Dom Pérignon’ was invented recently (in the
1950s), but through its name has been able to borrow from and enrich a
true, myth-building history: that of the monk Pierre Pérignon, who in
1665 accidentally created an effervescent straw wine, which became the
wine of the Court at Versailles, and was said to make women more beau-
tiful. Moreover, according to the legend, the form of the champagne glass
mirrored the shape of Madame de Pompadour’s breast. Other very
recent, so-called luxury brands, have made use of historical elements: the
Swedish vodka Absolut, or the Dutch Ketel One.
• The creation of a new, contemporary legend (Kapferer, 1990). Gucci
hints at a noble origin, linked to a great Renaissance family. Ralph
Lauren himself plays at being the modern incarnation of The Great
Gatsby, his shops designed like homes giving life to an imaginary of
English aristocracy and its accompanying lifestyle. The Italian watch
brand Panerai, born in Florence in 1860, draws its slogan from this:
‘Inspired by the past, built for the future’. But the history does not always
need to be that of the brand itself; it may be the history of its universe of
expression. This is the case for new brands: Shanghai Tang takes its inspi-
ration from the Shanghai of the 1920s and 1930s, an era where the demi-
monde and unheard-of refinement mixed together, as the brand’s
website recalls: hence its ripped dresses and its colourful Qi Pao.
them wherever they may be in the world. Time to allow nature to conduct its
miracle, even if synthetic versions would not be detectable to the client, but
would nevertheless reduce the object’s power to create fascination. The time
embodied in the number of years required to qualify as an exceptional artisan
(competence): the great alcohols are not an exact science, but the fruit of assem-
blages, such as those carried out by the makers of a perfume. The time, natu-
rally, of the manufacturing process, painstaking and magical, like that of the
maturation of a great cognac or whisky in barrels made of a wood that is itself
rare. There is also the time embodied in the brand, in the form of a concentra-
tion of transmitted, inherited, respected and venerated values. As noted above,
recent brands create a history for themselves, true or false, which makes it
possible to incorporate precious time into the products and their meaning.
The time of the luxury brand is embodied in renewed creators. It is signifi-
cant that Gian Franco Ferré and, later, Karl Lagerfeld, when they comment on
their Chanel collections, take a step back and seem, according to their state-
ments, only to rediscover what Coco Chanel would have done in 1920 or 1930.
In fact, when they put their names to their own collections, or on other brands
(Karl Lagerfeld collections for Fendi or H&M), these two creators design some-
thing entirely different from what they do for Chanel: although audacious,
even provocative, their collections remain Chanel; they have grasped the soul,
the design and the drawing of it. Moreover, when Karl Lagerfeld accepted the
artistic directorship of the Chanel brand, he spent a long time immersing
himself in the house’s archives, with his famous sketchbook, in order to under-
stand properly the semiotic grammar of Chanel, in order to speak its language.
Finally, let us note that time is part of the sale, and the purchase. The two-
year wait for a Ferrari falls within this domain. The time that the salesperson
will spend with the client does also. The time spent accessing the product: the
successive shells that must be opened, in order to have access to the product
itself. These successive wrappings are themselves settings and screens: they
project the famous brand name, the talented artist, even as they slow down the
process of discovery, and will be thrown away immediately afterwards (there is
no luxury without waste).
The final dimension of time is that of the time of consumption itself: the
great chefs are artists of the moment. This is why the cuisine of great, starred
chefs is a ritual that requires time: the guests must take time too, between each
course. This intensity of time spent together to which an alcohol may be
invited also explains why certain alcoholic drinks qualify as luxury objects and
others are disqualified. White rum is certainly linked to moments of joy, but
they are too profane, too much in the immediacy of the euphoric effect.
Time is celebrated in luxury: hence brand museums, the hymn to the
founders whose soul, and precepts, are respected, the itinerant global exhibi-
tions to recall past splendours (such as the Cartier exhibition of haute joaillerie),
Facets of luxury today 89
the systematic republication of old models, the durable sales of the oldest
models – Chanel No 5, Nina Ricci’s L’Air du Temps – the time that accumu-
lates forges uniqueness, mythology, and therefore value, if it can be mixed
with modernity, with what resonates with today’s clients.
The search for a dose of timelessness in luxury also concerns the products
themselves. At the time of the first collection by Christian Lacroix, an impa-
tient Bernard Arnault asked the creator where his ‘timeless’ elements were
(Télérama, 15 August 2007).
In order to conclude our discussion of this facet, it is one of the more signif-
icant paradoxes of luxury that it must maintain both timelessness and trendi-
ness at the same time: of course the two approaches go together, compensating
for the failures of too much timelessness (boredom) and too much ephemer-
ality (superficiality, the fashion that falls out of fashion): hence the importance
of limited lines, special editions, all by allocation...
It becomes all the more necessary to implement this trendy facet when the
luxury brand is obliged to be enrolled within a ‘tradition’. Once the word
‘tradition’ has been used, there is a risk that it will evoke mummification,
imprisonment within the past. This is the case if the brand does not offer the
necessary ruptures and distances that characterize luxury. It becomes self-
repetition and no longer forms relationships with today’s world.
advertising is, ‘Begin your own tradition’: this shows a father and son, both very
modern. Blancpain describes itself as ‘a tradition of innovation, since 1735’.
In the same way as the modern upper-range brand boasts of a technological
leap forward, and runs after ‘best product’ rosettes, so the luxury brand boasts
of its lineage, and places itself in the context of a tradition. The word ‘tradi-
tion’ does not mean dangerous petrification; it means respect for the values
and manners that have carried it through time. This is also why there is no
luxury without a dose of manual labour.
• There are more and more rich people, and very rich people. Thus the
demand for Ferraris has never been higher: to the American, South
American and European markets can now be added those of Russia and
China, where the liberated entrepreneurial class and show business create
billionaires. Ferrari could therefore double its production, maintained
today in an objective (industrial restrictions at Maranello) but also a
subjective rarity (mastery of what luxury means). Can they respond to the
goldmine that Asia represents, while maintaining objective rarity?
• In Asian countries, the importance of social integration is such that
everyone is ready to pay high prices to buy ‘instant class’. Japan was the
first to demonstrate that it was possible to sell at a high price and in high
numbers. This is why all the Western luxury brands have rushed to install
themselves in Asian shopping malls and department stores, where the
crowds file past the windows to learn of an international lifestyle, and to
buy a sign of it, an object to mark that they too belong to this universe that
gives rank. The fact that Japanese ‘office ladies’ all carry the same Louis
Vuitton handbag does not worry them; on the contrary. In Japan luxury is
a luxury of integration: too much rarity would therefore destroy the
brand’s value.
The business model of major capitalist luxury groups is to sell for mass
consumption products that are labelled by a luxury brand but are no longer
themselves luxury, hoping that this edifice will survive, and that the halo of
luxury will be continually regenerated through communication and exceptional
92 Back to luxury fundamentals
and specialists of male high luxury fashion. In 2008 it was the Royal Qiviuk,
where it was necessary to pay N1,840 per metre of fabric to wear a suit made of
this fabric: it came from the inner fur of the musk ox, an animal living in the far
north of Canada. Its short, fragile fibres are collected by hand by the Inuits.
They are mixed with Super 200s wool and cashmere.
Cosmetics are fond of rarities emerging from research, which play the role of
technological rarities. A brand such as La Prairie is known for its ‘Caviar Luxe’
cream, selling at N328 per 50 ml. In 2007 this brand also launched a serum with
pure 24 carat gold, already used in medicine as an anti-inflammatory, priced
N514 per 30 ml.
Second, technical rarity: it creates an impression of rarity through the ultimate
demand for perfection. In Newsweek of December 2007, the advertising catchline
for the Rolex Oyster Perpetual model, is ‘Pure Rolex’: it talks of its exclusive
foundry, which creates new and exclusive alloys of absolute purity. Likewise
Richard Mille boasts of its technological alchemy on its website: ‘metallic alloys,
ceramics, carbon nanofibres, silicon: a watch like this does not contain any stan-
dard parts’. The Black Centurion payment card, from American Express, also
plays with this strand: it is made from anodized titanium. Likewise all the new
upper-range vodkas introduced in the USA since 1998 have launched a pursuit
after purity, each adding another distillation for even more transparency and
purification, like a mystical quest for a purifying grail. Grey Goose, a luxury
vodka made in France and sold at a higher price than all the others ($37 per
litre), is distilled four times, reaching a kind of purified essence, cleansed of all
impurities, which makes for a kind of quasi-rarity at the imaginary level. It boasts
of being the ‘World’s best tasting vodka’, a title received from an Institute in
Chicago. Everything about it therefore says rarity, but reality permits volume: it
has the strongest growth in its segment and sells 4 million cases per year. Saying
that it takes 10 years to train an artisan capable of working on the mechanism of
a Cartier watch evokes rarity, but does not give away the number of artisans.
Third, the rarity of the production itself. This is the logic of self-limitation of
demand, of limited series, announced on the sly to the elite for pre-orders and
to wind the spring of desire through the emulation of those who will display the
product before everyone else, in this intra-class rivalry to signal pre-eminence.
Ferrari limits its production, hence the waiting lists that increase desire.
Fourth, the rarity of distribution also creates an impression of rarity. Lacoste
is seen as a luxury brand in China, because the brand, which has only recently
opened there, is only present in the best department stores, and in a few own-
brand boutiques in Beijing and Shanghai. The reverse is true in Japan, where
the brand, which has long been entrusted to a local licensee, was distributed in
neighbourhoods and shops that scarcely evoke luxury. Montagut represents
the extreme in rarity of distribution: this brand of sweaters with Fils Lumière
made its reputation in China by buying huge advertising posters – which were
94 Back to luxury fundamentals
very cheap at the time – when it could not be sold in China, and its distribution
was therefore non-existent. By creating recognition without distribution,
Montagut created the dream of what people could not buy.
Fifth and finally, informational rarity capitalizes on the rarity not of the
objects, but of the famous people who wear them, or who frequent such-and-
such a hotel, spa or restaurant. The constant feed of scoops, false rumours,
false secrets, etc is also aimed at increasing the virtual rarity through the
dissemination of things that we should not have known about. Exclusivities
disseminated through the press have the same effect. Informational rarity is
also built through the use of the word rare itself in product labelling, and the
names of products themselves (Lancôme’s Rare cream). Rumour has it that
only 10 Brazilians have an Amex Black Centurion card: this type of rumour
also increases the perceived rarity. Table 4.1 sets out the five types of rarities.
In modern luxury, it is therefore necessary to know how to distribute rarity
without rarity. Rarity is managed, or even simulated. After the Gulf crisis of
1991, champagne entered a crisis: falling consumption, increasing stocks.
Consequently, throughout LVMH the order of the day was to push the
volumes. As we saw in Chapter 3, in luxury prices must constantly move
upwards, which is contradictory with a volume strategy. If Moët raised its
prices 10 per cent, its volumes would immediately fall by 10 per cent to 20 per
cent: Moët is not a luxury brand. Dom Pérignon, a luxury brand, also under
pressure from the logic of stock reduction, decided to put all the major
accounts on allocation. When these accounts were preparing, during the
annual renegotiations, to complain of business slumps and exaggerated
prices, Dom Pérignon wrong-footed them by telling them that in any case
there would not be more for everybody: each major distributor was therefore
offered a contractual volume lower than the year’s sales, and told to think
themselves lucky, in addition to a 20 per cent rise in prices, conditions and
restrictions. Dom Perignon thus succeeded in achieving the systematic rise in
prices, without loss of volume.
The difficulty for the emergent luxury brand is to know when to open up, to
be less exclusive, in order to become profitable. In order to open up, it is
necessary to have already created an inaccessibility that is a source of desire.
From his first lunch with Bernard Arnault, Christian Lacroix told him that he
wanted to work on affordable prêt-à-porter. That year, the year of the first haute
couture collection by the young prodigy under his own name (he had previ-
ously designed for Jean Patou), Elle, the women’s magazine, asked him how
people could dress in the Lacroix style on a tight budget. Arnault declared
that he had lost face when he came across the article (Télérama, 15 August
2007). For him, it was clearly too soon. What would have been acceptable to
launch a ‘creator’ of classical fashion, was not so for a young luxury brand that
needed first to become consecrated as such.
The need for exclusivity and public honour explains why luxury today
increasingly nests within the service sector. Therefore, all around the world,
we are witnessing the renewal of first class air travel, which had disappeared
for a time in favour of frenetic competition between the airlines on business
class, to turn it into the haven of peace and serenity so necessary to the major
international manager (see also page 261).
The example of the airline clearly demonstrates the paradigm we
witnessed in the first chapter, namely that the need for luxury is broadened
by democratization, the so-called classless society. There has never been such
variance between the prices of different seats within a single aeroplane as
there is today. Admittedly this is due to the need to provide a few seats at very
low prices to retain clients attracted by the ‘low-cost’ airlines such as Ryanair
and easyJet. At the other extreme, however, the offer is also becoming more
sophisticated, either by the creation of ‘trading up’ segmentations from
economy class, such as the Economy Premium class introduced by Virgin
Airways for those paying the full fare, or at the top end of business class such
as Iberia’s Business Plus or British Airways’ Club World, and finally the
‘Must’ of comfort, the new first classes. Luxury is the watchword of first class,
comfort that of business class, and for the shrewd there is economy class. The
decoration of the first-class cabin, like any luxury clothing, is entrusted to
famous designers such as Terence Conran for British Airways. Revealingly,
the difference between first and business class is seen less in the products:
some business classes also now offer proper beds.
Let us look again at our anti-law number 8: ‘Protect… the big from the
small’: the first pleasure of a traveller in first class is to be truly a person apart
– both literally and figuratively. The Senior Executive Vice-President of
Singapore Airlines, considered the world’s best airline, Mr Bey Soo Khiang,
gives a succinct summary of the key to first class: ‘First class must offer absolute
exclusivity, a golden segregation... the first class passenger must enjoy the
luxury of being totally separate from the other traveller flows. To pay for first
Facets of luxury today 97
waiting time is around five years, or the restaurants and clubs of Dashanzi, a
north-eastern neighbourhood of Beijing, abandoned factories turned into
artists’ lofts but also into incredibly fashionable, selective premises and
ultra-private clubs mixing ultra-modernity with references to the past,
where the now-wealthy Chinese, young entrepreneurs and successful artists
mix. It is about finding yourself among your peers, away from others, to
signal this distance.
Remember how the car brand Lexus has used this typical trait of luxury. At
Flushing Meadows, the New York home of the US Open tennis tournament,
the brand has conspicuously reserved two car parks for the exclusive use of
Lexus drivers. There is also, moreover, a valet service, and finally you are
accompanied into the stadium itself. In Australia, Lexus has created the Club
Encore giving priority access to the city’s operas, restaurants and, naturally,
the closest car park.
structural proximity that luxury brands have always had with art, in particular
contemporary art, since they too are desirous to be included in the disruptive,
the beautiful, and the timeless, the sources of the trends that will make up the
beautiful of tomorrow.
Today, following the pioneer Cartier and his Fondation pour l’Art
Contemporain, all the major luxury groups are now encouraging all types of
arts, through their foundations (the Gucci Foundation in Venice, the Louis
Vuitton Foundation in Paris...). What are the drivers, motivations and work-
ings of this intimate link?
First of all, luxury for billionaires means being able to buy the very rarest
and to possess it for reasons of exclusive enjoyment. The systematic price rises
in art at the moment indicate that the world is growing richer, and that this
movement brings with it a pressure of demand for the most unique, refined,
beautiful, timeless, and famous art.
Billionaires themselves have a desire to leave their imprint behind. Hence
the foundations and the patronage: princes and kings have always encouraged
artists through sumptuary orders. The prodigality of their patronage attested
to their power and made it possible for the work, once completed, to be seen by
all, especially when it related to paintings or the decoration of buildings, most
often religious, hymns to the greatness of God, or royal or public buildings.
Many of the artists of the Renaissance had reason to be grateful to these
patrons: in addition to money, they were bringing them fame. Nowadays the
patron also acts as a consecrating agent on the work and the artist: the patron is
the ‘gatekeeper’. With them, the doors are opened to the aristocracy of their
rank; in order to avoid standing out, they will follow the patron’s choice.
The predilection of luxury billionaires for art has is founded on identity: it
perpetuates the idea that the function of luxury is the aestheticization of society,
the overtaking of the material by the spiritual, elevation through beauty and
art. In short, the accumulation of material wealth should encourage and offer
elevation through the intangibles – here the arts – to all. In addition, the
mythology of luxury must be maintained: it requires temples. We are talking
here of the founding legend: that of the artisan (art-isan), the iconic figure in
the imaginary of luxury manufacturing. The more luxury brands are built on
houses whose growth is achieved through industrialization and long series, the
more this luxury industry will venerate the unique, authentic piece. It trans-
mits this myth-building veneration to the media via art.
The emergence of the luxury market through its democratization, and
therefore de facto the logic of series, makes the upkeep of the myth of arti-
sanal, manual, coded production, respectful of tradition, more indispensable
than ever. The reference to the pure artist, and the financial support, are a
way of being included in this consecrating lineage, without ever speaking
about the reality of the artisans.
100 Back to luxury fundamentals
Historically, art was essentially religious: the great and good of this world
ordered works to embellish and build sacred buildings, to the glory of God.
Art accompanied the religious rituals: there was no religious object that was
not in itself a work of art, an expression of the utmost refinement that the arts
and sciences of the time would allow. Of this reference, a sacred dimension to
art remains, through the elevation of souls with which it was associated.
But if art in its modern conception has become profane, it remains a sign of
culture, of the capacity to appreciate the intangibles, and not only to possess
them through the effect of accumulated wealth. Luxury brands wish to create
this vertical dimension. Moreover, while production in series has given rise to
the luxury market, art is the market of the single work: the flirting between
luxury and art also sustains this mythology.
Art also makes it possible to nurture the specific relationship between
luxury and time, which differentiates it from fashion. Luxury nurtures the
myth that it is timeless: just as fashion – as required by the economic system –
organizes obsolescence on a massive and annual scale with the help of women’s
magazines, so luxury aims at timelessness. A Ferrari gains value over time;
part of the Maranello workshop in Italy is dedicated to maintaining the 38,000
Ferraris of all ages sold worldwide. Art, by its essence, aims at eternity: the
work will survive the creator and, over time, his epoch. This is how luxury
attempts to signal that it is not simply merchandise.
PART 2
5 Customer attitudes
vis-à-vis luxury
Who are today’s luxury clients? What characterizes them, at either the socio-
professional or sociocultural level? How many types of relationship to luxury
are there?
banks and private banking, either local or offshore. As 61 per cent of HNWIs
are over 56 years of age and as everywhere the consumption of the 50–64 age
bracket in numbers of luxury brands bought is markedly inferior to those in
the 35–49 age bracket, and that of those over 65 is even less (Dubois and
Laurent, 1994), it might be assumed that the expansion of the luxury market
is not occurring among HNWIs over 56.
More recent data leads us, however, to recognize that the gap being created
between these HNWIs and the rest of the occasional luxury clients, nicknamed
‘day trippers’ or ‘excursionists’, primarily buyers of accessories or of products
that are mere brand extensions at accessible prices. In fact, according to the
American publisher Forbes, the Cost of Living Extremely Well index is moving
ever further away from the index of current prices (see Table 5.1).
These figures show that the financial resources necessary to live a life of
luxury become extremely large and out of all measure with incomes in line
with the current cost of living. This is important, since if they run after the day
tripper clients too much, who are admittedly numerous but only buy occa-
sionally, luxury brands may be discredited among the HNWIs, where the true
potential luxury market lies. For them, only brands that have managed to
maintain their distance will be strongly attractive.
To be rich or to be modern?
For RISC, an institute that has been following the purchases and motivations
of luxury clients for more than 15 years, the luxury clientele is defined less by
its sociodemographic profile than by its behaviours, its purchases of products
from so-called ‘luxury’ brands. RISC evaluates the core of the luxury clien-
tele throughout the world at 80 million people: 32 million in Europe, 36
million in the USA and 12 million in China. Interestingly, two competing
factors may explain the rate of luxury purchases in one person: the income
level, of course, but also the person’s ‘modernity’, that is their openness to
change, to external influences. According to the data published by RISC,
clients with smaller incomes still purchase luxury when they have a modern
orientation. Conversely, someone who is extremely rich but not modern, a
Table 5.1 Comparing the cost of living and the cost of living extremely well
hoarder who may invest their fortune in furniture and art, may be less of a
luxury client.
Let us examine the data from global surveys (Dubois and Duquesne, 1990) on
12 million frequent purchasers of luxury in Europe (see Table 5.2):
• higher incomes account for 61 per cent of luxury’s ‘heavy users’, but 39
per cent of multiple purchasers are not among the most wealthy;
• sociocultural modernity (mobility, openness to change) plays an equal role
alongside money, since 60 per cent of the heavy users are socioculturally
‘advanced’.
Let us look now at Table 5.3, which relates to the penetration rate of luxury.
The percentage in each sociocultural case indicates the proportion of frequent
luxury purchasers in this type of population segment. We have summarized
the analysis of the overall European population into four segments: rich
versus non-rich, and ‘advanced’ versus ‘more conservative’ on a sociocultural
level. We can see how much the ‘modernity’ of the individual promotes the
acquisition of luxury objects. According to Dubois, ‘to move into modernity is
to double the probability of acquiring luxury products among the rich –
moving from 5.4 per cent to 11.3 per cent – and from 2 per cent to 5 per cent
among the less rich’.
What does the analysis of these sociodemographic factors teach us? Are they
linked to the propensity to buy luxury objects or products from luxury brands?
either in favour of much less expensive, low-cost type products, or for prod-
ucts that offer rather more in terms of image and perceived quality. L’Oréal
Paris is the typical brand of masstige clients: it imitates the codes of prestige
brands while communicating to the masses, for example on television – its
non-selective distribution network requires this. Italian brands, such as
Armani, also know how to capture this demand for trading up: they offer a
wide range of prices, adapted to the client and the circumstances of use.
This fourth type has a quantitative approach to luxury: they buy the most
expensive items to mark their success and share this pleasure.
In China, India, Brazil or Russia, it is the very expensive and status-loaded
Mercedes S-, M- or E-Class that sell. These are de facto inaccessible cars.
dream, to give status through the people who testify to the brand’s rank.
Having said this, the product must be adjudged to be without equal.
Moreover, in this culture, it is customary to subject the product to tests and
comparisons, which brings luxury closer to premium, since performances will
be compared. Thus, for Robert Parker, whatever the history linked to a classic
grand cru, it must be scored like any other wine.
An examination of luxury brand strategies clearly shows these two brand
construction models. The first is based on product quality taken to the
extreme, the cult of product and heritage, History with a capital H, of which
the brand is the modern embodiment. The second is American in origin, and
lacking such a history of its own, does not hesitate to invent one. These New
World brands have also grasped the importance of the store in creating an
atmosphere and a genuine impression, and of making the brand’s values
palpable there. America invented Disney and Hollywood – both producers of
the imaginary.
Luxury by country
These three axes make it place to situate countries according to their relation-
ship to luxury. If France can boast of having given birth to modern luxury, the
luxury market, for its part, can hardly count on the French. In fact, in this
country, a principle of non-ostentation reigns, where wealth must be hidden:
we buy Peugeots, not Jaguars. France is brought up on a vision of intimate
luxury, for the connoisseur, where history, know-how and detail are consumed,
Customer attitudes vis-à-vis luxury 111
before enjoying the object on its own terms. For the French, luxury is pleasure:
hence haute cuisine. Italy is inspired by art. The United States wrote into its
constitution that the pursuit of happiness was a duty and a right: in short, you
become happier through consumption rather than through pleasure. You
progress through life through more comfort, more performance, and more
efficiency. A country of builders, here everything must have a functional alibi. A
diamond is forever, so in addition to professing love, it is also a good invest-
ment. A Porsche is beautiful, but with its high reliability also has a good resale
value. A Nautor Swan yacht has exceptional navigation qualities. It is always
necessary to be able to talk of the superiority that the luxury object confers.
The emerging countries of luxury (Russia, China, etc) are very different.
Like the USA they are countries where you can climb the rungs of society
through economic success. Having done so, you then wish to benefit your clan
through it and make it widely known. It is a more hedonistic, sensual relation-
ship with luxury, where the signs of value must be strong, known and recog-
nised: you drink the special cuvées of the great names of champagne, as if at a
historical potlatch. Luxury is in the present tense, the intense and emotional
sharing of a renowned brand. You exist through luxury.
An examination of Figure 5.1 should not, however, deceive the reader or the
manager. The first mistake relates to the deep function of luxury: remember
that luxury is not premium. Luxury is there to recreate the distance, the gap, to
signify the inequality in riches, status and culture. It would be a mistake to limit
this key function to only one of the four quadrants: in reality each of them – our
four types above – seeks to mark the distance, in its own way. For creators or
managers of luxury brands, there are therefore several ways of offering this
manifestation of absolute distance. Krug and Dom Pérignon do not play in the
same quadrant. We would have to invent four luxury champagne brands.
With time and growth, however, the four quadrants should not be seen as
exclusive. If a brand begins its existence in one particular quadrant, it will
necessarily have to express itself in the other quadrants later: otherwise it
risks seeming frozen, anchored in a single model of representation of luxury.
Moreover, with the desire to renew its clientele comes the need to separate
the modes of expression according to the different clienteles, and according
to the range levels – all this for a single brand. Cartier does not communicate
in the same way on haute joaillerie and on its ‘Must’. Chivas, likewise, does not
do so on 12, 18 or 25.
Disruption as a way
of re-distinguishing
oneself
Discreet Stories
authenticity displayed on
oneself
Integration into an
aspirational world
two characters (she chi): the first means ‘important people’, the second
means ‘much’. As we can see, luxury in China relates to VIPs: through
luxury you become someone important, or simply someone. You acquire an
immediate distinction. China is the country where the number of dollar
billionaires shows the highest growth: they will desire distinctions in line
with their success.
In a society of nouveau riche, very rich, such as India, since business is an
Indian talent, it is necessary to make a great show of your power: after private
helicopters come yachts paid for in cash. There is a genuine bidding war of
personal recognition, first in relation to your peers and neighbours. Second,
there is a great deal of money that needs to be got rid of, illegal money. This
gives rise to a ‘high roller’ state of mind. In New Delhi, on any given evening
there are innumerable private firework displays, signs of parties where
hundreds of millions of dollars are spent. Still in New Delhi, three whole
Customer attitudes vis-à-vis luxury 113
80 USA
JAPAN
70 FRANCE
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6 Developing brand
equity
Can we imagine luxury without brands? The brand is an integral part of the
luxury product, but not of the concepts of luxury, which are abstract.
distance, the things that distinguish it from the premium brand. This, of
course, is hidden beneath other expressed motivations, such as hedonism
linked to the aesthetics of the product or the subtle taste of a special cuvée of
champagne accompanied by knowledge of the epic story of its manufacture. In
order to create separation, it is still necessary for the signalling of this separa-
tion to be recognized by others, by those who count: everyone else, in the case
of Ferrari, or a select few for Patek Philippe.
The brand is therefore the social visa, the ‘star-maker’, both of the product
and the person. To be expensive is not enough to qualify as luxury: it must also
be inscribed with a cultural hallmark accepted as a social stratifier. This hall-
mark is the brand, when the brand itself has a reputation with the cultural,
political and financial powers. This is what distinguishes it from quality arti-
sanship: an authentic Connemara Irish pullover, an English Morgan car, are
clearly rare objects, full of history, made by hand, sources of pleasure, steeped
in authenticity, but they are not factors of social stratification. They build the
purchaser’s identity but do not create vertical distance. They have not been
raised to the level of objects of distinction by those who have the casting vote
(Bourdieu, 1970).
A luxury brand is a brand first, and luxury second; this is another funda-
mental difference between luxury and artisanship. It explains why India as yet
has no luxury brands, despite having an ancient artisanship of extremely high
quality. A lack of infrastructure (no roads and a faulty electricity grid) means
that industry cannot develop. Moreover, the understanding of what a brand is
has yet to be promoted. What does this mean?
• The artisan creator of luxury saris in New Delhi certainly offers choice, but
in a single size each sleeve and neckline are slightly different: not all size 36s
are rigorously identical. To make a luxury brand is to make a brand, and
therefore to assure the purchaser that a 36 is indeed a 36, and that all the
size 36s of a particular garment are the same. The luxury side is attached to
the multisensory nature of the product (appearance, touch, smell, etc) and
the narration that accompanies it (on the materials, the finishing, the cut).
• In India, when you buy a diamond brooch, admittedly they will deliver it
to you, but in a plastic bag: the idea of investing in sumptuous jewel cases,
packaging that contributes to showing off the object’s beauty, by slowing
discovery and increasing the waiting time, remains unknown.
• The concept of a brand is not yet fully understood: the importance of its
very visible signal, which attests to the creator, the ‘house’, and therefore
everything that makes a product more than a product or the name of an
artisan, but rather the expression of a concept of the world and an
authentic talent recognized socially by the elites.
118 Luxury brands need specific management
Brand Valuation
# Brand Parent ($ billions)
1 Louis Vuitton LVMH 25.7
2 Hermes Hermes International 9.6
3 Gucci PPR 9.3
4 Cartier Cie Fin. Richemont 9.3
5 Chanel Chanel Sa 8.7
6 Rolex Montres Rolex S.A. 6.3
7 Hennessy LVMH 5.4
8 Armani Armani 5.1
9 Moet & Chandon LVMH 4.9
10 Fendi LVMH 4.7
Source: Millward Brown 2008 (including data from BRANDZ, Datamonitor and Bloomberg)
between the cost price and the sales price. Moreover, economic growth, in
India, China or Brazil, ensures strong financial prospects for those luxury
brands that know how to remain so.
BRAND
RELATIONSHIP CULTURE
MODE
IDENTITY (DNA and VALUES)
PRISM
CUSTOMER CUSTOMER
REFLECTED IMAGE SELF-CONCEPT
CONSTRUCTED RECEIVER
signs, gestures, postures, colours, traits that make up this resemblance? Thus,
at a fashion show, we should be able to recognize the Chanel touch, even
without the double-C brand: the softness and the silky look of the jersey, the
classic design, the quality of the often innovative textiles. The more the prod-
ucts have a symbolic, social and cultural function, the more importance
attaches to the non-verbal imagery. This is why the luxury brand needs a
semiotic grammar of its own, in order to express itself in its own way: the
camellia, the quilting, the collars at Chanel, for example (Floch, 2004). The
physical facet of the brand identity also comprises those iconic products or
features that currently underpin its representation: at Yves Saint Laurent it is
black, the dinner jacket, and other attributes of masculine clothing adapted to
women’s style, the perfect cut.
Second, the brand has a personality, when it itself is not a personality. In
luxury the brand is often a real living person, a creator: it has a strong person-
ality with character traits. The brand inherits these or constructs them. The
brand’s personality expresses an anthropomorphic vision of the brand, partic-
ularly relevant in the world of luxury, which emanates from the creation
emanating from a person. How do we describe the brand personality?
Through the same character traits as a person (on this subject see Kapferer,
2008). Thus Yves Saint Laurent gave his brand his impertinent, provocative,
seductive and inaccessible character.
The next two facets of the brand identity prism relate to the constructed
recipient. We will insist on that word ‘constructed’: in fact, the brand
through its communication does not describe its target, it offers a repre-
sentation of idealized clients, among whom they may or may not belong.
This does not necessarily mean that people are shown in the communica-
tion, of course, but that we think of them in the way that the brand
expresses itself.
Third, any luxury brand is a reflection of self offered to others. This is why
everyone is capable of describing a luxury brand through the image that they
have of its clients (this is what we call ‘the reflection’, the ‘external mirror’ of
the brand), even if we never see clients in luxury advertising. This is how it
works at Porsche: the advertising never shows the driver (unlike Audi,
Volkswagen’s premium brand). Porsche wishes to leave the client to the imag-
ination, to allow the establishment of a direct affective relationship between
the client and the brand, and not disrupt it with the interposition of a third
person, however well known. Chanel offers the reflection of an elegant
woman, seductive, sophisticated, and yet who loves to attract attention. At
Yves Saint Laurent, the reflection is of a woman in command of herself,
femme fatale, in competition with men, seductive and inaccessible.
It is often through the reflection that the brand fragments in its representa-
tions. Ralph Lauren is characterized by many different product lines, all
124 Luxury brands need specific management
highly targeted: but each of these targets manifestly belongs to the same
family, and adheres to a core of highly recognizable values.
Fourth, the brand is a ‘mentalization’ – a facet of Kapferer’s identity
prism, generally translated as a ‘consumer’s self-concept’. We should talk
here of the internal mirror, which may be different from the external
mirror (the reflection). How does the typical client construct themself via
the brand? For example, the mental picture constructed by the Black
Centurion Card is to have reached, by your own efforts, a level where you
need deny yourself nothing, and where you should be in a position to
access everything.
Each luxury brand offers a self-concept to its followers: this is less a question
of luxury in relation to others (the reflection) but of ‘my intimate relationship
with luxury’. Thus the mentalization of the woman who is a follower of Yves
Saint Laurent is: ‘I don’t need a logo to affirm me or to gain power: I feel sexy
and seductive.’ At Chanel it would be: ‘I am exceptional because I wear
Chanel, elegant, classic and modern.’ At Ralph Lauren: ‘I have access to
American distinction, made up of power and class.’
The two intermediary facets of the brand identity prism are relationship
and culture.
Fifth, it is through the ‘culture’ facet that the luxury brand creates a cult and
develops proselytes. This is the soil of its deepest values, which it venerates
and respects more than anything, religiously. For us, this is the essential facet
of the identity of a luxury brand. Too often we define the values of the brand
on the surface, through encompassing and international words such as
romance, classicism, elegance, Italianate, or yet the values of the upper bour-
geoisie for Chanel. In order to properly manage the brand over time,
however, it is necessary to dig deeper. What is the brand’s DNA, which
nurtures its renewed and reinvented inspiration? Thus, Ralph Lauren chose
polo as its symbol: besides being an aristocratic sport, one of the few that
remain today, what is the symbolic significance of polo? What does ‘being
Italian’ mean? Beyond the simplistic stereotype, how does Prada’s innate
Italianness differ from that of Ferragamo or Gucci?
In order to know its cultural underpinnings, we must closely examine all of
the brand’s identity signs. For example, who are the three women on the Nina
Ricci logo? What is their hidden meaning? You do not answer these questions
by interviewing clients in Mumbai or Buenos Aires or Paris. The identity is the
source of the creative act over time: we should therefore ask ourselves what
Mr Ricci saw in this well-known symbol, whose roots go back to the pre-
Grecian mythology, to agrarian pagan cultures: these three Graces are fairies.
What therefore is the value system of the only brand in the world symbolized
by the three fairies of mythology? Is not the essence of Nina Ricci to be the
initiation into femininity?
Developing brand equity 125
Sixth, as for the ‘relationship’ facet of any brand, it defines the nature of
the relationship installed between the brand and its recipients. Thus Chanel
liberated women, and Yves Saint Laurent gave them power: it lifts them up
and causes them to be affirmed.
It is the conjunction of all six facets that defines identity and singularity,
and also weaves the fabric of emotional connections with clients, to the
point that some of them become proselytes, ambassadors, or in any case
devotees. To create fanatics or ambassadors in each country, it is necessary
to attach them to the deeper meaning of the brand, and to its creative
manifestations (rather than solely the pride of exhibiting the sign or the
logo). Through its identity, rich, sourced from history or legend, the brand
lends memory and culture to its products and knits intimate relations with
its followers.
The identity prism of a luxury brand should never be ordinary. It captures
the fine detail of its uniqueness and appeal. It is also, however, a management
tool: as such it should be useful, a lever of coherence, without which there is no
brand (luxury or non-luxury). Finally, it is a springboard for creativity in the
service of the brand. Figure 6.2 gives an example of an identity prism for
Ralph Lauren.
CUSTOMER SELF-CONCEPT
REFLECTED IMAGE I aspire to the
Rich and class American dream
CONSTRUCTED RECEIVER
Building coherence:
central and peripheral identity traits
There is no brand; there are only expressions of the brand. The clients do not
know the identity prisms; they simply live the brand products and experiences
that we offer them. Clients therefore go from the experience to the essence.
This is why a brand perception is only built up through coherence. In luxury,
however, in order to grow it is necessary to innovate, to surprise, not to repeat
yourself endlessly, even while remaining faithful to your identity. This
dilemma of diversity and coherence is particularly acute in luxury, since
without inspiration here there is no aspiration. How, then, can the necessary
brand coherence be ensured over time and in all its products and communica-
tions? Through respect for the core of its identity prism.
In order to do so, it is necessary to consult the identity prism and identify
the facets that are central and those that are peripheral. By central, we
mean that without them the brand is no longer the brand: thus they must
be few in number. The other facets may be more or less present according
to circumstance.
This distinction between central and peripheral facets of identity comes
from the psychology of representations (Abric, 2003; Michel, 2004). Take the
analogy of a family: not all traits are equal in their capacity to distinguish
members of the family, or to estimate whether someone belongs to the family
or not. Is it height, face, nose, or a way of acting or speaking? The same is
true of brands.
Once these essential facets have been identified (Kapferer, 2008, p.188) it is
necessary to make sure that every manifestation of the brand strongly
expresses these distinctive values in its own way. Let us take the example of
Chivas. Its central values are energy, glamour and luxury; therefore each of
the three global products that carry the Chivas name (the 12-year, the 18-year
and the 25-year) must always express these three values, either in the product,
the bottle, the label, the cases, the advertising, the social events created for the
introduction of each product into a country... nevertheless, each product will
interpret these three traits in its own way:
This is not a question of curbing the creation of each product but of ensuring
that in addition it builds the same brand. Each of the brand’s creations has its
own tonality, but the melody is the same.
• The first is based on the creation of value, product quality taken to the
extreme, with a cult of the product and heritage. This model is nurtured
at a symbolic level by History with a capital H, of which the brand is the
modern emanation. It also pays regular allegiance to the spiritual legacy
of its founder, who is embodied in a new creator – passing over their own
personality – to reincarnate the original spirit of the brand.
• The second mode is American in origin: lacking such a history of its own, it
does not hesitate to invent one. Mr Ralph Lifshitz became Ralph Lauren,
taking on his Great Gatsby-like traits and character, a direct descendant of
the ultra-chic Bostonian high society. These New World brands also
grasped the importance of the store in creating an atmosphere and a
genuine impression, and of making the brand’s values palpable there.
America invented Disney and Hollywood – both producers of the imagi-
nary. This brand gives high priority to the experiential.
Today, these two models are converging. Recently Ralph Lauren created
Purple Label and Black Label, two clothing lines aimed at a demanding
European clientele and more formal situations, made in Italy from sought-
after fabrics. In the same way, all the European luxury brands have grasped
the role of the theatrical at the point of sale, or of consumption. The way in
which Hennessy create microbars to sit down, converse and consume is
evidence of this. Figure 6.3 illustrates the two modes of brand building.
Epic of the
product
History
European
approach to
luxury
American
approach to
luxury
Story telling
Experience in stores,
at points of sale,
and corners
world of luxury. This is how what is known as the luxury dream formula was
established (Dubois and Paternault, 1995). It is simple:
The dream is measured by means of a question such as: ‘Imagine that you won
the choice of a handsome present in a competition, which are the five brands
(from a list) that would give you the greatest pleasure?’ This formulation
removes the price barrier, since a dream is by definition the negation of the
obstacles to the attainment of accepted or rejected desires. The statistical analysis
of the interviewees’ responses to these three questions reveals that the dream is
a function of the difference between brand awareness and the rate of owners of
the brand. Here again we find the fundamental notion of luxury as separation
(social separation and separation on quality, excellence and price). The luxury
dream is boosted by the distance between those who know and those who can.
The operational consequences of this dream equation are considerable and
should be reiterated.
First, without awareness there is no dream. The brand needs to be known in
order to begin to provoke the desire driver. Too many young creators will
never cross the threshold of access to the dream, for lack of awareness. This is
why the creator must be media-savvy. It is also why luxury brands are quick to
produce perfumes. There is no perfume without media advertising, an imme-
diate lever of wider recognition. More: the first perfume expresses the brand
identity: all of Thierry Mugler is in Angel, and all of Van Cleef is in First.
Second, if awareness is high, then it is the distance between the number of
people who recognize it and the number of wearers of the brand that creates
the dream. This key factor only concerns luxury. Thus Americans dream of
Nike, or Adidas, as our studies show: these brands cause them to dream
because of the athletes with whom they can identify by wearing trainers every
day. Here, however, for Nike and Adidas, the product diffusion does not work
against the dream: they are not luxury brands. Moreover, Nike or Adidas’s
product lines are very fragmented, almost clannish.
For luxury brands, however, the perceived diffusion kills the dream
through the loss of exclusivity and therefore the loss of the social driver of
luxury, and of the impulsion of the desire of others. It is therefore necessary to
reduce diffusion, and increase the obstacles to accessing the brand. This is
done through a large rise in price: this divides the true luxury clients from the
false, those who are looking for meaning from those who consume the sign of
this brand today and of another brand tomorrow, as fashion dictates. This is
also done through a reduction of distribution, increased selectivity, exclusivi-
ties offered to clients... Finally, in the communication, it is necessary to make
the difference between a brand for more people and a brand for everyone.
130 Luxury brands need specific management
Figure 6.4 illustrates the ways of creating the dream according to the level of
brand awareness and penetration. They can be described as the search for
equilibrium between a brand that is too closed and a brand that is too open.
100%
0%
More status
Always higher
For the sake of the gesture
Brand
values
More roots More trends
Lines to open up
the brand
Accessibility
term, and therefore appears early in the brand’s life, hence its leftwards posi-
tion on the mapping above, on the side of the roots. Thus the painting of
Absolut Vodka by Andy Warhol clearly shows that the bottle is the brand’s
icon. Chanel No 5 is Chanel’s iconic product, as is the cut invented by
Madame Chanel, which expressed her vision of woman, also a radical change
at the time.
The iconic product is venerated. It is significant that at Chanel, in order to
grow and renew itself, all the perfumes have had variants and descendants:
for example, after Allure came Allure Sensuelle. Chanel No 5 never does this.
There is only one Chanel No 5. This does not mean that the icon is fixed or
mummified. Imperceptibly, but regularly, the Chanel house modifies the
design of bottle and label every 10 years. Of course it retains its shape and
simplicity, recognizable among a thousand others, but it is kept in touch with
its era by small, delicate touches. The communication around the iconic
product also evolves. The icon is not necessarily the best-selling product, as
No 5 is for Chanel, but it remains a definite value.
132 Luxury brands need specific management
The luxury brand maintains its past: it draws from it its strength, its serenity
and its confidence in the durability of its values. This is why it organizes demon-
strations that revive the memory of its founder. Who was ‘Mademoiselle
Chanel’? The Chanel website allows us to visit her very private apartments.
• conquer new clients for the brand, the ‘future faithful’, who will subse-
quently buy more sophisticated and more expensive products;
• meet the demand of those who may be called luxury ‘day trippers’, all
those clients who occasionally buy luxury, but not a specific brand.
If it does not extend the number of its loyalists, the luxury brand does not
create a religion: it remains a sect. If it is accessible only to its loyalists, it can
even become an obscure, even threatening sect – the opposite of what is
required to become a positive social marker. The church doors must be open
to all who wish to enter, as long as they behave themselves. This is why, while
targeting a restricted clientele, the luxury brand manifests itself in the
broadest of mass media, allows itself to be seen and visually consumed by all.
played in this field by these two aspects of the marketing mix. Currently, in
China, Lacoste is perceived as a prestige brand: its entry into the market is
recent and was very selective regarding its points of sale. It is also main
sponsor of the brand-new Shanghai Tennis Masters. Moreover, the Asian
journalists who count are invited to the New York Fashion Week, where the
Lacoste collections for the following year are paraded among all the great
names of fashion and luxury.
It is therefore necessary for the luxury brand permanently to outdo itself in
terms of star products, the function of which is to remind all and sundry of its
supremacy, its status among the elites, among the media that count, the
sources of prestige. Whereas the world only talks about speed limits, radars,
points lost from your driving licence, Porsche regularly launches a car in a
limited series, or at a price that amounts to the same thing, outdoing all the
competition in terms of brake horsepower, power, pure speed, etc. In this
quest for the absolute, which characterizes the brand, there are no limits. This
nurtures the dream and the supremacy.
That said, counterfeiting is only possible if the brand has reached a significant
awareness threshold (characteristic and universally recognized logo – LV; or
shape – Rolex), and is highly desirable; we may even say that if there are no
counterfeits of a brand, apart from those few cases where it is technically
impossible (cars for example), it is because the brand is not luxury: when the
Richemont group acquired Lancel, it aimed to quickly turn it into a luxury
brand. The absence of counterfeits, which would appear to be good news for a
group containing a brand like Cartier, one of the most heavily counterfeited in
the world, convinced Richemont that the way would be long and costly if they
wished to achieve this.
The existence of counterfeits (up to a certain limit) is therefore a proof of the
health of the luxury brand, in the same way that pain is a proof that we are
alive! As Jeanne Lanvin used to say, ‘counterfeiting is Vice’s homage to Virtue’.
• Those who desire the brand in order to be part of the ‘club’, but do not
want to pay the price, either because they cannot afford it (fake Vuitton in
Africa), or because they think that the price is not justified by quality
(Vuitton bag considered as just a plastic bag with a logo), or finally because
they believe that nobody will see that they are wearing a fake (Rolex with a
quartz mechanism... and weighed down with lead).
• Those who buy as a present, thinking to deceive the recipient. It even
happens that a man buys two products: a fake for the wife and a genuine
article for the mistress...
• Those who buy a fake believing that it is genuine. Such a case, much more
frequent than we might think, is generally the consequence of poorly
controlled distribution.
The key point, for a brand, is not to treat the wearer or carrier of a fake auto-
matically as an enemy, but as a potential customer: if they are wearing the
counterfeited product, it is because they like the brand, and maybe believes
that it is a real one (especially if it is a gift). Another point: for economical
reasons, many consumers of fakes could not buy genuine products now, but
may be good customer later, when they become more affluent. Finally, if the
tangible added value of a product is too weak (a simple T-shirt with a logo),
counterfeiting merely penalizes this abuse.
Developing brand equity 135
Even as a client who wears a fake must be treated with tact, so the producers
of counterfeits should be given no quarter. In fact, not only are they perfectly
well aware of what they are doing, but they often belong to powerful criminal
networks, who traffic not only counterfeits, but also drugs and arms.
Counterfeiting presents fewer risks for the organized networks that now
operate in this domain: the prison sentence for transporting a suitcase full of
fake Lacoste has nothing in common with that for someone who traffics drugs.
Moreover, since this counterfeiting does not present any physical danger for
the consumer (unlike medicines), and the client dream is often caricatured as
ridiculous snobbery, it is often difficult for a copied brand to obtain genuine
support from the authorities in their struggle against counterfeiting.
Drawback of licensing
Since licences are expensive, it is tempting for the licensee to use the brand for
products other than those specified in the contract, or to sell products of a
lower quality.
7 Luxury brand
stretching
Every day we hear of luxury brands moving out of their original sphere and
extending their reputation to other sectors: Baccarat is to put its name to a
range of hyper-luxury resort-hotels; Bulgari and Armani have already
done so. Ferrari inscribes watches and a PC manufactured by the Taiwanese
brand Acer. The Richemont group is to produce Ralph Lauren’s luxury
watch, and so on.
In parallel, premium brands are entering the luxury world. Vertu is the
luxury mobile brand of Nokia, and the mobile telephone now also uses griffes:
Samsung is offering an Armani phone, LG a Prada one.
In fact, the luxury market is made up of brands that have, for the most
part, grown through moving out of their original sphere. Fendi is a former
furrier. Former dealers in fine leather moved into footwear and then into
prêt-à-porter (Gucci, Ferragamo); a great name in the jeweller’s craft (Cartier)
now puts its name to pens, famous watches and fine leather goods. Ralph
Lauren sells prêt-à-porter, but also decoration, furniture, household linen,
even paint (interior decoration). The creator of glass and crystal objects,
Lalique, now sells jewellery. Some brands have moved classically from haute
138 Luxury brands need specific management
couture to prêt-à-porter and then into accessories (Chanel, Dior, etc); others
have followed the opposite trajectory: Hermès, Louis Vuitton. What are the
origins of this propensity to extend elsewhere?
a zone of legitimacy for its stretchings and limits them to variants that seem to
derive from the same know-how.
In order for these to be legitimate, there must be a ‘fit’, a coherence between
the original trade as it is perceived by the public, and the proposed stretch.
Brand stretching in luxury has a particularity in that it does not seem to have
limits. This is to be expected; the luxury brand is a transmitter of taste and
distinction moved by a creative passion and standards higher than the usual,
exercised with a total control over manufacture and distribution. If the first-
circle stretching must respect the brand’s field of competence, the growth will
increasingly rest on the immaterial aspect of the luxury brand. This is not in
short supply.
Luxury stretching:
a practice that has changed the sector
Stretching has allowed luxury houses to grow more quickly, without being
limited to organic internal growth, or finding themselves prisoners of the
regression of their original trade (Hermès and the disappearance of horse-
drawn carriages). Many have departed from luxury altogether, launching
themselves into the licensing system, which then places products that are not
luxury on the market.
What has generally accelerated this evolution is the financial aspect:
• on the one hand, building a luxury brand is a long and costly exercise; the
need for money can lead to a rapid stretching through licences;
• on the other hand, the value of a luxury brand is such that pressure from
shareholders to ‘leverage’ that value on other products, in order to
improve the sacrosanct ‘return on equity’, is very strong, particularly
when the brand is no longer in the hands of its founding family.
All these stretchings together make it possible to create boutiques where the
client, who came to buy one product, will leave with an entire panoply, or in
any case with several products, which increases the average income from each
visit to the store at the same time as increasing the reasons to return there.
At a time when luxury brands, like religions, are building their modern
cathedrals or pyramids (their megastores) on the most expensive main streets
of each world capital, the importance of a broad, and maximally profitable,
range is vital. Stretching is also risk-balancing: having remained a specialist in
fur, Revillon suffered when this market fell, unlike Fendi, which had moved
out of this specialization.
• either the brand seeks greater accessibility in price and therefore brings its
absolute price down, through accessories, in order to seduce the broad
clientele of luxury ‘day trippers’ or ‘excursionists’;
• or the brand stretches out horizontally, without changing its relative price
level, parading its lifestyle in other areas of the client’s life.
The first model is known as vertical stretching: it may move downwards, like
many haute couture brands, but also upwards, as for example in the creation
of a couture line made in Italy by the American Ralph Lauren, or in the
trading-up model of all credit cards like American Express, which launched
the luxury card: Black Centurion.
The second model orbits around a centre, the brand’s spirit, often in the
form of the eponymous, still living creator. All the extensions of the brand are
differentiated expressions of the brand’s values, as expressed by the creator or
the creator’s successor. Beyond brand stretching, these two ways of working
are in fact business models, two ways of making money in the short but also in
the long term: the pyramid or the galaxy (Figure 7.1). A major difference
between these two models is that in the pyramid it must be possible to display
all the products in one place, known as the shop, which demonstrates the
coherence of the brand, whereas the galaxy is made up of different universes
whose coherence is ensured by the creator themself.
Luxury brand stretching 141
Larger series
Licences
Advertising
All entries in the brand are equivalent
Lowering of and represent a facet of the brand
creation
Market (Mass) They must all be equally creative
The pyramid
The luxury brands emerging from haute couture position themselves on the
pyramid, occupying (or not) several levels according to their strategy and their
financial results (see also Chapter 13). Some take the position of remaining at
the upper levels even in their accessories.
Chanel stays at the upper level. Its bags are expensive, as are the accessories.
The exception to this rule is the brand’s presence in optics distribution, admit-
tedly selective but nevertheless mass (Optic 2000 for example).
Most of brands emerging from ‘haute couture’ keep to the summit of the
pyramid, but the business is made mainly on very accessible products: this is
the case with Dior. Finally, we find the case of houses that have abandoned
haute couture but attempt to preserve the memory and the myth of it by revi-
talizing a prêt-à-porter business: a house such as Thierry Mugler, now bought
by Clarins, once had a haute couture business and still capitalizes on this
memory to sell perfumes with great success (Angel).
Italian houses such as Armani have followed this pyramid model, but – until
recently – without haute couture at the summit. Thus we found Giorgio
Armani, then Armani Collezione, then Emporio Armani for the young, and
then beneath these the very casual Armani eXchange, or Armani Jeans. These
lines correspond to the price strata, the targets, the degrees of exclusivity of
the boutiques, each line having its own boutiques, in order to avoid mixing the
clientele (remember that the luxury brand is segregationist: it must protect its
clients from its non-clients). With each of these lines, we find accessories:
142 Luxury brands need specific management
leather, shoes, watches. Beneath them there exist even more diffuse lines in
multi-brand shops (glasses, cosmetics, perfumes). The system is therefore
highly stratified, but united by the aura, the style and the name of the creator
(Armani), whose personality is transmitted through the media and the world
of art. Recently, Armani added the missing summit to its pyramid: haute
couture in Paris (Armani Privé).
In a pyramid model, sub-brands names are chosen to compensate for the
lower creativity or the legitimacy handicap. For example, Saint Laurent’s
second line is known as Rive Gauche, in order to add the halo of distinction
that the words ‘Rive Gauche’ carry. Likewise, Chanel cosmetics are known as
Chanel Precision, Dior’s as Dior Science, since there is no obvious legitimacy
in passing from the mastery of needle and thread to that of the molecules that
preserve eternal beauty.
This pyramid model is tempting for many brands and their financial
owners: it offers a rapid increase in turnover and profits through lines that
have low cost of production through industrialization, but priced upper-
range, since they benefit from the prestige halo of the luxury brand. Hence
the profitability of these so-called accessible lines: the average gross margin on
bags and perfumes of this type of ‘luxury’ is typically around 75 per cent. This
source of short-term profits is attractive to the stock market.
However, this carries the risk of the impoverishment at the bottom of the
pyramid on the three essential elements of luxury: creativity, excellence and
selectivity. This trading down quickly becomes a descent into hell, through
destruction of the brand value. Luxury is a dream, but the dream has a
fragile equilibrium. Democratization reduces the distance – and luxury is
meant to create distance. Mainstream clients may not express this need: the
elites do.
This is why strong luxury brands do not follow this model. They have a
long-term vision and seek to preserve their reputation. They develop a very
short range for these lines, made of products that are all creative, made in
short series, and distributed exclusively in the brand’s own boutiques. Above
all, they control production: this is the case for Chanel, which acquired six
artisan houses on the road to disappearance, in order to preserve their unique
know-how (for example an artisan in bird feathers) (see also page 235).
The galaxy
This model is represented by Ralph Lauren: it has been nicknamed the
‘galaxy’ model (Sicard, 2006). Ralph Lauren in fact sells everything: prêt-à-
porter, accessories, perfumes, and cosmetics, but also furniture and paintings,
not to mention the cafes and restaurants under its name. Every Ralph Lauren
Luxury brand stretching 143
product is a legitimate entry into the brand universe. Its lifestyle adapts itself
to the times of day or of the week, according to the occasions and situations of
use. For greater clarity, Ralph Lauren segments into highly coherent sub-
brands, each offering a complete selection linked to each usage, moment or
occasion: the Polo line is casual sportswear; Purple Label corresponds to more
formal occasions.
Here, therefore, there are no very creative, superior products and other,
non-creative, inferior products.
Lifestyle Home
Blue Label
POLO LAUREN
Ralph Lauren
Ralph Lauren
RL Classics RL Classics
for men
CHAPS for women
Menswear Womenswear
In the galaxy-type model, the sub-brands are all equal: they are all variants
on a single concept at the centre of the galaxy, differing according to the
moments and occasions or gender (women’s and men’s lines).
fine leather goods), rather than recognized transversal competences. And yet
transversal stretching is practised almost without restriction. On what bases is
the brand therefore legitimate?
We should begin with the sociological definition of luxury: the two eternal
sectors are habitat (therefore the palace – Versailles, Chambord – and its decor
– Baccarat) and dress, which is subdivided into clothes (haute couture) and
finery (jewellery); it is these that legitimize the others, not the other way
around. This is why dealers in fine leather goods like Hermès or Vuitton have
no legitimacy in haute couture, hence their very relative success: in fact, they
are seeking an updating and energizing of their brand through fashion.
Certain brands are more at ease with their original know-how than with
their cultural universe. Through a desire for coherence and prudence, the
first extensions are called similar: they remain within the trade. Lalique
diverted its know-how with crystal and its art deco style onto vases, tables,
objects, costume jewellery, cufflinks. Stretching, however, can go beyond phys-
ical similarity, exploiting the brand’s imaginary quality in its own way. The first
perfume from Van Cleef and Arpels was called ‘First’, since it was the first time
that a jeweller had created a perfume. This name strengthened also the
desired pre-eminence of this house on the Place Vendôme.
There are other forms of legitimacy for brand stretching in luxury: history
is one of them. It is significant, for example, that Baccarat references its
history in order to launch jewellery, an approach that has existed from the
very beginning. On another level, the stretching of the Baccarat name to
luxury resort-hotels derives from a coherence linked to the ‘dream life’
according to this ‘house’: crystal – the brand’s identity material – is the imagi-
nary lever of a superior lifestyle, made up of great receptions in prestigious
palaces. The Baccarat name may then signify an intimate, rare, pure and
precious excellence, beyond the classic great names of luxury hoteliers. This
stretching into the hotel business makes use of and reincarnates the cultural
facet of the brand’s identity.
This is not true for Armani cafes, or Ralph Lauren restaurants. Giorgio
Armani or Ralph Lauren are living human beings: their approach is mimetic.
‘You want to imitate me? Absolutely: do it by taking everything you want from
my world’ – something that the two Louis (Vuitton and Cartier) cannot do,
since they are no longer living.
As for Pierre Cardin, although the character is still as fascinating and has a very
good image internationally, its problem arises from the fact that it has stretched
its universe of products so far that we can no longer perceive the link or the
distinctive power. Cardin divides out its licences by territory and by product. This
is no longer a galaxy (which, let us remember, is a group of stars gravitationally
arranged around a black hole that ensures their coherence), but has become a
nebula (an inconsistent and unstructured group), which will eventually dissipate.
146 Luxury brands need specific management
Having said this, the Cardin system still works very well in economic terms,
thanks to the creator’s exceptional talent, but nowadays on purely populist
targets. In France, for example, it is the premier brand of men’s shirts, or belts. At
Galeries Lafayette, the Cardin stand (shirts, ties and belts) has the highest
turnover per square metre. It is therefore a popular reference in both senses of
the word. In China, too, the public wish to buy Cardin, but not at a high price.
The idea of respect for brand identity is an essential one: for commercial
reasons there is too much of a tendency to want to soften the edges of the
brands, hoping thereby to reach more clients and increase sales. This is a
mistake. A brand must remain a brand. If Paloma Picasso is the vivid, red
brand with a strong Hispanic connection, there is no point in launching less-
heady perfumes under its name in order to attract an Asian clientele. Better to
concentrate on South America, or Texas and Florida.
The fourth step of the extension process is risk evaluation. In luxury more
than anywhere else, everything is in the realization: therefore the SWOT
(strengths, weaknesses, opportunities, threats) analysis will be done on this. Each
extension may succeed or fail. What is more serious, in luxury, is that it is easy to
borrow brand capital without recreating any in return. Finally, extension is often
accompanied by reduced control over creativity, manufacturing, distribution
and communication; thus you are leaving the luxury business model behind.
• The first circle begins with the brand’s prototype product (the pen) and
gravitates around it. In the first circle of Mont Blanc we find a man’s other
personal objects that gravitate around writing: leather briefcases, file
holders, office notepads. Mont Blanc offers a complete range, a universe
for the office.
• The second circle moves further away from the first, but must neverthe-
less express all the key facets of the Mont Blanc identity. The second circle
is that of small, intimate, personal objects: cufflinks, wallets, leather cases
for the iPod, the iPhone or the Blackberry.
• As we move still further away, certain facets of the brand may be less
present, but in any case are never gainsaid. The third circle is that of
watches and jewellery for men and women.
• The fourth, and most intangible, is that of perfumes.
Luxury brand stretching 149
MONT BLANC
Classicism
Humanities
Intimate
Self-expression
Close to heart
Office
accessories
Cufflinks
Pen
Luxury Attaché cases Watches Fragrance
and writing
stationery Wallets Jewels
The virtue of these extensions is their strong coherence around a clearly iden-
tified identity with its semantic invariants, its strong recognition codes (the
star, the colour black). As for communication on these extensions, it generally
calls on celebrities from the world of arts and the cinema, whose personality
reinforces the identity of the brand. Let us add that in capitalist terms, the first
circle – that of the intimate know-how of any brand – should be closed to
external investors: it has to stay secret.
order to do so, it was necessary to keep on increasing sales. Since the growth of
cosmetics was not enough, it was necessary to offer other products on the same
stand, products that would not cannibalize the existing ones but would
increase the average spend or would attract a new clientele.
Strict coherence would have insisted that Clarins also talked about protec-
tion regarding this line of make-up products, and launched the range by
promoting its non-allergenic qualities. This was tried, but the motivations of
make-up clients are far removed from worrying about taking care of them-
selves: here everything is play and seduction.
The dilemma was therefore simple: either to remain highly coherent in
terms of the brand, and thereby handicap the success of the extension, or to
accept a lower degree of coherence but seduce young Asian women... without
waiting for their first wrinkles to appear.
This example of Clarins, a premium brand, does not entirely address the
specific situation of luxury brands. In fact, in luxury, there is no need for a
product promise: it is taken as read; only the universe remains. Of course we
expect a form of qualitative excellence in all products, but what forms the
essence of the luxury brand is its universe, its stylistic and imaginary territory.
Let us examine a case of incontrovertible success: the Angel perfume
from Mugler. Angel followed a genuine luxury perfume strategy, the same
one that No 5 and L’air du Temps had followed in their day, and which is
exceptional today.
The Clarins group is small compared to the giants of L’Oréal, Procter, etc. In
order to launch the first Thierry Mugler perfume, they knew they would only
be able to afford a modest advertising budget. Angel was therefore the result
of a series of voluntary risks and strong bumps, in order to involve a small
group of enthusiasts from the very beginning:
• The product has a great intrinsic value: the scent is expensive to produce.
• It was a genuine creation: thanks to original molecules, it was possible to
create a completely new olfactive family: the ‘Oriental gourmands’. In
fact, the scent was highly innovative, sugared, built with the creator
himself. Tests revealed that it was highly polarizing: people either loved it
or hated it. A large company, naturally risk-averse, would have suppressed
it. The directors of Clarins kept it.
• The bottle is superb, with the star, a universal archetype, closely linked to
the stellar imaginary quality of Mugler himself.
• The name and the advertising are loaded with all the imaginary quality of
Thierry Mugler, a mixture of romanticism and intergalactic symbolism,
which creates a dream.
• The initial distribution was highly restricted, comprising only those
retailers who could subscribe to the high minimum volume requirements
Luxury brand stretching 151
• In order to practice stretching, the brand must already have defined its
own ‘dream life’. Defining itself as ‘chic, relaxed sportswear’ is not
helpful enough in specifying the imaginary quality that is offered to
clients the world over. This is why the country of origin plays such a role
in luxury: it provides roots, and offers a degree of imaginary quality of
its own. Something chic and relaxed that is ‘Made in Paris’ does not
suggest the same imaginary quality as ‘Made on the Riviera’. In the first
case, the Japanese will imagine the dream life of the Parisian bourgeoisie
152 Luxury brands need specific management
and French nobles. In the second, it will be Portofino, the Rivas and the
stars of Cinecitta.
• Since the ‘know-how’ dimension of stretching is overlooked in relation to
the intangible dimension (a luxury brand rarely means a mere product
promise), it is necessary to multiply the semantic invariants. All Mugler
perfumes retain his highly typified stylistic inspiration (the interstellar
universe) and elements of code such as the star. It is also significant in this
respect that all Hermès products are signed with the equestrian symbol
that harks back to the history and the initial know-how (the saddler) and
the imagined social status of those who could afford Hermès saddles.
Second, the risk of loss of control over the brand, linked to the internal organ-
ization within the brand itself. The licence must be controllable. Licensees are
independent companies: their principal goal is not to build up the brand, or to
invest in its long-term development. In order to control a licensee, you need
the ability to do so with a talented management, experienced with figures, but
also with an intimate sense of the brand. You also must not be too dependent
on the money brought by the licence. Faced with big groups like L’Oréal, or
Coty or Procter & Gamble, you need more than managers; you need guaran-
tors of the luxury brand, who understand when the brand’s essence is no
longer being respected, even if the product is selling well.
Third, relocations lead to a qualitative risk. Everything still depends on the
mode of organization: at Devanlay, the historic licensee that produces the textile
lines of the Lacoste brand, local production in France of the iconic Lacoste shirt,
voted by Americans ‘the best polo shirt in the world’, represents less than 5 per
cent of the whole. However, Devanlay controls around 90 per cent of the total
production, through its own factories, on all continents. The Lacoste shirt is in
fact the ‘prototype’ of the brand: it summarizes all of its tangible and intangible
virtues. There is no question of delegating its fate to anyone else.
Fourth, risk also attaches to the concomitant stretching of distribution.
There is a big difference between the brands that sell their extensions only in
their own shops or megastores or corners, and those that, due to the produc-
tion and distribution licences, find themselves engaged in a distributional
stretching. Of course, contracts stipulate that the distribution of the products
under licence should be carried out with care to the selection of the points of
sale in order not to damage the prestige of the brand. But if a local manager is
asked to choose the multi-brand points of sale that in their view are selective,
they will have a very different point of view from that of an international
manager concerned with overall coherence.
On the other hand, the licensee must remain profitable despite the payment
of a licence fee: the licensee makes a few upper range products, but could be
Luxury brand stretching 155
tempted by volume and rotation, and therefore tempted to select points of sale
with high traffic. Conflicts of interest can thus arise. We are familiar with the
court case between Calvin Klein and its jeans licensee, Warnaco. The famous
designer accused the licensee of selling its jeans to Costco, a giant of mass
distribution. He received the riposte that in any case, the designer had barely
any actual control over the Warnaco creations any more.
It is true that most market studies show that consumers do not associate
luxury with rarity (Danziger, 2005). In fact, there would be hardly any
luxury market today without the relative democratization of luxury.
Nevertheless, these studies are deceptive: they focus on mass-market clients,
even if they are wealthy ones. These clients are followers: it is not they who
crown the brand and make it a luxury brand. Those people always keep one
eye on the growth of diffusion, and therefore the loss of the distancing func-
tion of the luxury brand.
Fifth, another risk of brand stretching is the fragmentation of the adver-
tising representation, and therefore of the brand’s discourse. There are
innumerable Ralph Lauren advertisements, due to its many daughter
brands and extensions. However, they all seem very Ralph Lauren, because
they tell the same story.
When you entrust the creation and distribution of your perfumes to a mass-
consumption products company, you also entrust the advertising strategy.
The distinctive competence of L’Oréal and Procter & Gamble lies in their
know-how in terms of the repetitive launches of new products, based on
demand marketing. Based on the brand’s identity facets, demand marketing
first establishes the potential market by measuring the number of clients to
whom these facets are attractive, by means of quantitative surveys. Then it
divides this potential market into ‘client types’ and constructs perfumes based
on celebrities worshipped by each of these client types.
The problem is that there are so many brands in this universe that they
must necessarily share a few of the same identity facets, and therefore the
same targets. For example, both Boss and Ralph Lauren express the values of
‘success’ and ‘ambition’. Beginning with stereotypes (who are the preferred
international actors of each client type?) ends in communications aimed at
these segments, without any intimate link with the depths of the brand,
leading to a strong impression of interchangeability between the advertise-
ments of all the perfumes constructed in this way. Moreover, when you put
together all the communication of all the perfumes of a same brand, arising
from different stereotypes, you do not get the impression of a unified clien-
tele, of a true community, but rather of a patchwork of personalities that mani-
festly have nothing in common. This is the very opposite of identity.
Sixth and finally, stretching creates a service risk, when licensees are manu-
facturers and distributors. For clients, any point of sale bearing the brand
156 Luxury brands need specific management
These are the people found in classical market research. This audience,
however, is made up of followers. It does not have the power to name and
consecrate luxury brands. It is the elites, the celebrities, the men and women of
power, the artists, and the leaders of opinion who have this power. It is among
these latter that the loss of status gives rise to immediate changes in behaviour.
These opinion leaders are not available to interview through the usual
methods of surveying institutes, but they are reachable. It is among these
people that one must regularly sound out the present and the future of the
luxury brand.
158
8 Qualifying a product
as luxury
In luxury, everything begins with the product. Here we will take the term
‘product’ in the broader sense: it could mean a concrete product, like a watch,
a cultural good such as a concert, a service such as a night in a hotel, or a
product–service combination such as Vertu by Nokia, etc. What does a product
need to become intrinsically the object that stimulates dreams among the greats
of this world, a source of intimate pleasure and the aspiration of others?
For example, the packer Louis Vuitton was not originally a suitcase-maker,
but came to the client’s home to wrap possessions so that they could be trans-
ported without suffering too much damage. Then he invented the flat, water-
proof suitcase (until that time suitcases had been rounded and were not
waterproof), making it easier to handle and to stack, important functions for
the new transportation of his time, the Belle Époque: the railway and the
packet steamer. He therefore became a luggage-maker, opened a manufac-
turing workshop, and became hugely successful as the maker of a product: the
steamer trunk; but the service was always maintained for the important
clients. Until the closure of the Avenue Marceau shop, they were able to leave
their belongings in their trunk or suitcase. Likewise, luxury hotels keep
certain personal effects and objects, whether furnished or not, at clients’
request, so that, as soon as they arrive, their room becomes their home.
The relative importance of these two components, object and service, may
vary widely according to the market (essentially object in personal accessories,
essentially service in leisure, both to the same degree in a restaurant), but the
point of commonality is that it is this object–service pairing that is the luxury
‘product’ that the client pays for in a clear and perfectly conscious manner; the
other components of the marketing mix are an environment that is not
accounted for as such.
Of course there are areas of overlap, in particular in terms of distribution:
service at a restaurant is paid for and therefore forms part of the product;
service in a shop is free and is therefore not part of the product. Another key
aspect: the product must be strongly humanized, that is, the object must have
been made ‘by hand’, the service must be rendered by a human being, and the
client must have a genuine interlocutor.
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.
We have seen above that the luxury product always comprises a functional
side and a symbolic side (dreams for the user, prestige for others). In the
conception of the luxury product, the most fundamental and the most difficult
thing is to separate the functionality aspect (the product’s use justifies its
purchase, even in luxury!) from that of the dream that it carries. This distinc-
tion is difficult to make since, if functionality is objective and measurable, and
therefore easy to define, dreams are individual and subjective, and therefore
particularly difficult to manage. A single product may lead to very different
luxury objects, according to the differing dreams of potential clients.
Therefore it is possible to create new products in an existing market, without
necessarily entering into head-on competition with existing products, without
necessarily cannibalizing them, taking a part of their market share. The
market is not totally elastic, but one of the particularities of the luxury
universe is that a new product proposition is always possible: unlike the
universe of consumer goods, it is never saturated.
Let us take the book as an example, with the alternatives ‘luxury’ book or
paperback. As the functional part of the book is the written text, the paper-
back is a perfect answer to the problem for a modest price; having bought the
book in paperback form, you will not buy it again in the same format.
However, there is a very large and diversified luxury book market, corre-
sponding to dreams of various kinds:
Very different dreams inscribe themselves onto the same function, reading a
book; very different luxury strategies are therefore possible, with correspon-
ding, very different products. Moreover, people may buy the same book in
different formats: owning a paperback copy of La Fontaine’s fables would not
prevent you from owning one or more illustrated editions.
Another enlightening example is that of the ‘live show’, compared to the
recorded show. The function of ‘enjoying a Verdi opera’ is perfectly satisfied by
viewing the DVD of La Traviata filmed by Zeffirelli on a high-quality home cinema
network. Going to see a performance of the same opera at La Scala in Milan or
the Opéra Palais Garnier in Paris adds a considerable amount of hedonistic expe-
rience and dream to the pleasure of listening to it. The development of home
cinema has not emptied the opera houses, since the additional cost in money and
time of visiting them is compensated by other elements:
Rationally, in terms of functional value, you may choose to view at home the
recordings of the best interpretations, while a live performance of the opera
may not be up to standard. As for comfort, you are better placed at home than
in a seat at the opera house. And yet everyone fights for a place at the opera,
impelled by the experiential and the dream.
The conclusion is that initially it is necessary to expend all your energies and
resources on fine-tuning the product and in conquering a first core 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 reori-
entate your financial investments towards distribution and communication.
It is typically in this way that the great luxury brands in the field of fine
leather goods, such as Hermès or Louis Vuitton were developed: in the begin-
ning, an artisan-creator and a small shop, often in an inconspicuous location.
Then, once success has been attained, after decades of work dedicated to the
product and the satisfaction of the first few clients, and once profitability had
been reached, they move on to the stage of opening a second point of sale,
then a whole network of shops, all sustained by a massive communications
effort, which swallows up almost all the company’s resources. This change of
direction, which is accompanied by a revolution in priorities and a change in
the company’s economic model, is particularly tricky to manage.
Ferrari will be able to make it across!), and is an integral part of their dream
(‘you have to suffer for beauty’).
For many luxury niches, in particular that of luxury cars, hedonism takes
precedence over functionality, in contrast to the upper range or premium
(see Chapter 2).
Another very important aspect of the luxury product is its holistic nature. The
functional part may be sensually one-dimensional, but the dream part must
satisfy all the senses; in a great restaurant, the food must be excellent, but the
plates must be beautiful, as must the table and the room as a whole, the table-
cloth must be agreeable to the touch and the ambient noise must be pleasant.
Now let us turn to the more concrete aspects of product management.
constraints on the materials, but also, and much more so, on the style, which
must have a touch of timelessness about it. More specifically, the luxury
product must remain both current and be timeless. How can we resolve this
difficulty? Through two aspects: painstaking design and materials that age well.
In fact, a luxury product sees its value increase over time, like a great wine.
Fashion is perishable, but haute couture models are displayed in museums
and exhibitions. There is a genuine market for second-hand Chanel dresses.
travel fast and light, on an aircraft the luggage is in the hold, and therefore
invisible. Worse still, the transport part of the journey, which was once a
pleasure and a party in the days of the ocean liners, has become a chore on an
ordinary aeroplane, and all that is associated with it, including luggage, has
suffered in consequence. The ‘cost per hour of use’ of a Vuitton trunk or rigid
suitcase becomes prohibitive, as the hours of use trend towards zero.
Faced with this situation, and not wishing these luxury objects, the
symbols and pride of their house, to become merely museum pieces, Louis
Vuitton started with the fact that trunks often served as travel furniture
(Savorgnan di Brazza’s trunk-camp bed, the suitcase-clothes racks set up for
a week’s stay in an ocean liner cabin, etc) and that, nowadays, urban mobility
was a fact of society for part of their clientele – even if only in their heads! To
own a trunk, or several, as a piece of furniture enclosing the products that
are dear to us enables us to think that we could leave with it if we so wished,
taking them with us.
On this basis, the trunks have found a new lease of life, in the form of either
special made-to-measure orders, or on the second-hand market, or rather
the antiques market. Each Vuitton trunk has a number, and the Vuitton
house has kept all its archives: when you buy an old trunk, you can therefore
find out when, by whom and why it was purchased. The ‘Vuitton trunk’
product is therefore still current and very much alive, but on the urban
furnishings market.
A narrow range
The principal characteristic of the luxury brand is its narrowness, its concen-
tration on a very small number of products – or even a single product with few
variants (like the Hermès square and its designs, or the Vuitton trunk and its
internal arrangements). The reason is simple: it is extremely difficult to truly
succeed with a luxury product, and the perfect combination of
utility–aesthetics–price is often unique; moreover, concentration on one
product makes communication and the creation of a symbol of social stratifi-
cation, which must be widely and easily recognized, much easier.
168 Luxury brands need specific management
• one shoulder bag, one one-handled bag, one two-handled bag, one ruck-
sack, one women’s handbag;
• one large capacity, one medium capacity, one small capacity;
• one holdall bag, one organizer bag.
The role of the creator and the product chiefs is to ensure that each function is
found in at least one product. As we are in luxury, once the functional need
has been met, the application of anti-law number 3, ‘Don’t pander to your
customers’ wishes’, makes it possible to satisfy the customer: ‘You want a ruck-
sack? No problem, we have them; here is the one we’ve designed for you.’
HEART Necklaces
OF THE Watches
RANGE
ENTRY Rings
PRODUCTS
Leather, Pens
‘MUST’
1. The company is tired of its product, having seen too much of it, or thinks
that the product’s success has caused it to lose its ‘luxury’ rank. It is high
time to ‘inject some new blood’.
2. A new team arrives, naturally confirming this analysis, since it was hired to
do so, and wishes to demonstrate its talent and usefulness by launching a
new range, often with the ulterior motive of dethroning, or even replacing,
the old one.
3. Since the existing range is selling itself, there is a desire to use the available
cash to launch something new, following an approach known as ‘cash cow
Qualifying a product as luxury 171
milking’ (that is, by transferring all the advertising costs of the brand that
is selling well to the new product).
4. This strategy leads to failure, and sometimes brings the company to bank-
ruptcy, by gravely weakening the flagship range, the source of profit. The
trade where this error is most often committed and the failure is most
obvious is in perfume, in which a new perfume is in fact a new range.
The most incredible case experienced by one of the authors in this field is that
of Louis Vuitton and his monogrammed line in 1986. At that time, two camps
were fighting:
• The majority camp, made up of those who felt that the success of the
Monogram range (the LV-signed canvas) was such that it had become a
commonplace product, counterfeited everywhere, and that the Louis
Vuitton company, in order to remain in luxury, should abandon the
Monogram and replace it with another canvas or with leather, and at the
same time should step away from the heart of its trade (luggage and fine
leather goods) by launching watches, perfumes and scarves.
• The other camp, strangely in the minority, of those who felt that you do
not kill a product that sells, and that it is not the visibility of a product that
causes it to cease being luxury, but its vulgarization, essentially due to
counterfeiting.
To the author it was clear that the majority camp had only wrong reasons for
launching new ranges; convinced by the analysis of the minority clan, he
immediately worked with the teams to seek for better reasons to launch a
new range.
This brings us to the right reasons to launch a new range:
• A new creative idea, enriching the brand universe, but not to the detri-
ment of other ranges: the Pacha range of watches by Cartier did not
damage the Tank, Santos or Panthère ranges.
• Strengthening an existing range: a range of soft luggage by Vuitton,
accepted as carry-on luggage, completing the traditional range of rigid
trunks.
• Reaching a new clientele without rejecting the old one: Hermès silks
(square scarves, ties) made it possible to reach a younger, more modern
clientele, which was not interested in Hermès’ fine leather goods or its
saddlery.
• Reaching a price territory where the brand is legitimate, but the existing
ranges are not.
172 Luxury brands need specific management
To give an example of this last point, let us return to the case of Louis Vuitton
in 1986. There was at this time an excellent reason for launching a new
range: whereas luggage under the Louis Vuitton range and with the mono-
grammed canvas sold well at over $5,000, bags in this canvas had not
succeeded in crossing the $1,000 threshold in retail prices, as they were
perceived as chic, but casual, city bags; the formal handbag market was there-
fore out of reach. The company had tried to cross this threshold by launching
models where the natural cowhide and the metal pieces in brass, highly
resistant raw materials used for luggage, which aged well but were unsophis-
ticated, were replaced by calfskin and gold-plated metal pieces. In vain: the
client no longer found in these new, more sophisticated materials the dream
carried at Louis Vuitton by luggage and transposed, via the canvas and the
‘rustic’ raw materials, into the handbag.
The situation was clear: Louis Vuitton as a brand was legitimate to ask
$2,000 and more for a bag… if it was not a monogrammed one. A totally new
line was necessary. Luckily, owing to the ‘minority’, it has already been devel-
oped, under the name of Epi.
The decision was taken to accentuate the aesthetic choices of this line, which
were already very strong (bright colours, geometric and ultra-modern lines,
rigid leather, discreet LV logo, no canvas), the complete opposite of the
Monogram line (dark colour, rounded, classical lines, soft leather, highly
visible LV logo, significant use of canvas), in order both to avoid any risk of
cannibalization of the Monogram line, and to attract a new clientele in search
of aesthetic modernity.
The strategic choice, clearly stated within the company, was to prefer the
failure of the new line over the weakening of the old one… and success vali-
dated the choice: the Monogram line continued its strong growth, and the Epi
line achieved resounding, worldwide success.
Not only that, but the brand universe was considerably enriched: in order to
remain coherent with the dream carried by Louis Vuitton, it was necessary to
have rigid trunks in Epi leather. These were therefore manufactured and sold,
but it was not these that legitimized the handbags, but rather the other way
around: Louis Vuitton had become a true fine leather goods dealer, while also
remaining the premier luggage maker in the world.
• Do not systematically recruit the best individuals or teams to the new line:
managing the heritage and the past is not, in luxury, an activity reserved
for the incompetent and lazy.
• Give yourself new, ambitious sales targets for the old range, and prudent
ones for the new range (in contrast to ordinary consumer goods).
• Launch the new range at a markedly higher price than the old one: this is
proof that you are a luxury house.
The aforementioned Epi line was introduced at a price 50 per cent higher
than that of the Monogram line, which did not prevent it from enjoying signif-
icant commercial success.
Remember that all these rules relate to the brand core, and not to periph-
eral ranges.
9 Pricing luxury
contrary to the way things are in the rest of consumer society, where every new
product launch is prepared by comparative studies to decide the price differ-
ence that will separate it from ‘the competitor’.
Contrary to received wisdom, luxury and price are not always inseparable.
Many luxuries have no determined price, or are ‘priceless’ for some (health
for the sick, free time for the stressed manager, clean air for the urbanite).
Even today, a large part of what may be considered luxury is outside the
merchant economy (beauty, art, happiness, nature, ecology); but this is a ques-
tion of ‘luxury for yourself ’. These intimate luxuries can never become luxury
markets, inasmuch as the sociological dimension of luxury is lacking.
It happens that price is a major factor in the strategy of a luxury brand, and
it is then loudly proclaimed: ‘Bugatti Veyron, the world’s most expensive car’,
‘Joy, the world’s most expensive perfume’, while attempting to back it up with
impressive figures (10,600 jasmine flowers and 300 roses for 30ml of
perfume). Alain Ducasse’s arrival in New York was achieved by proclaiming
the opening of the most expensive restaurant in the city. Richard Mille, a
newcomer to luxury watches, launched the RM 008 at N415,000.
This being said, this type of strategy is rarely attended by financial success,
and when there is success it does not last: someone else, more expensive still,
will always come along quickly. Moreover, this price strategy sharply reduces
the size of the market and gives rise to suspicion. Even in luxury, the under-
lying ‘worth the cost’ dimension is always there: what is the symbolic value
created by this claim? That of someone who ‘can really afford it’, or of someone
naive enough to be sucked in by such a claim? The slightest disappointment will
set off the word of mouth of the opinion leaders in the microcosm, and imme-
diately causes the client to fall into the second category, one of the ‘mugs’.
small variation in sales volume, and never to a brutal leap in one direction or
the other (a crumbling or an explosion of sales).
While this hypothesis may be reasonable for ordinary products, it is rarely
applicable to luxury products, even when they have reached a sizeable sales
volume (Chanel bags, Cartier watches). This is illustrated by the ‘threshold effect’:
below a certain price, the product is no longer considered by the target clientele
as a luxury product. By dipping under this threshold, the product ceases to sell,
and by rising above, the product once again sells well... if the quality justifies it!
A well-known example in France (prior to the euro) was that of champagne:
at a retail price of fewer than 100 Fr, a bottle was no longer considered ‘real’
champagne. Dropping the public price from 100 to 99 Fr halted sales, and it
was necessary to drop the price much lower in order to find another clientele,
that of mere sparkling wines.
Inasmuch as there is a threshold effect, it is the existence of a price zone that is
completely ignored by clients, between products considered ‘luxury’ and those,
beneath, that are called ‘mass prestige’; the latter are obedient to the laws of
classic economics and traditional marketing... and never hesitate to play on the
words to create confusion (‘Champenois method’).
This threshold effect is linked to that of physiological perception, which is
applicable both to the price difference between products of the same range, and
the price difference between ranges. In luxury, the relationship to price is more
qualitative (too expensive/not expensive enough) than quantitative (how much?);
the perception of the price is therefore more psychological than rational.
Price differences, in order to be perceptible, must reach a physiological
threshold (in the order of 30 per cent, like perceptions of weight difference); a
few per cent one way or the other will pass completely unnoticed.
clients does not change, whether the price rises or falls (a seat in a box at the
opera or at a concert by a famous artiste, a house or a dream apartment).
leather) since the economies exceeded the increases, in the end the products
as they were became much less expensive.
Rather than reducing the retail price, the decision was taken to maintain it,
and to significantly improve the characteristics of the zip fasteners, fine-tuning
a new technology with the Japanese supplier YKK, which made the zip
considerably easier to slide, and building new machines whose production was
reserved for Louis Vuitton.
• The price premium proves the brand’s value, as in the case of consump-
tion goods, but it is much higher in luxury, since the price of the ‘part of a
dream’ and the recreation of the distance are added to it. This price differ-
ence in comparison to a ‘comparable’ product sold under the same condi-
tions without the brand should be at least 30 per cent if you wish to be a
luxury brand. It frequently reaches 100 per cent, or even higher.
• The quality of the distribution is one of the factors that explains and justi-
fies the price. The distribution (or rather the service) forms an integral
part of the product.
• The premium is always higher when the brand is within its territory of
legitimacy.
• It is important to measure it regularly, since it is one of the best indicators
of a brand’s strength, and one of the few that are objective.
Two examples reveal the price dynamic in luxury. Compare champagne and
sparkling wines (sekt in Germany), made using the ‘Champenois method’: an
ordinary champagne clearly sells at a much higher price than a Spanish cava,
even if the cava is of a higher quality. The price of the part of a dream is easy to
measure in this case.
Luxury watches and the price of a ounce of gold provide a second example.
The comparative study of the retail price of watches and bracelets by weight of
gold makes it possible to check the status of a luxury brand; Cartier does these
studies systematically, and the alarm sounds when the distance from less pres-
tigious brands drops below 30 per cent.
184 Luxury brands need specific management
Let us note yet again to what extent this is the opposite strategy to that prac-
ticed by classic products, where you begin with a high price, in order to attract
innovative clients (pioneers), prices that are then progressively dropped with
the increase in sales volume, in order to reach an increasingly broad market
(the followers).
The price objective can be expressed as follows: ‘what my client is willing
to give for my product, for it to be considered a luxury product, but which
they can afford to give’.
Once success arrives, luxury products in fact become global products, for which
the transport costs are relatively low and demand almost universal. In these
conditions, they travel easily, and as luxury clients also travel a great deal, a strict
worldwide coherence between retail prices among the different networks and
countries is vital. In order to achieve this, there are two dominant strategies:
186 Luxury brands need specific management
The well-known example of Louis Vuitton in Paris, which has lasted for
decades, perfectly illustrates the problem: the difference in retail price
between Paris and Tokyo was around 40 per cent, justified by customs duties
and the very high cost of ‘retail’ in Japan. For an ordinary Japanese tourist, it
was therefore advantageous to buy yourself or your family a Vuitton bag in
Paris, by way of souvenir, but once the customs duty had been paid (around 30
per cent in 1986), it was not an extraordinary bargain.
But if the bags could be introduced to Japan without paying taxes it
became very advantageous; if, moreover, you had Japanese money to be
laundered (in which case the criminals are ready to pay around 30 per cent
laundering commission), the bargain became extremely profitable: the
demand for Vuitton products in Japan was such that a new bag was sure to
be resold immediately, at the local market price. Under these conditions,
the pressure exerted on the Avenue Marceau shop, the only Vuitton shop in
Paris at the time, was terrible. The company therefore decided to limit sales
to one product (bag, suitcase) per family and per foreign traveller, in order
to halt the traffic, despite French law, which did not permit this limitation.
The result: every passer-by was stopped in the street, and offered a cash
commission to go in and buy a Vuitton bag. We know of many students of
Pricing luxury 187
our generation who earned their pocket money this way, but who never
understood why normal Japanese people were giving them money to buy
products in the shop close by!
the desired service at a lower cost, the economy being clearly justified (an ‘out-
of-season’ Relais & Châteaux, for example). This is therefore not a marked-
down product. However, it should not be used as a method for filling spaces,
as is commonly done in classic products.
Take the example of a luxury cruise, where the clientele is often some-
what older. If the company that charters the boat does a ‘special newlyweds
offer’, the clients who have paid the full fare will not feel affronted, because
a honeymoon is an exceptional time, and they would not be shocked if on
such an occasion a favour was done for newlyweds. On the contrary; it will
remind them of the good times of their own youth. If, however, the
company makes a ‘last-minute’ offer, addressed to everyone over the
internet, leading to complete filling of the boat and therefore saturation of
the services offered during the cruise, those clients who have paid the full
fare will not be happy to receive in return a less effective service, to the
benefit of ordinary clients who have obtained exceptional financial condi-
tions. Those of us who have already experienced this situation, particularly
common in air travel, have certainly not enjoyed it. The luxury brand is
exclusive: if it leaves the door ajar, it is only for socially justifiable reasons
(special occasions, etc).
This example is a good illustration of the rules to be observed:
The price varies freely according to the offer and the demand
This is the world of auctions, originally reserved for exceptional products
(namely art) and concentrated in a few, relatively inaccessible places (auction
rooms), but which modern technology is revolutionizing and allowing to
generalize: since a luxury product gains value as it ages, an important second-
hand market will grow up, and computing and the internet will enable it to be
monetarized (via eBay for example).
Pricing luxury 189
No sales in luxury
The sales, a significant and public reduction in price whose aim is to sell off
unsold or poorly-selling products, are the total opposite of luxury. The price,
and therefore the value, of a luxury product should increase over time, and
not suddenly crumble, showing that ordinary clients have been robbed:
Consequently, any brand that holds sales cannot be a luxury brand, or, more
precisely, the products in the sales cannot be luxury products. This is generally
the case for complementary ‘fashion’ ranges of luxury brands. Sales are vital in
fashion: fashion is the collective organization of programmed individual
change. Several times a year, it is necessary to bring the client into the shops
and cause them to buy. Shops therefore need to make space for the new offer.
Unsold items from the previous collection may be subject to sales, or turn up
in a brand sales centres (such as McArthur Glenn) where the brand boutiques
sell new products from old collections.
Although they are structural to textile and footwear lines in fashion, sales
are proscribed in luxury: on this point, there is total divergence between
luxury and fashion, and we can even say that this is the concrete aspect that
most differentiates a luxury brand from a fashion brand. Strict control over
product policy, manufacturing and distribution is indispensable in order to
avoid them. For example, a house such as Louis Vuitton, which sometimes
sells ‘fashion’ bags, will destroy the unsold stock at the end of the season rather
than sell it at a discount: this apparently anti-economical action is in fact the
consequence of the strict application of a luxury strategy in leather goods, and
the benefits to its image of this rigour largely make up for the cost of the
destruction of a few fancy handbags.
Price reductions?
It may be opportune to give a price advantage in certain cases to particular clients.
In order not to damage the brand and to legitimize a reduction in price, this
approach must be personalized and individualized: you do not lower prices
190 Luxury brands need specific management
because you can’t sell off the product; on the contrary, it is the brand that
decides to enable such or such customer to benefit from favourable treatment.
The key point is to manage this personal aspect well: by lowering the price,
you are not devaluing the product, but giving greater value to the client, since
you enable them to make a good bargain.
The two most legitimate reasons and ways of doing this, both at an image
and an economic level, are:
• Seducing discerning clients who are blasé, or who feel guilty because they
already own many of the brand’s products: they will buy yet another
product, on the pretext (either to themselves, or to their partner!) that it is
‘a bargain’. The key point is this: it is a brand that they like, and continue
to like; not only does this offer not put them off the brand, but this advan-
tage makes them like the brand even more; in fact, it is a loyalty gift that
the brand is giving them. Moreover, rather than being compulsive buyers,
they are shrewd buyers. The sine qua non: never do this with anyone who is
not already a loyal client of the brand.
• Giving a new client the opportunity to discover the brand universe. In
order to avoid any misunderstanding, the reason for the advantage
should be clear, and moreover be clearly perceived as legitimate. This
could be, for example, a special offer for newlyweds, or for a first child, or
for obtaining a prestigious degree.
As we have seen above, ‘yield management’ is a very effective tool for areas such as
leisure and tourism, since it makes it possible to manage with extreme precision.
In general, the price level (not the exact price) of the brand’s flagship prod-
ucts should be known, not only by potential clients, but also by a broad fringe
of the population, as broad as possible (a function of luxury’s social restratifi-
cation, and of the signalling of social distance).
Pricing luxury 191
Moreover, it is desirable for the presumed price to always seem higher than
the actual price. Here again, we find the opposite of the entry-level price
strategy of common consumption goods, where the idea is to lure clients in
with very low prices, trying to sell them a more expensive product, for
example by means of supplementary options, as with cars, where the basic
version has a steering wheel and four wheels and not much else.
There are two virtuous effects of the presumed price seeming higher than
the actual price:
• It gives higher value to the gift. A large part of the luxury market is in fact
a gift market, with its own rules: in particular, when giving gifts, a high
price, or better yet, a reputedly high but unknown price, is a plus.
• The uninitiated client discovers that ‘for what you get, it’s not all that expen-
sive’: the price of the luxury is fully justified (reassurance after the purchase).
The best example is a luxury restaurant: menus without prices for the guests,
a menu with prices for the person who pays the bill (discreetly identified:
nowadays it is not always the man who pays...), or a prepaid bill, or a bill sent
later. In any case, the intimate relation between luxury and gifts should be
management’s guide to the way in which prices are communicated.
key in this process: it is to explain to the client the entire symbolic value of the
product, explain in detail the refinement of its raw materials, all the work that
the object embodies, which more than justify the price. The client must under-
stand that, for the quality and the prestige that are obtained, the product is in
fact quite cheap: this is very important in the rationalization and reassurance
after purchase that always takes place.
The price must retain some mystery. Consequently, all communication must
make an effort to position the product at the highest possible, still credible,
price, all without ever mentioning it directly.
Note that this is one of the trickiest points on the use of the internet in
luxury, and is one of the major reasons why luxury has so far avoided the
internet as a means of selling: we will deal again with this problem in
Chapter 10.
193
In every major city of the world, luxury shops are flourishing, luxury malls are
opening up, and the most beautiful streets are being transformed into luxury
streets. This ostentation is proof, if proof were needed, of how distribution
plays a key role in luxury management.
Distribution is also the most awkward part to manage on a daily basis, once the
brand has a global reach: ensuring coherence and strategic rigour, while
remaining profitable, when you are embedded in countries that are totally
different culturally and economically, requires considerable engagement and
energy from management. Furthermore, the distribution is often entrusted to
local partners, which in fact comes down to entrusting client service and client
experience to them.
Distribution is generally the weak link of luxury strategy, and this is where
many brands die or lose their status. Note also that in the world of fashion and
luxury there seems to have developed a kind of first division: the brands
capable of financing ‘cathedrals’ on the most desirable main streets of the
world. The costs of the ever-increasing rents on Ginza or 5th Avenue lead the
large luxury groups to think in terms of real estate and to build genuine real
estate strategies in order to be able to compete in this first division.
advice’ aspect of the sale is very important in luxury. Hence the importance of
stability of the staff in boutiques and the continual training of sales personnel
and the greater importance of their feeling of belonging to the house.
As a consequence, distribution must be done in such a way that the client
buys in calm (no forced sales, no pressure from the salespeople) and security
(the true product at the true price). In fact, you are not selling the product to
the client, but it is the client who buys the product – giving rise to the following
apparent paradox.
When the client discovers the price, in the end they will find it not that high
for the quality of product that they are buying.
Our anti-law number 12, ‘Luxury sets the price’, is applied to the letter
here: the role of the store and the sales personnel is indeed to make the poten-
tial purchaser understand all the refinements of a product, all those aspects
that make it a luxury product. This leads us to a conclusion that is surprising
for classic marketing: the true role of the salesperson is not to sell the product
– it is to sell the price.
The price is even often the only thing that the store really has to sell: the
product the client desires is often on allocation or on a waiting list. If the
product, nevertheless, requires selling, since the client is undecided (a
common case with gifts), the price still needs to be sold.
Sometimes, there is no need even to sell the price (the blank cheque, the
person who signs the bill apparently without even looking). In this case, the
role of the store and the sales personnel appears in its purest form: sell the
luxury of the product. This has a fundamental consequence: the sales
personnel should never earn direct sales commission.
the client. But, as in the affective parent–child relationship for example (very
close to the brand–client relationship), the fact that one dominates the other
does not mean that they do not respect them; otherwise, it is not an affective
attachment, and a brand that does not respect its client is no more a luxury
brand than a father who does not respect his children is a true father.
This relationship, intrinsic to luxury, is a logical one: if the client is seeking
social elevation in a luxury product, it is clearly with a brand whose social
status is higher than theirs; to carry it is to appropriate part of the brand’s
value to increase your own. Let us also note that in consequence, each product
sold carries away part of the brand value and weakens it; it is therefore neces-
sary to continually regenerate it (see the dream equation, page 129).
This specificity of luxury in the client–brand relationship is manifest in
the distribution:
• the client often asks the brand, through its sales personnel, for a prescrip-
tion on what they need, or rather what it would be right to buy;
• in the case of a gift, the client often gives the salesperson free rein.
• The pre-purchase, where they dream of the product. The brand must
prepare the dream through its communications strategy, and long before
the act of purchasing; in luxury, the time lapse between the act of commu-
nication and its practical outcome is often counted in years. The
marketing director of BMW in the USA, when asked what was the point of
his advertising, replied: ‘My job is to make sure that all young Americans
over 18 dream of a BMW before they fall asleep at night.’ This implies that
you cannot ‘launch’ a luxury product, much less a brand, as you would a
washing powder.
• The moment of purchase: the pleasure that they should feel at that
moment is an integral part of the luxury of the product itself. The
aesthetic environment is of course very important, but the human envi-
ronment is even more so: the client should not feel simply at ease faced
with the brand; they should also not feel under pressure to buy.
• The after-purchase: it is necessary to reassure the client that they were
indeed right to spend so much, putting in perspective the heart of the
brand itself, its values, its heritage, its fundamentals, its demands.
The luxury product gains value over time, either in itself if it is durable (a
bottle of a great wine), or in the memory if consumption of the product is
immediate (like that of a journey or a cruise). In the latter case, the brand
should help in commemoration, through objects, such as the metal ashtray
that Air France used to offer each traveller on Concorde, or through the
personal contacts afterwards; we continue to receive greetings from the
Oriental in Bangkok several years after our stay. We also recall the role of the
luggage labels of palaces.
The brand must absolutely foster, and help to create, this feeling, both on prin-
ciple (remaining a luxury brand), and through commercial effectiveness: clients
will come back, and will tell their friends. ‘Buzz marketing’ is a child of luxury.
This has given rise to the concept of the ‘magalogue’ (such as ‘Le Monde
d’Hermès’), a hybrid between the luxury magazine that makes you dream and
initiates you into the codes of luxury, and the brand catalogue, designed to
make you buy. Hence the little booklets which accompany the product,
containing of course the instructions for use, but mostly beautiful images of the
brand universe, of which you have purchased a part along with the product.
Distribution and the internet dilemma 201
Strict control over distribution, in all the key aspects of the brand (product
policy, price, merchandizing, communication) is vital in luxury; the personal-
ized human relationship is crucial, and the idea of the ‘client file’ is to be
discouraged, in particular in the form of automatic IT management, which is
often used in CRM (client relationship management) strategies.
However, a very discerning CRM is necessary to maintain the unique rela-
tionship that you can have with a shop manager who knows you so well that
they alert you to new products that you in particular will like. It makes it
possible to anticipate a client’s annual journey from New York to Monaco, and
to alert the Monaco store. Luxury’s main clients are great travellers: they
expect that their brand will recognize them everywhere they go.
design, software), but for the most expensive aspect (the personnel), the
opposite is true: competent salespeople are rare, and it is difficult and costly
to move them when you need to open a new sales point, particularly in
another country.
Opening a new sales point is to a brand what having another child is to a
family: a marvellous and longed-for, but very costly event.
A specificity of luxury is that, since each brand is its own universe, it is diffi-
cult to compare two luxury brands, except in vague terms such as ‘level’; in
fact, a client does not desire a product from house X or a product from house
Y, but a product from one and the other.
Consequently, the proximity of two stores for two brands of ‘equivalent
level’ is not a problem, quite the reverse: each strengthens the other from the
image and social codes point of view. It is perfectly natural to walk into a
Cartier store with a Hermès product wrapped in one of the brand’s paper
bags; you will not be asked to leave it at the door, but rather, they will try to
find out what you bought at Hermès, in order to sell you a complementary
Cartier product!
Hence the ‘luxury streets’ that we have already discussed, where you are
among the right kind of people, and where less noble brands seek to implant
themselves to increase their value, in the same way that we seek to frequent the
society of people ‘superior’ to ourselves in order to elevate ourselves.
but from the removal of all costs and damages due to intermediaries. Louis
Vuitton’s competitiveness was therefore structural.
The other major advantage, and perhaps the most important, of the own
brand store is the human aspect: the sales personnel are really part of the
brand, and are the brand for all clients; the quality of the link with the client is
therefore very strong: at Louis Vuitton, the store managers have always had
priority access to the company management.
One final point: it is the only distribution system that completely protects
the client from counterfeiting and enables the company to counter this
scourge effectively; since the brand only sells in its own stores, any product
bought elsewhere is of dubious origin, to say the least: a fake, or a product that
has been used for money laundering.
Having said this, this system has the major failing of any vertically inte-
grated system: it is very rigid, both at the top and at the bottom. It therefore
presupposes a very reactive and anticipatory management, but also a stable
product range. It also presupposes that the product can be sold in sufficient
quantities and at a sufficient pace to make a store profitable (which excludes a
trade such as jewellery, but is appropriate for fine leather goods), but
conversely the quantities sold and the sales pace should not be too much for a
store network (which excludes perfume, or strongly diffused products such as
Cartier’s ‘Must’).
Exclusive distribution
This is also very suitable for luxury, since it preserves the personal relationship
to the brand, provided that the distribution agreement specifies that sales can
only take place in the specified location, and by the specified personnel, and
that there should be total transparency regarding the clientele and the condi-
tions granted them. This system is particularly suitable when there already
exists a vast, quality sales network, and the product has strong after-sales
constraints that require a vast network; the best-known examples are watch-
making and cars.
Rolex, for example, has succeeded in becoming the global number one
luxury watchmaking brand, and the most profitable, without developing any
stores under its own name, but by relying on a network of very high-quality
exclusive distributors.
The biggest advantage in comparison to the exclusive own-brand store
network is that this system is much more flexible and the break-even point of
a store here is much lower (overheads are shared with other brands).
Moreover, it is very easy to have a mixed network (own brand stores and
exclusive distributors) without damaging the brand: the success of Cartier is
ample proof.
206 Luxury brands need specific management
Selective distribution
The major difference relative to exclusive distribution is that the brand no
longer chooses its distribution network. In the European legal context, any
sales point that respects the brand’s specifications can distribute its products.
This admittedly protects the product environment by respecting the
brand’s codes, and therefore makes it possible to preserve a minimum of the
universe, but it is the first step towards departure from the luxury universe,
since the direct link between clients and brand has been broken: they are
clients of the sales point, no longer of the brand.
The advantage of this system is that it enables wide diffusion of the product,
without, however, making it common. This distribution will therefore be used for
luxury products with wide distribution and frequent purchase, such as perfume.
The major disadvantage, on the other hand, is that you very quickly cross
the barrier that separates ‘luxury’ from ‘premium’, and we may legitimately
ask how often products sold in selective distribution, such as perfume, remain
in the luxury universe. It is also enough to see how far the ‘gift with purchase’
has invaded the perfume market over the past 10 years, illustrating the fall in
the product’s status.
The other disadvantage of this distribution system is the ‘grey market’: since
the prices are no longer controlled, products arriving from zones with lower
prices, and particularly Duty Free zones, have the troublesome tendency to
invade the zones with higher prices, exerting a strong downward pressure on
prices, and therefore on margins. The vicious circle of brand impoverishment
is set in motion.
One final disadvantage: since it is very difficult to check that all sales points
respect the brand’s ‘code’, qualitative degradation is inexorable (bad money
drives out good). Despite the armies of controllers and constant court cases
against ‘discounters’ who sell perfumes, the outcome of the battle is
inescapable: you must spend more and more money on communication and
advertising to recharge the product image, while margins continue to fall.
The example of perfume in selective distribution is a good example of what
we said at the beginning of the chapter: ‘distribution is generally the weak link
of luxury strategy, and this is where many brands die’; the risk is very high for
perfume, despite being one of luxury’s flagship products, that in a short space
of time it will no longer be a luxury product but a ‘mass luxury’ product, a
modern neologism that speaks volumes.
At-home sales
For the sake of completeness, we should not neglect this final mode of distri-
bution, which in fact was luxury’s original mode of sale (the artisan travelled to
Distribution and the internet dilemma 207
the client to take their order, then to deliver the product) and whose legiti-
macy remains total, in particular for very prestigious products such as haute
joaillierie; you could not dream of better service, and in addition everything is
carried out with the greatest discretion and security; the risk of the client
being attacked by criminals is removed.
11 Communicating
luxury
Its qualitative impact is measured using classic tests, but also, most importantly,
by asking existing clients, who are always delighted and flattered to be consulted,
whether during a visit to the boutique, through a mailing to their home, or via
the internet. This point is very important: a communication campaign aims at
least as much to comfort existing clients, who will make another purchase or
convince others to do so through ‘word of mouth’, as to conquer new clients:
• The value of a luxury brand depends on the quality of its image, much
more than on its recognition.
• It is better not to communicate at all than to communicate in a mediocre
way.
• A good campaign should be pursued for a long time, despite the often
contrary opinion of the creative directors within advertising agencies.
• Not talking about the price of a product in communication, and if you are
legally obliged to do so, it should be in small, hard-to-read characters.
• Talking about discounts or savings even less: we recognize an ordinary car
from its advertising, which states the price in large type, and then in much
smaller writing that this price relates to the basic, bare-bones model.
• Never talking about financial results, which are the acme of materiality.
One of the great advantages of Chanel is that, since it is not listed on the stock
exchange, it is in no way obliged to give out its figures. In contrast, a serious
212 Luxury brands need specific management
problem for Louis Vuitton Malletier was the publishing of its results and its
management secrets when Louis Vuitton merged with Moët-Hennessy to
found LVMH, and then during the struggle for control of the group that
followed the merger.
according to the level you are at on the pyramid. At the mass market level,
media advertising plays a key role, with the stores being promoted. The
closer you get to the summit, the less of a key role advertising plays; in luxury,
it is secondary.
Of course you buy pages in glossy magazines, the media streets of luxury.
What matters, however, are press relations and public relations. From this
point of view, everything the brand does should be ‘PR-able’. A brand that is
not spoken about, that is not quoted, mentioned, whether in films or on televi-
sion, or carried by a celebrity who is then caught on camera during her arrival
at the Oscars ceremony – is that really a brand that counts? The brand is a
transmitter of taste: as such it should be a sign of ‘good taste’. In order to be
recognized as such, it should display the visible signs of its adoption by those
who make the front covers. It should be present in the high places of taste,
living culture, and fashion, a little, as well.
Let us examine this luxury communication in detail.
Celebrity advertising,
online advertising, press relationships
Chandon de Brailles, who were great fans of motor racing, offered a Jeroboam
(the equivalent of four bottles) of Moët et Chandon to the winner, Juan-
Manuel Fangio. This gesture was appreciated, and was subsequently general-
ized to other prestigious motoring events. In 1966 the champagne offered to
the winner of the Le Mans 24 Hour Race, Jo Siffert, was warm; the cork flew
out and the wine sprayed out, showering the crowd around the foot of the
podium. In 1967, the winner, Dan Gurney, voluntarily shook the bottle and
sprayed the crowd. A tradition was born.
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.
This very important point has been repeated many times, in particular in
the context of the analysis of René Girard’s thinking: it is precisely because a
luxury brand is desired for itself, and not only because you desire the desire of
someone else for it, that luxury escapes the trap of ‘triangular desire’, the
register of mass consumption goods and in particular of fashion.
The best way to avoid any ambiguity on this point is not to have any ‘signifi-
cant’ personality appear in your advertising. If this is easy to do in markets
other than personal apparel (cars, cruises, hotels), or for very technical prod-
ucts, such as watches or jewellery, it is much more difficult for the market of so-
called ‘fashion accessories’. Yet it is here, due to the risk of trivialization of the
product and confusion with fashion products, that it is most important to take
care on this point.
Using a ‘star’ is not helpful to the success of a beautiful advertising
campaign; indeed, it is often harmful, since it screens off the direct affective
client–brand relationship, or even destroys it by replacing it with the affective
client–star relationship, while reducing the richness of the imaginary. In
luxury, only the domination of the brand, as abstract as a god, is legitimate in
the client’s eyes, and not that of such-and-such an individual, especially not
that of such-and-such a film star, who will fall out of fashion.
Often, the conspicuous use of a star is a way to hide the absence of creative
ideas, replaced by the use of the cheque book to buy the celebrity of the
moment. Luxury, however, owes it to itself to be particularly creative in
communication so that the brand is not aged by the continual sale of ‘eternal’
products such as Hermès’ Kelly bag.
How do you translate this club? In advertising, for example, it appears that
all the luxury brands appear in the same glossy magazines: this is a typical
manifestation of the club. The essential, however, is elsewhere: advertising is
not the essential vector of luxury. The essential vectors are events that are
simultaneously exclusive and incomparable, intensely translating the brand’s
values, to which only a minority are invited.
Little by little, over the years, in each global capital, the luxury brand thus
builds itself a reputation as a creator of events that become ‘musts’, like the
royal parties of yesterday.
What is the function of these events? First, to legitimize the brand’s status as
a creator of taste, a cultural transmitter. But also to create this social distance
through the game of inclusion and exclusion: who is ‘in’? who is ‘out’? This is
the management of buzz.
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 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.
This is how the brand recreates distance. This brings us back to anti-law
number 8 (‘Protect… the big from the small’). Paul Ricard is the creator and
promoter of a very popular aniseed brand. His success stemmed from this
essential phrase that he would repeat to his salespeople: make a friend every
day! After 50 years, that makes for a lot of friends. In luxury, to caricaturize the
situation, it is sometimes the opposite: ‘make enemies, by excluding them’.
Once the brand has been marked out as a transmitter of taste and events,
this creates expectations each year. When winter arrives, rich Russians can talk
only of the coming Martell evening at Courchevel. Two of luxury’s essential
constituents are present: time (the wait) and desire. Of course, as art demands,
the brand must be very creative at these events.
In addition, if the luxury object leads to what Thorstein Veblen called
conspicuous consumption, the event organized by the brand, if it has an
artistic or cultural dimension, leads to what we must call ‘conspicuous cultiva-
tion’. It must stimulate the connoisseur in everyone. Thus Royal Salute, a
luxury whisky brand if ever there was one, brought John Major, the former
British Prime Minister, to Shanghai for a meeting organized privately for over
100 Chinese company managers. Martell cognac would not hesitate to bring
its cellarmaster from France for an exceptional occasion, such as a Hollywood
party hosted by Steven Spielberg.
Communicating luxury 219
• The figure of the brand’s creator, he or she who made the brand a work
and not a production: the effigy of this person will be found in its shops
and communications.
• The logotypes, generally short and very visual, such as Chanel’s double C,
Dolce & Gabbana’s DG, etc. Originally this was a way of protecting them-
selves against counterfeiting: it has become an aesthetic form of signature,
capable of being repeated ad infinitum, as Louis Vuitton was the first to do
with LV in its famous monogram canvas.
• A visual symbol that accompanies the logotyped signature: Aston Martin’s
wings, Mercedes’ circle.
Communicating luxury 221
• A repeated visual motif: this is typical of all brands, from prêt-à-porter to luxury.
The latter use the repetitive motif as a visual signature on their textiles.
• A brand colour: Tiffany’s blue, Veuve Clicquot’s orange.
• A favourite material, such as silk for Hermès or python skin and ostrich
leather for Prada.
• 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.
• 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.
These codes are found in the communication, of course, but also in the store,
on the products and on the packaging, a veritable antechamber of the
product, the theatre of the brand, a signature and factor of surprise and the
tension of desire, all at the same time.
It is interesting to note that even the most recent brands reproduce these
nine codes: Ralph Lauren, Paul Smith are recognizable on sight, even without
the names, so successfully have they developed their eight types of visual
signature. They have defined their semiotic constants and use them all,
systematically, all the time. Veuve Clicquot has been doing so since 1772.
This is why the luxury brand should be thought of like a story: there is no
luxury brand without storytelling. As all studies on the diffusion of rumours
and urban legends show (Kapferer, 1990), we like to tell stories that are
perceived as authentic, somewhat secret, and capable of transmitting an
implicit message, loaded with collective values. This is why the luxury brand
should reveal its story, both in the historic and the mythical dimension: they
give it status and at the same time feed the word of mouth. This is an ongoing
task: everything is suitable for becoming the object of word of mouth, from the
search for the rarest raw materials, to the number of silkworm cocoons neces-
sary to create a single Hermès scarf, the manufacturing methods at Ferrari’s
Maranello home, the creator’s life... Everything is useful for feeding the myth,
the cult through the communication of a luxury brand.
Note that recent brands have invented their myths from scratch: countless
books have been published by the Ralph Lauren House about Ralph Lauren
himself (in reality Ralph Lifschitz), a man become a legendary personality in
his lifetime, and presented throughout these books or magazine reports
among his collection of old Jaguars, or at his timeless ranch.
These four types of relationship to luxury do not expect the same communications:
• To the first client type you will talk of the brand’s patrimony and heritage,
timelessness, and exclusive know-how.
• To the second type, you will talk of creativity, and references to contempo-
rary art will be important.
• To the third, you need to reassure them through the myth, the proof of
prestige, celebrity and social success.
• The fourth type wishes to stand out from the rest: they are sensitive to the
transgressive discourse, the values of wealth and glory, excess and power
reserved for a small minority.
As they grow, luxury brands will of course number all four types among their
clientele, but to varying degrees according to the brand, its novelty, its status
and its style. They must therefore communicate in several registers at once.
How then can they avoid incoherence?:
• partly through controlling the register of the most visible part: the
advertising;
• partly by remembering that luxury communication goes well beyond
advertising (events, foundations, charities, public relations, art).
A great luxury brand such as Louis Vuitton communicates in reality with all
four types, as Figure 11.2 shows, but using varying tools.
Figure 11.2 How Louis Vuitton balances its communications for different
targets
12 Financial and HR
management of a
luxury company
behind BMW ($28 billion) and far ahead of Mercedes ($18 billion), L’Oréal
($16.5 billion), or Nike ($12.5 billion). This shows how luxury brands, even if
small in size, can be profitable. Those estimations of brand equity illustrate the
fact that a luxury strategy leads to a better financial valuation of the brands than
a fashion strategy. It is also interesting to mention that the Apple brand, whose
value was down to zero in 1997, is valued 10 years later at $55.2 billion, at the
same level as IBM; we will analyse later the strategy of Apple (Chapter 15,
‘Learning from luxury’).
In consequence, the financial strategy of a luxury brand will be to maximize
not the net profit, but the brand’s value: this is very different from traditional
strategies.
Another consequence: since brands have never figured on the balance sheet
at their true worth, particularly as long as the company remains controlled by
the family, luxury companies generally have a very high ‘return on equity’, a
phenomenon accentuated by often very high profitability.
It should also be remembered that it takes lots of time and money to build a
luxury brand: high net profit now is the reward of several years of loss in
the past.
• Above a net profit rate of 35 per cent on sales, constantly obtained for
more than 20 years, we find the biggest stars, the brands highly concen-
trated on a product niche, like Louis Vuitton Malletier, or Rolex.
• Above 25 per cent, we find more diversified brands, but with coherent
universes, like Cartier or Chanel.
• Fashion brands that flirt with luxury, like Dior, Gucci, or Yves Saint
Laurent, undergo highly contrastive highs and lows, according to their
standing at the time.
• Brands at the upper end of the range, but too expensive to find a signifi-
cant client base: Rolls-Royce (the cars, not the reactors) or haute joaillerie,
are not profitable.
You might even say that luxury should be extremely profitable, since:
• Profit is the proof of the brand’s success: it has matched the dream of a
significant clientele, ready to pay the price, knowingly (as we saw in the
‘Luxury and art’ section of Chapter 1).
228 Luxury brands need specific management
This very high profitability must be maintained over the long term. In order
to do this, some basic rules must be followed:
Globalizing
It is rare that a local clientele is large enough to set this spiral in motion, once
again for reasons specific to luxury:
• maintaining the price level does not help to increase the volume;
• economies of scale cannot be taken too far, since it would require a sales
volume such that the brand would lose all the status linked to its exclusivity.
Under these conditions, you must seek the minimum volume beyond your
own borders: internationalization, and then globalization, is the law of luxury.
All the great French luxury houses have a percentage of foreign clients above
90 per cent. However, relocating production in order to reduce costs destroys
the brand, as we have repeatedly seen. It is therefore a question of globalizing
the image and the distribution, but under no circumstances the production.
• Through volume increase, the functional part obeys the classic industrial
laws of cost reduction owing to experience effect (put forward by the
Boston Consulting Group – BCG), but also of diminishing returns on
investment (ROI). For this reason, in all good industrial as well as distri-
bution management, it is normal to invest in improving productivity and
reducing cost through volume increase, as long as the ROI is acceptable.
However, according to the BCG, you need to double production to reduce
costs by 30 per cent. Even through globalization, following this volume
strategy leads sooner or later to a departure from luxury.
• The sociological part (awareness, reputation), a key component of the
dream part, initially obeys the laws of word-of-mouth diffusion and
rumour (Kapferer, 1990). This leads to an effect that starts very slowly, but
then grows exponentially (networking behaviour) up to a certain aware-
ness threshold. Investing a great deal in advertising, before this threshold
is reached, is extremely expensive and gives poor results. We know that
the impact of an advertisement in a magazine (the fact of noticing and
remembering it) depends on prior awareness of the brand: when it is not
known, it is unlikely to be memorized. Beyond this awareness threshold,
created by buzz, on the other hand, advertising investment rapidly
becomes more profitable; the marginal profitability rate on invested
capital in communication and distribution grows.
Sales
New products
Communication
and
Distribution
First product
Time
• Know how to spot the moment where you have reached a reasonable cost
price: at this point, you should swing the majority of your investment into
communication, including the distribution network. It is important at this
stage not to ‘invest’ the economies of scale obtained by the development of
sales into a lowering of prices, but into communications and the construc-
tion of a quality distribution network.
Luxury has therefore left many financiers with a bitter taste in the mouth, as
we saw in Chapter 2, ‘The end of a confusion’.
The most common error is the brutal reduction of ‘image expenditure’ and
in particular communication expenditure, in order to improve the before-tax
profit: the resultant weakening of the brand does not appear in the accounts
until the following year at the earliest. The effect on results is therefore very
positive the first year; since the punishment is not immediate, the temptation
to reduce these expenses still further the second year is too strong for a finan-
cier to resist... and this is when everything falls apart, because the loss of
volume and the fall in the margin rate at the end of the second year are
immeasurably greater than the savings made over the first two years.
Financial and HR management 233
Artists
Luxury is extremely creative and refined, particularly at the product and
communication levels. The team should comprise at least one artist, who
should simply know how to bow to both the brand (whose universe they must
respect) and economic and practical reality: a luxury product must of course
be beautiful, but it must also sell; a luxury watch must be beautiful, but it must
also tell the time.
234 Luxury brands need specific management
Artisans
The importance of the manufactured side of the product is such that, in fact,
all those who contribute to the production should be genuine, experienced
artisans. This is a rare resource, and you should defend them and make them
loyal. Each time that Louis Vuitton Malletier wished to open a new produc-
tion workshop, it sought a place where there was a strong shoemaking
competence: the near-disappearance of this trade in France left a number of
worker-artisans out of work, who were specialized in leatherwork and could
be easily retrained to fine leather goods; all of their competence was
preserved and valorized.
Managers
Here, again, you need both ‘right-brain’ and ‘left-brain’. The ideal is to
employ people who have proved their worth in the classic world (sales or
marketing at L’Oréal, P&G, Carrefour, or production in classic industry), and
who are therefore familiar with ‘real life’, but who have that little ‘something
extra’ that means they know how to work with artists and handle fluid
concepts, since they have an artistic side – and know their limits in this field. If
they have spent too much time in traditional marketing companies, adapting
managers to the specificities of luxury proves difficult.
In general, in order to succeed in luxury, you need to know yourself (all
aspects of your personality are used in this trade) and know your limits, and in
particular remain humble in the case of success (it is not yours, but the
brand’s), and always remember that luxury is for the client, not for the
internal teams. In particular, vast expenses are reserved for the external
universe, not the internal one; the client’s money is not theirs, and daily inter-
course with ‘extraordinary people’ can turn the head of weaker people.
The great luxury houses have splendid stores and beautiful production
workshops, since these are places that transmit the brand’s image to the
public, but modest offices, since clients do not visit the offices; it is a very
important sign that the high price of a luxury product is not due to vast,
wasted expenditure, but to extreme quality in production and distribution.
product and the stores. Without demanding total stability, which is also a
factor of immobility that is particularly dangerous in a universe as fluid as ours
today, you should not move to the other extreme of many companies, where
employees change company constantly: this instability leads to permanent
hybridization, which, added to the incessant benchmarking, causes all origi-
nality to disappear.
This is one of the problems of ‘luxury’ perfumery, which must absolutely
remain original. If there is no longer a ‘house nose’, the scents no longer
carry the house’s ‘mark’. This is more and more the case in many ‘luxury’
brands, where creation is steered by ‘product chiefs’ – talented, but entirely
interchangeable. The result is that ‘premium’ perfumery brands, such as
Lancôme, succeed better economically today than ‘luxury’ perfumery
brands, like Guerlain.
Finally, not only are the true luxury houses characterized by high team
stability, but they also have a role in the preservation of certain artisanal
trades, which would not be economically viable without their help: hence
Chanel recently (2007) bought six dying French artisan companies.
accustomed to giving orders from their desk; travelling endlessly to the four
corners of the globe is tiring; knowing how to stay in the background is unnat-
ural to the ego of the Western ‘chief ’.
This is also one of the reasons why this management is so exciting: the
human relations are so rich and real within the company.
Finally, this is one of the reasons why wanting to introduce fashion, with its
‘star system’, within a luxury house is so difficult: the rejection is immediate, if
the teams dealing with fashion do not have the right human behaviours... and
God knows that it is difficult for them and contrary to their nature.
• The notion of brand portfolios does not work in luxury. Since each ‘house’
has its own specificity, and luxury does not work in direct competition
within a single market, there is little sense in constructing a portfolio of
brands in order to cover this market with complementary brands, as the
major food or household products groups do.
• There are few real synergies within a group. In fact, groups that work
well, like LVMH, are associations of companies each with its own brand,
Financial and HR management 237
PART 3
Strategic perspectives
240
13 Luxury business
models
• On the one hand, examining whether they are truly luxury brands,
other than in their own statements or in the perception of the mass audi-
ence: for many Japanese, Burberry is luxury, and for many French,
Cardin is also.
• On the other hand, deciphering the models of working of the companies
that manage them, integrating the creation, production, distribution,
human resources and finance aspects.
242 Strategic perspectives
One of the contributions of this book is to relocate luxury within the business
models that underlie it: there are several of these. We will examine them all
in turn.
In luxury, a product is always accompanied by a service, and we can distin-
guish four major families of luxury business models, according to whether the
product or the service is dominant:
• Two for the ‘luxury products’, according to whether the brand has a core
range with a sufficiently large and profitable market, or whether this
market, being too narrow, forces the brand to sell other articles outside
the core trade, benefiting from its aura (brand stretching) in order to be
profitable.
– To these two families we can add another very specific one: the perfume
model.
• One for ‘luxury services’.
• One for ‘luxury in high-tech’.
Epi line), the same visual appearance (LV monogram for the Monogram line,
graining for Epi).
The worldwide success and recognition of Louis Vuitton rests on this
balance and this complementarity, which must be maintained: the Louis
Vuitton bags and luggage will remain luxury products just as long as elites the
world over continue to buy Vuitton trunks and ‘special orders’ with the LV
name, even if the middle classes the world over queue up in Vuitton stores to
buy bags made of the same materials. It will also be necessary, of course, for
these products to remain of impeccable quality, manufactured by the
company, and sold exclusively in Vuitton stores.
Audemars Piguet
In 1875, in the Swiss village of Brassus, two young admirers of haute
horlogerie, Jules-Louis Audemars and Edward-Auguste Piguet, pooled their
know-how in order to design and produce intricate watches. The history of
the brand is a succession of creations. We will mention two of them. In 1892,
Audemars Piguet designed and achieved the first minute repetition wrist-
watch: it was a world first. In 1972, breaking with the codes of haute horlogerie,
Audemars Piguet created Royal Oak (2121 calibre), the first upper-range
steel sports watch.
Today, Audemars Piguet remains the oldest manufacturer of haute horlogerie
to have remained in the hands of its founding families. It has more than 700
employees worldwide, 550 of whom work on the three production sites in
Switzerland. It produces 24,000 watches per year. The Royal Oak watch is
priced from N600,000 (ordinary product for extraordinary people) to N8,000
(extraordinary product for ordinary people); as with Rolex, another highly
representative example with its Oyster model, unchanged for decades and
always current, a single design is used for the entire Royal Oak range.
Of course, N8,000 is a steep price for ‘ordinary people’, but if the watch is
worn every other day for 10 years, the classic situation for a watch designed to
resist aggression (shocks, water), that gives 20,000 hours of use, or less than 50
euro cents per hour, which makes it reasonable for an ‘ordinary’ person.
The specificities of the business model illustrated here relate to the product,
production and distribution levels, as detailed below.
To help make more explicit this concept of entry product and its specificity, let
us see how references are managed in fashion, in Figure 13.2.
Price Index
1000
100
10
Price Index
500
100
Internal lassitude
As we saw in the case of Louis Vuitton regarding the Monogram canvas in
1986, this is one of the biggest risks that come with success in this case. The
greatest restaurateur can end up tiring of their great dishes, which is under-
standable; deducing from this that the clients are also tired of them, forgetting
that they do not dine on them daily, would be a grave mistake.
The late Claude Terrail showed great wisdom in continuing to cook (and
number) his ‘Pressed Duck’ daily at La Tour d’Argent for decades.
CLASSIC MODEL
Single model
‘Star’ creator
RA
AU ART Regular renewal
Hyper selective
SMALL distribution/target
HAND-MADE
Y
and label
NE
SERIES
MO
The two risks of the pyramid model are creative dilution as you move away
from the summit, and also contamination from below:
• The loss of the creative power and therefore of its influence on clients and
its authority over the other strata may be genuine: leather goods, perfume
or watchmaking, being legitimate luxury trades for the brand, may be
tempted to run themselves.
• Contamination from below: ‘easy money’ from small products with high
margins leads to the facile solution of highly profitable mass marketing as long
as the brand maintains its prestige. The risk of contamination from below is all
the stronger if the brand is managed by financiers wishing for rapid results.
In this business model, the small products have the highest margin and are
sold in larger quantities; their financial contribution is therefore significant,
sometimes even indispensable to the company’s economic stability – in which
case, the brand is extremely fragile. The natural temptation of a fragile brand,
under pressure to make money quickly, is to griffe everything within its reach,
to multiply its licences while providing itself with a ‘creative office’ supposed
to offer its creative talent to licensees chosen principally for their ability to
contribute financially, and to relocate to the area of lowest costs.
Using Figure 13.4, we can also see how different is the management of Louis
Vuitton-like brands.
252 Strategic perspectives
Special order
TOP trunks
We will now analyse several famous brands according to this pyramid frame:
Chanel, Armani, Dior and Cardin (Figure 13.5). We include also Louis
Vuitton and Rolex although it is clear from our analyses that their business
model is not that of the pyramid.
The case of Chanel is a very interesting one, due to its lasting success and
high profitability. Its pyramid is unique since not only the top of the pyramid,
haute couture, is luxury, but in addition each product-universe of the brand is
also a luxury universe: the leather goods are produced in France, as with
Hermès, the perfumes are created by a house ‘nose’ (Chanel even has its own
jasmine plantations at Grasse), the watches are real watches and not griffe
products, etc.
Chanel has another specificity, which explains its success in haute couture
now that Gabrielle Chasnel, alias Coco Chanel, is long dead: the constitution
of a tandem of brand (which guarantees luxury) and creator (which guaran-
tees fashion), with the creator in question (Karl Lagerfeld) fully respecting
the ‘Chanel spirit’ and its semiotic grammar in his creations for the couture
house. In parallel, Karl Lagerfeld is expressing himself personally through
his own brand, and working for other companies (such as Fendi or H&M),
thus avoiding any confusion between himself as an individual and the
Chanel brand. The Chanel pyramid is therefore made up not of descending
strata, but of mini-pyramids placed side by side, hardly descending at all in
quality and price level. The only exceptions: glasses, distributed by multi-
brand optician chains, or T-shirts.
LOUIS VUITTON CHANEL ROLEX
TOP
RANGE
TOP Special order TOP Haute
RANGE trunks RANGE couture
253
Figure 13.5 Luxury brands in perspective
254 Strategic perspectives
Emporio Armani
UPPER RANGE Armani eXchange
Armani Jeans
LICENCES/ACCESSORIES
(MASS TIGE)
Haute couture
ART ‘Star’ Creator
Jewellery
SMALL Luxury ready to
HAND-MADE
HAND MADE wear shoes
SERIES
Watches
UPPER RANGE Leather
Textiles
LICENCES/ACCESSORIES Fragrances
(MASS TIGE) ‘Logo products’
As for Pierre Cardin, only the base of the pyramid remains, but it is an
extremely broad base. The aura is the memory of the now-gone era in which
Cardin was a creator and a griffe, with the remaining recognition at a truly
global level among the mass audience.
nothing and became rich and famous), and a true invented story, that of the
aristocracy of the north-eastern coast of the USA.
In these conditions, we are no longer looking at the myth of creation, but
the true field of luxury, that of the dream; moreover, RL himself has said:
‘other designers have taste; I have dreams’. RL’s talent is to enable many to
share his dream.
Let us note here a point that is very important strategically: whereas, in the
pyramid model, we are dealing with a luxury brand that sells products that
might not be luxury products, when a brand functions on the galaxy model, as
long as the creator is alive, it might not be a luxury brand (‘Ralph Lauren’ is
not a luxury brand), but all its products may be luxury products for those who
dream of the brand, if all its products are legitimized by the creator as forming
part of his universe. This quickly borders on fetishism: RL even sells the furni-
ture he has used, which become luxury products for his fans.
Unlike the pyramid model, therefore, the galaxy model does not a priori
exclude any product, and does not require all products to be sold in the
same place to demonstrate the brand’s coherence, under the influence of
the product generating the dream; coherence is ensured by the personality
of the creator.
The risk with this model is that it rests on a single person, and that person
must remain constantly vigilant, even with increasing age, or everything falls
apart: even a man of exceptional talent such as Pierre Cardin was not able to
maintain his name at a high enough level to keep his galaxy within luxury:
nowadays, nobody, or almost nobody, identifies with the dream of Pierre
Cardin – which, moreover, he no longer seeks to communicate.
In any case, can the galaxy model survive the death of the creator? It is imper-
ative that the creator be alive, in order to ensure the cohesion of the whole.
This galaxy model does not only concern fashion: a luxury restaurateur
such as Alain Ducasse functions in this way. Nor is the centre of the galaxy
necessarily a human being: this model can be applied to famous monuments,
carriers of an eternal dream, such as the Chateau de Versailles, the Chateau de
Chambord, or the Taj Mahal.
of the elitist product, and the cost of maintaining the brand is also very high, since
it requires investment in communication both to maintain the dream, and also to
push sales. At P&G’s prestige and beauty division, which manages perfumes
under licence, the media advertising investment is 20 per cent of turnover.
While there was still hope that the perfume would easily become a great
classic, these launch and brand maintenance costs were justified.
Nowadays, the life expectancy of a new perfume is getting shorter all the
time, due both to the direct competition between luxury and premium in this
market, leading to a logic of constant launches, and to the introduction of lots
of star perfumes (Delon, Dali, Spice Girls, etc), of which companies such as
Coty have become specialists.
Under these conditions, the luxury perfume market is today not very
profitable.
The true business model of the luxury perfume is therefore of the introduc-
tion of a single fragrance, made to last forever and immortalize the couturier’s
universe. Chanel No 5, or L’Air du Temps by Nina Ricci are the paragons of
this genre, and it is in this same way that the most recent of the great successes
in luxury perfume was introduced (not launched!): Angel, by Thierry Mugler.
You do not ‘launch’ a perfume in this case ‘because you need to’, but you
‘introduce’ a new perfume because you have found a new olfactory composi-
tion, coherent with the couturier’s universe. Opium was a part of the Yves
Saint-Laurent universe, Paris another one.
This strategy is the only one that leads to lastingly high financial results,
coherent with other luxury activities.
• The nature of the basic motivations for purchasing a perfume: for me, or
for seduction?
• Gender: is this a perfume for men or women?
• The psychological profile of the target, arising from a segmentation of the
brand’s potential market into client types: each type then sustains a
different perfume project.
In this business model, value is not placed on the product, the scent itself, the
packaging, or the bottle, but in the advertising and merchandizing. This is
typically ‘demand marketing’ and not offer or supply marketing, based on a
strong brand identity. The advertisements for this type of perfume are inter-
changeable since the link with the creator, or a creative root that provides
coherence, is lost in favour of target analysis and the use of advertising skits
based on the stereotypes of each target. These are not very numerous.
Another approach to justifying these repeated launches consists of following
the vagaries of fashion. Thus Calvin Klein has been able to spot emerging
trends and capitalize on them to sell to the masses thanks to his reputation as a
designer. In 1980, Obsession surfed the wave of moral liberation, and later
Eternity, its opposite, signalled the return of cocooning.
260 Strategic perspectives
Those that offer shared enjoyment: first class on common transport (train,
underground, aeroplane, certain large cruise ships)
In this case, already dealt with in Chapter 4, the differentiation is achieved
through the luxury in the service, in discretion... but also in ostentation (the
first-class traveller who is ushered past the rest during boarding). Here we
find both aspects of luxury.
One example of this business model is Singapore Airlines. This company,
created in May 1947, is regularly named by Fortune Magazine as one of the
world’s most admired companies. It is also the world’s most valuable carrier.
Its first class is a true luxury product, but what is striking is the ability of the
brand as a whole to surpass all other airlines. It has four key values: perma-
nent innovation, the best technology, authentic quality, and excellence in
customer service.
While these values come as no surprise to anyone, it is nevertheless their
lasting implementation at the highest level that represents a genuine feat:
• Singapore Airlines has always, systematically, been the first to launch most
innovations concerning client experience on board and on the ground, as
well as their entertainment. The most recent was the installation of a PC at
every seat!
• Singapore Airlines also has the most up-to-date fleet of any airline: it was
the first to buy the new A380.
• Every luxury brand has an icon. The icon of Singapore Airlines is the
Singapore Girl, created in 1968 and the focal point of all its advertising
since then. Pierre Balmain was asked to create her uniform, a special
version of the Malay sarong kebaya. This icon symbolizes the hospitality and
warmth of the company’s welcome and service. In order to maintain it,
ongoing training is given to the hostesses, stewards and personnel in
contact with the client, in order to increase their competence: for
example, they take courses to better recognize wines and cheeses and be
able to talk about them, recommending them to passengers who them-
selves are so competent and demanding. Singapore Airlines’ advertising
has systematically promoted this icon of service for 40 years.
to worry about it; hence there are two conflicting choices for leading a luxury
strategy in this sector:
When in the electronic field, the technological rhythm of evolution is such that
you need to split your product between the physical object and the service.
The service can be easily and permanently improved, allowing the object to be
durable, and as a consequence, luxury. But both service and object need to be
real luxury. Nokia’s Vertu telephone is a perfect illustration of the case: service
(the concierge) is the quintessence of luxury, as is the object (the mobile),
which everyone can admire, and which is made by jewellers.
The most difficult to manage are the electronic products where object and
technology cannot be split. It is feasible, as shown by Bang & Olufsen, but
success is very volatile, as design and technology must be both at the top.
Founded in 1925 by Peter Bang and Sven Olufsen, B&O has been very
successful, and some of its products are part of the permanent collection of
New York’s Museum of Modern Art. But in the 1980s the company departed
from the strict requirements of a luxury strategy. As a consequence, at the
beginning of the 1990s the brand suffered big losses, its design being outdated
and its technology behind top competitors like Bose: both aspects of luxury
were severely harmed. However, B&O being a luxury brand again, it didn’t
die, and Anders Knutsen made a remarkable turnaround by again imple-
menting a luxury strategy.
The big difficulty in this case is to be both very modern in design but, unlike
fashion, staying modern for years and not for months, and staying at the edge
of technology – which is requesting the mastering of two very different areas of
expertise often contradictory. When you are able to do it, then you can imple-
ment a luxury strategy, as described in this book, with huge success. But this is
fragile as shown by B&O’s poor results in 2007–2008.
265
Everyone has examples of luxury brands in their head, those that exist today.
The list, however, is not closed: some brands will die, but tomorrow new
brands will be born, and in great numbers, whether in Europe or the USA, or
in China, Korea, Japan, India or Russia, since we saw, in Chapter 1, the degree
to which the luxury market is growing structurally in these countries and how
it is progressively conquering all trades.
Here we will address the three key questions that the founders of new
luxury brands should ask themselves:
Likewise, the role of the internet in a luxury strategy will evolve along with
the tool and the sociocultural environment: rightfully completely excluded
from luxury some 10 years ago, we now strongly recommend including it in
the communications mix, thanks to its considerable qualitative evolution
(images, sounds) and technological evolution (high speed); we exclude it from
sales today (while still strongly recommending its use in pre- and after-sales, or
CRM – customer relationship management), until it becomes more secure and
personalized... but perhaps we will recommend it tomorrow. Here again,
pragmatism is king!
Conversely, this does not mean that a luxury strategy is always possible, and
less still that it is economically realistic: the cemeteries are full of people who
believed they were indispensable, but also of companies that thought they
were ‘luxury’.
The fact that your grandmother was able to stitch together a few garments
for the notables of the village, or that your great-grandfather sold a few hand-
made articles at the market in the neighbouring town, is not, de facto, enough
to justify the historic roots of a luxury brand. Artisanship is not luxury as long
as it is not socially coded and a bearer of taste, or even simply art.
Likewise, you should not confuse a product that is not sold with a rare
product, by blaming the incomprehension of potential clients and not blaming
your own obstinacy and the failings of the offer.
Consequently, if you are not in the top three in any market, it is worth thinking
of adopting a luxury strategy, as explained throughout this book, if there is a
base for it in your product or service. Small initial size is not a handicap in that
case, and it can even be an asset, as we will see later on.
If the first two conditions are hardly surprising to the reader, since we have
already developed them in full, the third, which can be rewritten as ‘start
small’, is different. We have already seen how closely luxury and time are
linked, and how much time luxury needs. A famous Asian proverb says: ‘What
time has not made, time destroys’ – it is now time to apply it!
Entering luxury and leaving it 269
• either that the link already exists with all clients (the ideal case, but a rare
one if the company has reached a significant size);
• or that it must be built. If there are already many clients, this is difficult. A
process of recentring on part of the clientele, and closing part (perhaps a
large part) of distribution and accepting the risk of a significant drop in
turnover, will be necessary: this is a financially costly operation and
requires the shareholders to hold their nerve.
before the dream can fade away with a change of socioeconomic circum-
stances, or a competitor who fulfils it better than you do. In some sense you
need to ‘occupy the terrain’.
Here we find the practical consequence of what we called the ‘swing
threshold’ in Chapter 12 on finances: this is the moment when the resource
allocation policy must be fundamentally changed. There is no rule of thumb
for determining this threshold: it depends on the trade and the brand’s situa-
tion versus the competing offer. One thing only is clear: as long as the company
is not, even slightly, profitable, this threshold has not been reached. Very few of
those who have sunk large sums of money into a brand in order to develop it
before it reached financial equilibrium by itself have ever recovered their stake.
Acquiring a brand
This second strategy is increasingly employed, since (in theory!) it saves a
great deal of time that would otherwise have to be spent building the brand
universe. It has led to a considerable increase in value of luxury brands over
the past 20 years, as we saw in Chapter 12 on finances.
Entering luxury and leaving it 273
coming years. From these elements we might conclude that, once ‘in orbit’, a
luxury brand remains an eternal success, like a work of art.
However, this is not the case: even if luxury as such will never die, a luxury
brand is fragile, and even an entire trade; we are thinking here not only of the
furrier business, but also of perfumery, which is imperceptibly evolving from
an art to a mass prestige trade under the influence of the repetitive launches of
new products under a single brand. Once you cannot or no longer wish to
apply our ‘anti-laws’, the end is nigh: a ‘premium’ strategy then dominates. As
we have already seen, even if a luxury brand never disappears completely and
can always be resuscitated (as were Gucci, Balmain and Bugatti), it can rapidly
wither away through refusing a change in status to become a premium brand.
In the eyes of some (but not in the eyes of the authors!), moving from ‘luxury’
to ‘premium’ represents a diminution of the brand. This is a capital mistake: a
luxury brand is neither better nor worse than a premium brand; it is simply
managed differently. A parallel can be drawn here with the fairly classic behav-
iour of the heir of a prestigious and wealthy family finding themselves in a
difficult financial situation. Refusing to admit that their social situation has
changed, they refuse to re-evaluate and to work hard to begin again on a new
basis. Thus begins the downward spiral of decline, of selling the family jewels
in order to keep up appearances.
The principal causes of the withering away of a brand are:
According to the chosen business model, the causes of this withering are different.
1. Diversifications that are not wholly legitimate and are less profitable.
2. The ease of the everyday.
3. Internal lassitude.
4. Rejection of the past.
Entering luxury and leaving it 275
However, the most serious risk is the extrinsic risk: that of shareholder greed,
attempting to ‘milk the brand’ to the maximum by pushing it to move away
from its domain of legitimacy, and to move towards the pyramid or galaxy
models, which are not suitable in this case.
This is death by dilution, dispersion or evaporation of the brand content. A
famous example is that of the Gucci family, which succeeded in causing the
Gucci brand to almost completely wither away, before it was saved through
acquisition by Investcorp and taken firmly in hand by the Domenico De
Sole–Tom Ford duo, and then by the French PPR group.
Hypnotique, Pure Poison, etc) and the bottle (varied in every possible colour),
are recycled, with one or two cosmetic modifications (a particularly apt term in
this case), while changing those things that are not too expensive to change
(the ‘juice’, the advertising creation). These are last-ditch strategies, which risk
voiding the brand of its contents for limited financial profit.
However, all is not lost for luxury perfumes:
• The market where the highest level of the brand is recognized and expressed
is disappearing. It was the case for the silversmiths’ trade at Christofle, where
the heavy, solid silver products were linked to a way of life that has almost
disappeared (ceremonial dinners of the haute bourgeoisie of the 19th
century). In the same way, as analysed in the previous chapter, ST Dupont
(like Dunhill) suffered badly from legislation against smoking in public and
tobacco advertising, and therefore the cigarette lighter as a prestigious gift
no longer had cachet; the brand succeeded in a first evolution towards pens
(thanks to the product coherence between the cigarette lighter and the pen),
and then with much less success into leather goods and prêt-à-porter in the
Entering luxury and leaving it 279
classic British style. The absence of (technical and image) legitimacy, and
therefore of the ‘dream part’, of ST Dupont in these latter trades explains the
failure of this brand stretching. It is interesting to note that the same is true
for Dunhill: despite its different roots (one brand is French, the other
English), different shareholders and different management, the recent
history of these two brands has been almost identical. The laws that we have
revealed for management of luxury are indeed structural laws.
• Without disappearing, the market may be considerably reduced: this was
the case for haute joaillerie, which is much less frequently worn in public,
hence the evolution of these brands into watchmaking, a legitimate evolu-
tion, and then perfume (again!), a much less legitimate one.
• The creator changes strategy. This is how Pierre Cardin became a brand
managing a global business of pure licences, which profitably exploits the
afterglow of his prestige among a mass clientele: the stand of shirts, belts
and ties at Galeries Lafayette is one of the most profitable of the entire
men’s department at the Parisian department store.
• The death of the creator, when he alone embodies the dream and there-
fore cannot be replaced, often leads to a departure from luxury (the
Chanel house is one of the rare exceptions). Thus Thierry Mugler has
ceased to create: all that remains under its name are the Angel and Alien
perfumes, and a few accessories, all managed by Clarins. The same is true
for Loris Azzaro, Nina Ricci now owned by Puig in Spain, or Guy Laroche,
bought from Bic by a Chinese group.
• loss of creativity;
• impatient or greedy shareholders.
In all these cases, it is better to get out of luxury before it is too late, that is,
before the brand becomes worthless.
For whichever reason the decision to leave luxury is taken, implementing
this strategy is not easy: as we saw in Chapter 1, you can be lastingly prof-
itable either in classical brand marketing (L’Oréal, Procter & Gamble) or in
luxury (Louis Vuitton, Cartier, Chanel); very rarely can you achieve prof-
itability in-between the two. Managing the transition is a difficult and
perilous art of its own.
However, success of the strategy is possible, as shown by a case of clever
management of departure from luxury: that of Dior. In fact, the man
Christian Dior was never really replaced after his death in 1957, despite the
talent of the great couturiers who succeeded him as head of design over
almost half a century, from Yves Saint-Laurent to Gianfranco Ferré.
280 Strategic perspectives
The arrival of John Galliano in 1997, exactly 50 years after the launch of the
‘New Look’, was a key element in the complete change of strategy: the transi-
tion from that of a luxury brand (Christian Dior) to that of a prestige fashion
brand (Dior).
Without of course admitting it publicly, so as to avoid damaging its superb
image, the Maison Dior passed in a few years from being a haute couture
house, in the name of Christian Dior, with a talented designer (Gianfranco
Ferré) and superb collections made to be worn, to a brand, simply named
‘Dior’ (and a set of initials, ‘CD’), with an ‘artistic director’ who is admittedly a
great couturier, but also and above all a very talented showman (John
Galliano), and whose fashion shows are designed to provoke and to highlight
the accessories, not to sell dresses.
This strategy proved economically rewarding (after many difficult years,
Dior is now profitable), but at the price of a great separation: the Dior name is
always mentioned among the first when people are asked to name French
luxury brands, but the Dior products are practically never mentioned when
people are asked to name French luxury products spontaneously. It will be
interesting to see how long this unstable situation will last, and whether the
decision will be taken to return to luxury, or to depart totally from the luxury
universe. Today, both strategies are possible; the decision to pursue
outsourcing of the manufacture of products sold under the Dior brand will be
one of the key factors in this choice: relocation is an anathema to luxury.
Dior is not the only couture house in this situation: Yves Saint Laurent is
in a very similar state to Christian Dior’s before it became Dior; it could
become the prestige fashion brand Saint Laurent, and a set of initials, YSL.
As seen above, the sale of Yves Saint-Laurent Parfums to L’Oréal is a big step
in this direction
We have already analysed this subject several times: luxury and fashion are
both economically significant universes, but completely different (the ‘luxury
streets’ are not in the ‘fashion quarters’) and have only marginal overlap;
while the creator is alive, a fashion brand, even if it is not a luxury house
(Ralph Lauren for example), can sell luxury products, if they are given legit-
imacy by the creator.
Once the creator is gone, in order to remain a profitable luxury brand, it
must succeed in forming a ‘tandem’: of the brand (which guarantees luxury)
and the designer (who guarantees fashion), as Chanel succeeded in doing with
Karl Lagerfeld; but success rarely follows, since it is markedly similar to a
mixture of water and fire, so strong is the deep opposition between a luxury
brand and a fashion designer.
We have taken our last examples in the universe of fashion, because it is
there that the question is the more frequently aroused, but we have previ-
ously seen another example: the Daimler group and the Mercedes brand.
Entering luxury and leaving it 281
The decision of the Daimler group to have Mercedes leave luxury was moti-
vated by the too small size, according to the shareholders, of the luxury
market; so, the acquisition of Chrysler, the launch of the Mercedes A-class
and of Smart, and the revival of the Maybach brand. As of now, the decision
to leave luxury has shown less financial success than the one of BMW, which
decided to stay in luxury, but this was the shareholders’ decision!
In order to be successful, the departure from luxury must be achieved in
time (the brand must have retained its prestige, and must not be under too
great a financial burden), and carried out with a great deal of marketing
rigour. One of the key points, however, is the transformation of teams: we have
seen how much, in luxury, the quality of the teams and their loyalty to the
brand were crucial. When you move from a ‘luxury’ strategy to a ‘premium’
strategy, the human and technical competencies required are different,
leading to a considerable task of recentring, training and conviction to be
carried out by management... all without saying so officially, since the key to
success here is to maintain the luxury image for the client: the client should
not become aware of this departure from the luxury universe if you want the
‘dream part’ to remain intact as far as possible, since this is what will protect
the company during its transformation.
282
Let us take the example of surgery: at first glance, this is the opposite of
luxury, both because the superfluous is prohibited (you must save the sick or
injured person), because it is frightening (being operated on is never a
pleasure), because it is not a social stratifier (we do not generally show off the
operation scars, or boast publicly of having been operated on). Moreover, its
economic model is specific (reimbursement biases the entire system of price
fixing and strongly limits the freedom of both the ‘producer’ and the
‘consumer’) and is under strong financial constraints (pressure from health
insurance funds and Social Security). Finally, it is the subject of ongoing public
debate, hardly a propitious environment for drawing up a strategy that takes
time to implement. And yet, there is indeed at least one luxury niche here:
cosmetic surgery, in which the strategy we have revealed in this book works
very well, as the success of the upper range clinics clearly demonstrates. Brazil,
and particularly Rio de Janeiro, are carriers of the dream of youth and phys-
ical beauty: this is one of the most desirable places to set up a clinic where, in a
luxury environment, the ‘surgical act’ loses all aggressive connotations and is
sublimated into an artistic act, which procures for you not deliverance from
suffering, but access to greater happiness.
At another level, it is not only at the top of a market that a luxury strategy
can prove relevant: in the food market, caviar is admittedly a luxury product,
but organic is just as much relevant for a luxury strategy, since it has all the
necessary characteristics, and yet without being ‘unaffordable’, in accordance
with our anti-law number 12: ‘Luxury sets the price, price does not set luxury’.
In fact, all the elements of the luxury marketing mix are applicable in this
case: the dream part of the product is health, its ‘social signifier’ is respect for
the environment, the price is not the primary question (and is moreover
higher than for an identical, non-organic product), distribution is controlled,
and communication is there to recharge the dream, rather than to sell. In
addition, there is a certain rarity due to non-intensive production.
sharply and continuously, then anti-law number 13, ‘Raise your prices as time
goes on in order to increase demand’, must be adapted; in particular, it is the
relative price to the market that must be taken into consideration, and not the
absolute price of the product. The price of the product might be decreased,
but it must decrease significantly less than the market price, so as to conserve a
high price premium, and in addition it is necessary to plan a ‘compensation’
strategy for existing clients.
A typical example of this type of market is that of electronic goods, where
‘Moore’s law’ dictates that prices decrease even as the functional quality of the
products increases. However, one of the main brands is successfully following
a strategy inspired by luxury: Apple.
Steve Jobs returned to the original strategy, while adapting the manage-
ment style to the new situation. Everyone knows the rest: the iMac, then the
iPod and iTunes, finally the iPhone, an entire series of global successes, both in
technical terms and at the level of financial profits… and the queue on 5th
Avenue in the spring of 2007 for the launch of the iPhone, on an already satu-
rated and ultra-competitive market, was spectacular proof of the wisdom of
the ‘Jobs’ strategy. In 2007, Apple’s stock market value was equal to that of
IBM – it has come a long way in 10 years!
The case of Apple is a prime example of the difficulty, even the impossibility,
for a brand or a company, to cross this border between ‘luxury’ and ‘premium’,
in either direction, even within the same market niche, and even if the market
is not a traditional luxury market. In fact, Apple’s strategy has all the character-
istics of a luxury strategy applied to a classic market: let us review them:
in direct contact with their clients, and never in direct comparison with
other PC brands. Apple distribution took a further step with the launch
of the iPhone, which is granted to a single telephone operator per
country, at a high price (30 per cent of turnover) or a considerable
royalty rate, which speaks volumes about the gross margin. We can
understand the rush of sharp minds and hackers around the world to
unlock this device and render it compatible with all operators. For Apple
this is the equivalent of the counterfeiting or grey market typical of the
luxury market.
• The prices clearly higher than all competitors and never reduced.
• Clients set at a distance: Apple was revolutionary in its day through its
open invitation to ‘techies’ on all sides, to the ‘nerds’ to freely create with
and for Apple. With iPhone and iTunes, we are moving into another logic,
closed and aiming to manage demand.
The fact that Apple’s strategy is clearly a strategy copied from what we call
‘luxury’ is likewise confirmed by the failure of John Sculley to return the
‘Apple collective’ to the straight and narrow of classic marketing, a failure that
demonstrated the specificity of the brand, or better yet, the fact that Apple is
not only a brand, but above all a universe, that of the original dream of
‘human, user-friendly computing’ of 1970s California.
In contrast, the most recent incident, due to the price positioning of the first
offer, illustrates how difficult it is to manage a luxury strategy in ‘non-luxury’
trades: the iPhone was introduced at $599 (and not $600, as would have been
the rule in luxury) on 29 June 2007 in New York, with great success. Despite
this, and against our anti-law no. 13, ‘Raise your prices as time goes on in
order to increase demand’, Apple abruptly lowered its price to $399 (and not
$400) shortly afterwards, placing it at the level of other ‘smartphones’ and
taking a major risk for its image.
gamble. In reality BMW is applying a luxury strategy to the Mini, even if this
car is not a luxury car. The essential facets of this strategy are visible:
• A strong temporal anchor point that grounds its authenticity: the 1960s. It
was created in 1959.
• A strong geographic anchor point, maintained even though Mini is managed
by BMW: England. Moreover, the Mini is produced close to Oxford.
• A strong cultural anchor point: that of creativity and moral liberation
associated with the 1960s (the miniskirt, the Mini, pop music).
• A status dimension: the Mini has become a bijou car, and less of an
everyman’s car, the status it held in its first lifetime.
• Exceeding functionality through aestheticization, with the Mini becoming
a style accessory, an element of one’s own personalization, through its
multiple options. The design of the Mini is the first purchasing criterion
among its owners.
• The maintenance of a handmade element: the leather on the front seats.
• A relationship to art: the Mini quickly became an iconic shape of its century,
adopted by contemporary artistic milieus. This led to partnerships with
FIAC (Foire Internationale de l’Art Contemporain), Apple Expo, etc.
• A progressive beginning based on a single product (‘the Mini’), which created
a cult thanks to an unparalleled design and the enthusiasm of opinion leaders.
• Nowadays it has been brought up to date technically but the heritage is
respected. The Mini is 60mm bigger than the historic Mini, but has
respected the proportions of the latter down to the last micron. The
increased length has enabled it to accommodate a larger engine, and to
achieve more sporting performances, even without the Cooper S version.
• Ultra-personalization (300 exterior and 320 interior options): there is also
a profusion of accessories. This creates high profitability owing to the fact
that it prevents distributors from having stock: Minis are built to order,
which leads clients to await ‘their Mini’ (once more the temporal dimen-
sion) and does not encourage them to haggle over the price – Mini offers
zero reductions in any case. Profitability is all the higher as a result.
• The staging of desire through celebrities with Minis, photographed in
their daily lives, all acting as ‘buzz’ factors.
• A feeling of exclusivity conferred by the two factors above, not to mention
the exclusive distribution, close to the mythical BMW brand.
• The maintenance of a community of believers: people who collect Minis in
the same way that others collect watches.
A little-known fact that confirms through its absurdity the association of the
Mini with luxury: before its acquisition by BMW, this car had never made
money throughout its 41 years of existence. Today it is very profitable.
288 Strategic perspectives
Mixed strategies
We took a firm line on the indispensable coherence of all the elements of the
marketing mix in luxury, meaning that you cannot successfully pursue a
strategy mixing elements of the luxury ‘4 Ps’ with elements of the classic ‘4 Ps’,
for example a luxury price policy and a traditional product policy. It is imper-
ative to choose one or the other at a given moment.
Having said this, a purely luxury strategy is difficult, and often costly, to
pursue; in particular, as we have already seen, it is highly demanding in terms
of distribution. We might therefore wonder if it is not possible to pursue both
strategies in parallel, within the same brand; this is what we will call ‘mixed
strategies’, characterized by the fact that they are practised under the same
brand name, one part using the classical ‘4Ps’, the other the ‘4Ps of luxury’.
(founded in 1931) is attacking the luxury niche, and now leads Nespresso in
Germany and is hard on its heels in Switzerland in terms of provision of
domestic machines.
Having said this, even in its choice of ‘premium’ advertising strategy,
Nespresso retains a spice of luxury, in the way it is treated. In the advertise-
ment, it is the Nespresso that attracts the client and not George Clooney: anti-
law number 16, ‘Keep stars out of your advertising’, that is, ‘The brand is
above the stars’, is therefore applied, as in luxury.
The future will tell whether the choice of a mixed, and therefore ambiguous
in communication terms, strategy will last, whether Nespresso will align itself
with a ‘premium’ strategy in order to continue to grow in the environment of
a major group, or on the contrary choose luxury, in order to maintain its orig-
inality and its exceptional profitability.
The considerable success of Nespresso shows the relevance of this mixed
approach; to successfully apply it, two conditions must be met:
• the offer must comprise at least two complementary elements and both
must be indispensable: they must be overlapping;
• it must be possible to place the brand name on both, even if it is co-
branding on the part of the offer that is managed as ‘premium’.
It would therefore seem that for a developed country producer active on the ‘B
to B’ market, the search for a monopoly, via the classic acquisition/restructuring
strategies, is the only way to maintain a position of strength vis-à-vis its clients.
In fact, there is another path to be explored. In certain cases, an industrial
‘B to B’ may successfully pursue a luxury marketing strategy, or rather than a
‘luxury product’ marketing strategy: it is clear that, in this case, not all
elements of the marketing mix are present (no distribution or public price
policy), which means that a luxury strategy, as we have previously defined it,
insisting on the total coherence of the ‘4 Ps’, is clearly not applicable. However,
it can be applied on the part of the ‘4Ps’ which are relevant in ‘B to B’.
For this strategy to work, it is imperative that:
In order to shed further light on this subject, let us take a revealing example,
experienced by one of the authors: glass bottles for perfumery.
At first glance this is hardly exciting: glass is a heavy industry, and therefore
in contradiction with artisanship and creation, and the luxury part of the
trade is that in which finished objects, destined for the end consumer, are
made by hand (Baccarat, Daum, Cristal de Bohème), essentially for the deco-
ration and tableware markets.
How can the business of glass packaging, essentially focused on the produc-
tion of an enormous quantity of disposable objects (beer or wine bottles,
yoghurt pots), become a business of producing luxury objects?
In fact, as we saw in Chapter 13 (perfume business model), the bottle is a
key element of the perfume: it is what you pick up, it is what appears in
advertising; it is therefore in some senses the ‘transactional object’ of the
perfume product; it is, together with the name, the carrier of the product’s
luxury. Moreover, since time immemorial, perfumes have been placed in
precious vessels. The key, for the glassmaker, is not to be caught in the trap
of the simple packaging supplier who is subjected to competition, but to
cross the barrier of the perfumer to understand what the end clients want,
what their motivations are, to carry out its own market research on the
ground, and to work upstream with the bottle designers to create original
forms and colours. If this is well managed, the perfumer is obliged to work
through this specific glassmaker if they wish to access rapidly an original,
high-quality bottle, corresponding to the dreams of their potential clients,
and therefore making a strong contribution to the perfume’s success. In the
launching of a perfume, it is the bottle that is on the ‘critical path’, since the
292 Strategic perspectives
other elements of the product (the scent, the advertising) are easy to carry
out quickly. In our time-poor society, the glassmaker and the designer who
arrive together to present a handsome, rapidly manufacturable product will
win the contract. There is no longer any question of being subjected to
savage competition… especially on price. Owing to this ‘luxury product
strategy in B to B’, or rather ‘luxury strategy in B to B to C’, the French
glassmakers of the Picard valley of la Bresle, and in particular Pochet du
Courval and Desjonquères, have become world-leading and highly prof-
itable companies, in a trade – glass packaging – where profitability is difficult
to achieve.
This case is interesting for its marketing subtlety: a crystal Lalique bottle for
the perfume L’Air du Temps by Nina Ricci, or a Baccarat bottle for the Louis
XIII cognac by Rémy Martin, are luxury objects in themselves, which the glass
bottles of Pochet or Desjonquères are not. The fact that they are key elements
in a product relating to a luxury strategy (perfume, fine spirits) does not mean
that these simple glass bottles can automatically become major actors in this
luxury universe; It is the application of this original ‘B to B to C strategy of
luxury’, and the progressive diminution of the perfume brands’ capacity to
properly manage a proper luxury strategy that strengthened the relative posi-
tion of the manufacturers.
This example shows that it is possible to concentrate on only one of the
elements of the marketing mix (the ‘4 Ps’) of our luxury strategy as we have
proposed it (in this case the product), always provided that it is not in contra-
diction with the others. It is in fact only possible if you are not in ‘B to C’ and
therefore not in direct competition at the end client level.
This example relates to a supplier to a luxury trade and there are similar
suppliers to many trades: among these, packaging, high-tech (founders such
as Intel), technical car supply (Bosch, Valeo) or service (health) lend them-
selves particularly well to this exercise. Having said this, it is still necessary for
the product to be perceived by the end consumer as a luxury, and therefore
unique, and not as a premium product, and therefore substitutable, in which
case the protection is illusory, as Valeo has found out.
The basic approach for a ‘B to B luxury strategy’ consists of:
• Finding out how and for whom your product can be luxury, and therefore
have an existence of its own in the eyes of the end consumer, not only as a
component, even of high quality.
• Beginning with the principle that your client is not the company to which
you are selling your product, but the end consumer. This is what we call
moving from ‘B to B’ to ‘B to B to C’. It is necessary to break through the
fence that your industrial client erects between you and the consumer, to
understand directly how the final demand (quantitative and qualitative)
Learning from luxury 293
It is sometimes even possible to also lead a mass audience brand policy, which
is a considerable strategic support; of course, it is necessary to communicate in
luxury codes and not premium codes (dreams and not desire). Here we are
entering fully into the true ‘B to B to C’, where the producer can master all
elements of the marketing mix, right up to the end client. This is how Du Pont
de Nemours built a reputation for Lycra, its luxury name for the fibre known
as elastane: by working first and foremost with the luxury houses, which are
always seeking to enrich their products with added value, it bypassed the first
level of its clients (textile manufacturers) and directly addressed their clients,
right up to the end client, through advertising.
Not only can they be found in 1,000 Lacoste boutiques around the world,
but also in sales points in department stores. Nowadays the production has
been relocated and the number of licences has increased.
And yet, the Lacoste management follows the model of most luxury brands.
On analysis, one can find the ingredients of the management of luxury brands
and many of its guiding principles:
• A real story, that of tennis champion René Lacoste, who was one of the
French Tennis Musketeers. At that time tennis was an upper-class game,
similar to golf, and a sport his wife and then their daughter, Catherine,
excelled at, since they were world champions. Rene Lacoste, nicknamed
‘the crocodile’ (Kapferer and Gaston-Breton, 2008) became the symbol of
sports achievement, as well as of elegance.
• A historic, iconic product, the 12×12, still the top seller, a concept typical
of luxury brands, which make a very high profit, is regularly given a more
modern look, and is the centre of many advertising campaigns.
• Constant concern for quality, with hand-finishing, genuine mother-of-
pearl buttons, and the embroidered crocodile, the brand’s symbol.
• An advertising campaign that does not aim to sell a product but rather to
make people dream: ‘a touch of air’.
• The opening of exclusive Lacoste stores on the most fashionable avenues
around the world (Rodeo Drive in Los Angeles, 5th Avenue in New York,
the Champs-Elysées in Paris). Since Devanlay, the historic partner in
charge of production and distribution, was taken over by Mauss, priority
has been given to upgrading the quality of the boutiques, making them
look more soberly classy, and increasing their average surface area.
• The constant reference to the brand’s founder René Lacoste, who even
appears in adverts, and has inspired many publications (Kapferer and
Gaston-Breton, 2002, 2008).
• The brand’s presence in sporting events, mainly through sponsoring,
which revitalizes its historic tennis and golf roots and puts it in the news.
• The growing importance given to creativity, thanks to a fashion designer,
Lemaire, whose collections are now shown during New York fashion week.
• The launching of limited series, created by fashionable designers: for
example the metal or plastic-stitched polo shirt.
• A booming worldwide expansion, especially in the USA, and now in
China, India, Russia and Brazil.
• A wider range of products associated with fashion: shoes, accessories
(glasses, watches) and of course perfume. Some licensees have been part-
ners since the beginning of the brand, which proves that time and tradi-
tion are major components of the Lacoste management.
296 Strategic perspectives
16 Conclusion: Luxury
and sustainable
development
Bibliography
Index
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