3: Anti-Laws of Marketing
Thus far, the description of luxury has implied that it is not subject to traditional marketing practices - many of the "laws" of marketing do not apply or are completely reversed in this class.
Luxury is fairly unique in this way. For most other classes of product, it is possible to elevate the brand incrementally, and expect that some present customers will trade up, and new ones will be attracted for those that do not. The difference between the highest level of premium product and the lowest level of luxury is not a smooth transition, but a transformation.
In this chapter, the authors will consider the ways in which luxury behaves according "anti-laws" of marketing.
1: Forget about 'positioning', luxury is not comparative
The brand strategy for mass-marketing, firms attempt to offer a unique selling proposition by positioning its brand against others: it is better than others in some way (it is the most popular, it is the fastest, it is made locally, etc.). The messaging focuses on comparison to others.
Luxury items are aloof - they have a unique identity ("this is what I am") and indifference to comparison ("this is how I compare to others" is regarded as vulgar). In essence they have integrity,
Said another way, luxury is superlative and not comparative. MM brands feel gratified by imitators; luxury brands are debased by imitation.
2: Flaws are not to be feared
The upper-premium market justifies its price by its quality, and wile it is possible for a brand to achieve luxury buy virtue of flawlessness, most luxury brands are indifferent to their flaws.
Consider that a dime-store digital watch is capable of keeping perfect time, yet many luxury brands are known to lose a few minutes a day, or that luxury automobiles require a significant amount of maintenance.
However, one cannot achieve luxury by being flawed, nor can a luxury product be so flawed that it is practically useless, but it cannot be slavishness to functional or utilitarian concerns.
Luxury brands are hedonistic and symbolic, and so long as their flaws do not interfere with pleasure or esteem, they are incidental.
3: Do not pander to customers
A brand that changes itself to the whims of customers, critics, and the public has no integrity. Luxury is uncompromising and uncompromised.
Instead of changing itself to appeal to customers (particularly, to be popular with the masses), a luxury product seeks to attract those who appreciate its quality. Luxury recognizes that it is not for everyone, but for a selected few of discerning tastes who appreciate it.
Historically, a patron sponsored a craftsman and relied upon his skill. To know enough about the work to be able to dictate what constituted good workmanship was beneath the nobility of patronage. Even in the mass market, the carpenter was the keeper of knowledge and artisanship in carpentry and his clients accepted or rejected his goods.
The authors suggest that this changed around the end of the eighteenth century, when French craftsmen began making models of things to secure commissions to build them. This increased the esteem of some designers (they became recognized names, not anonymous craftsmen) while debasing others (they changed their models to pander to the tastes of the market).
4: Seek a small clientele
Mass marketing counts the quantity of customers but is unconcerned about the quality of customers. If a luxury brand considers this at all, it opts for the exact opposite.
Not only does luxury refuse to pander to the preference of the common man, luxury brands do not want commoners to consume it, and wishes anyone who is not qualified to own the brand to keep a distance.
5: Do not respond to rising demand
In the mass market, being out of stock makes customers unhappy, and even irate. People feel they have a "right" to have certain things whenever they want them, and failure to produce them on demand is an offense to their sense of entitlement.
Ownership of a luxury is a privilege, not a right. The customer understands the product is rare and is prepared to wait.
The producers of luxury also reject the notion that the petulant demand for possession is not to be tolerated. Ferrari deliberately keeps production to fewer than 6.000 vehicles per year to maintain its rarity. The CEO of Hermes is quoted as saying "When a product sells too much, we stop producing it."
The authors state "it should always be necessary to wait to possess a luxury item."
Catering to demand, or seeking to capitalize on the mass market by producing as much as can be sold, is a practice that has caused some labels (Rolex and Louis Vuitton) to have fallen from luxury. This will be discussed in greater depth in chapter 14.Catering to demand, or seeking to capitalize on the mass market by producing as much as can be sold, is a practice that has caused some labels (Rolex and Louis Vuitton) to have fallen from luxury. This will be discussed in greater depth in chapter 14
6: Dominate the client
Ownership of a luxury brand is a mark of distinction, a token that signifies the owner deserves to have objects of luxury. In this sense, luxury brands can be demanding of a clients as a means to serve the interest of all clients - ensuring that each new owner deserves to be part of the luxury club, and their inclusion will not be offensive to the current members.
The authors note that "dominating" is not to be confused for a lack of respect. The relationship between parent and child, or professor and student, is one of mutual respect - but with one guiding and setting the standards for the other.
7: Make it difficult for clients to buy
The difficulty of obtaining a luxury product is part of the price of ownership, and a factor that ensures the rarity of the item and the enthusiasm of its customers.
The time spent searching for a luxury item and waiting to possess it, as previously discussed, is one obstacle to ownership that keeps the common rabble out. It is also in the nature of a quest: the effort to obtain an object, and the longing to have it, contributes to the appreciation of eventually having it.
There are generally a series of obstacles to obtaining a luxury item:
- The customer must refine his tastes and learn to appreciate it
- The customer must be able to afford it
- The customer must find out how to obtain it
- The customer may need to travel to purchase it
- The customer may need to wait to have it
Mass-market goods seek to reduce or eliminate these obstacles for their customers. Luxury must not do so, and may even make choices that create or exacerbate obstacles to acquisition.
8: Protect clients from non-clients, the big from the small
Ownership of luxury is a distinction, a factor that differentiates nobility from the common rabble: it is elitist, and not democratic. Consider the following practices:
- A retailer that places discounted merchandise in the basement, keeping the discount customers away from their regular patrons
- A manufacturer that creates a sub-brand for merchandise to protect the dignity of their flagship brand
- Restricting promotional messages by mailing to selected customers, or advertising in venues that have a specific audience
- Refusing to advertise at all, which requires customers to exercise discretion in spreading word-of-mouth
- Separating "first class" passengers from business and economy classes in airlines
(EN: These are all mass-market examples. Luxury isn't the first-class cabin of a commercial airline, but a private jet.)
9: The role of advertising is not to sell
Traditional advertising is undertaken to drum up sales. The cost of advertising is an investment in an immediate return, with little though to the future. Luxury can afford to take its time.
Luxury brands promote the esteem of the product, not the price, and the esteem of the product has more to do with the mythology surrounding it than its features and functional capabilities. It shows people what to want, and reminds them to want it. Highly luxury brands do not advertise at all: there is sufficient and sustained desire for their product, so there is no point.
Advertising is not to sell now, but to stimulate a more distant, future desire. A person should not wish to rush out and buy one tomorrow, but to have the brand in their mind, for that distant future time in their life when they have earned it.
The authors speak with admiration of BMS's 2004 advertising campaign, that asked several great Hollywood director to each make a short film - not a commercial, but a film that would last several minutes, to be broadcast on the Internet - that was about the brand. The result was a number of successful "viral" films, which spoke to the things people admire, desire, love, and dream about in regard to automobiles.
In addition to revitalizing the dream and ensuring it remains relevant, a luxury brand must protect its vision from reality: its products are not part of everyday life - so not only should advertisements depict the product in a way that does not related to everyday life, its advertisements should also be relatively rare.
10: Communicate to those you are not targeting
Traditional advertising focuses on customers, and any dollar spent on promoting a product or even making it known to someone who is not in the target market is wasted. This is efficiency.
Recalling that luxury has two facet, for self and for others, the latter sort seek to gain esteem from others who admire them for owning something they cannot afford. Luxury brands must therefore seek to promote their reputation to people who cannot afford them, so that they might envy those who can. This envy is the source of esteem that the luxury-for-others buyer wants to have.
Product placement in movies is a natural match for this, as it associates the product with myths and legends in a way that commands attention rather than begs for it. Most commoners know Aston Martin as the vehicle of choice of James Bond - they've never seen the brand advertised, but associate it to wealth and sophistication.
This game is changing somewhat as mass market products seek placement in films - the main difference is that luxury brands do not pay studios to feature their products in films, but instead the filmmakers come to them asking permission.
11: The presumed price should always seem higher than the actual price
Luxury items do not attempt to sell themselves as affordable, but are snobbish about their unaffordability. Most do not disclose the price at all, on the principle that if you have to ask the price, you cannot afford luxury.
The lowest end of products promote their low prices, and even the mid-range of products want people to feel they are affordable. For automobiles, even premium models communicate the lowest price of a stripped-down base model and then attempt to convince their customers to pay more at the dealership. Discount airlines show the price of their cheapest seats, which quickly sell out, such that most customers will be lured in with a low price.
Luxury wants to be perceived as being high priced because, in the eyes of the beholder, price is what they recognize. This goes back to luxury-for-others, in that the more that "others" assume something costs, the greater the esteem they grant to the owner, or when someone receives a luxury gift, they appreciate it all the more because they overestimate the cost.
(EN: Consider that overstatement is likewise used across most segments of the jewelry trade, where markups can approach 1000% - it's generally known that a jeweler can easily be talked down to half the price and still make a significant profit - but the owners still consider the "appraised value" to represent its worth, rather than the price they actually paid.)
12: Luxury sets the price, price does not set luxury
For mass-market products, the price is considered to set the class: a given price point is discount, standard, or premium regardless of the qualities of the merchandise.
The authors alleged that the producers of luxury are fixated on their product, with price as an afterthought: "you first come up with a product, then you see at what price you can sell it." IF they have been successful at creating a luxury item, they will be offered a very high price for it.
The opposite applies in mass market products: producers look for a price point at which there is little competition, then create a product that can be profitably sold in that range. Which his to say that the market's desire for a price is the incentive to create a product.
13: Raise your prices to increase demand
In the standard market model, firms decrease their prices to increase demand, making their product more accessible to people of lower income brackets. In the luxury market, demand increases due to the esteem of the brand - and as the brand's esteem increases and the firm can, and does, raise the price.
The authors tell an extended story of champagne - a product that was the result of incompetence, but which came to symbolize luxury through marketing efforts, and whose competition has been largely on price: when Dom Perpignan challenged Krug, the long-standing premium brand, the firm merely tripled its prices (eventually quintupling them over the course of ten years) to preserve its prestige, and by so doing enjoyed a revival of demand.
While luxury is largely indifferent to price, luxury loses its prestige if it is affordable to the common rabble and available in sufficient quantity to meet the full range of demand. In that way, a luxury brand that raises its prices sheds the "bad customers" that diminish its esteem, thereby making it more appealing to the "good customers" who wish to elevate themselves.
14: Keep raising the average price of the product range
Traditional marketing starts a product at the highest price that people will pay, called the "skimming price," to extract the margin available at the top of the market - then, the price is lowered to make it affordable to the masses.
In luxury, it is entirely the opposite: a luxury brand may be made available at a low price, or even given away, to the select few to gain an association to them, then raise the price when this association becomes more widely known.
In the economic sense, luxury goods are irregular goods, in that demand increases as the price is raised, the opposite of what is evident with standard products.
Luxury does not provide an entry level product for unqualified customers. Mercedes-Benz offers the "C" class sedan for as little as $35K - but you will find no entry-level Aston Martin or Ferrari. While these brands have a range of models, they do not seek to suit a range of markets.
In another sense, being able to afford luxury places the customer in an elite club - the more people that can join, the less elite the club will be. For that reason, prices across the full range of products must increase, rather than decrease, over time.
15: Do not sell
The mass market is for the masses, the more the better. Meanwhile, luxury seeks to preserve its esteem by remaining aloof, even willing to refuse to sell itself to the wrong sort of customers. Buy so doing, it is losing revenue, but it is accomplishing the more important goal of preserving its value.
A brand that is desperate to be wanted is subordinating itself to the taste of the commoners. A brand that is genuinely wanted is above such vulgarity.
16: Keep stars out of your advertising
Mass-market products seek to associate themselves to celebrated personalities - actors, athletes, and the like - as a method of elevating the brand
For luxury products, the relationship between brand and consumer is opposite: prestige is not signified by being associated to star personalities, but people are made into stars (or are perceived by such) by their association to the product. "Calling on the service of a star is tantamount to saying that the brand needs some of the star's status ... and admitting it has none of its own."
It's also worth considering that stardom is temporary, whereas luxury is timeless. Today's media darling will be has-been in time, or a single scandal may make them hated rather than admired.
17: Cultivate closeness to non-popular art
Mass-market brands seek to appeal to the masses, for which it leverages popular music to associate itself to art that is appreciated by the masses. What is popular change frequently, and the brand must follow.
The luxury brand seeks to be close to high art - it seeks to be different, creative, and bold. It must therefore associate itself to non-popular arts. It may associate itself to classical arts, those from a past age, to suggest its timelessness, or it may associate itself with emerging arts, which have yet to appeal to the majority (and may never).
The authors mention a few brands that sponsor concerts, exhibitions, and other artistic events, but choose to patronize emerging artists rather than draw on the popularity of established ones.
18: Do not relocate your factories
From an accounting perspective, the location where a good is fabricated is irrelevant, and it makes sense to move production to wherever it is cheapest.
Luxury goods are unconcerned about cost control, at least to this degree. It is more important for a luxury item to be steeped in a culture, and being made in a certain place is worth the expense of maintaining this association. To be made elsewhere is to dilute the identity and perceived value of the brand.
The authors suggest that BMW has a factory in the US for its low-end model (the 3 series) and parts are produced in the Far East. By so doing it has ensured that the 3-series is not perceived as a "real" BMW, but likely hopes a person who buys that model will eventually want to step up to a better model that is made in Germany.
Having the product designed in one location and built in another is an imperfect compromise - it is suggested that the designer loses contact with the raw material and the "way of working," meanwhile the manufacturer is reduced to mechanical concerns and cannot support or even understand the intentions of design. It is implied that moving production to sweatshop factories in the Far East was a significant factor in the death of fashion.
On the other hand, a luxury brand may delocalize to take advantage of the quality of materials or workmanship in other locations: a fashion garment may choose to include wool from Kashmir and buckles that are handmade in Niger, to bring "the finest in the world" into the brand. But it is reasons of quality rather than cost that motivate them to do so.
19: Do not hire consultants
The company that hires a consultant is looking to gain from his experience at other firms. Implicitly, the firm is attempting to imitate other firms, and the input of the consultant is to "do like others" for whom he has consulted in the past.
This would be a serious strategic error for a luxury brand, whose value is its own unique identity, and taking the advice of a consultant would erode the unique characteristics that define the brand.
To that end, a mass-market brand that wanted to take on certain characteristics of a luxury brand would benefit from hiring a consultant who can bring aboard the knowledge he gained from luxury brands.
A luxury brand should never seek to bring in a consultant whose experience is in the mass market, and should even be reluctant to engage the services of a consultant whose knowledge comes from competing brands.
To hire a consultant at all is to pursue economy rather than quality: the firm seeks to have temporary services because it is unwilling to pay for a permanent employee. Moreover, consultants themselves tend to be motivated by efficiency: they are more inclined to tell you where to buy the cheapest materials rather than where to get the best.
Consultants also seek to adjust the brand to the tastes of the market and the practices of the industry. This drives the short-term performance of a firm, at the cost of the esteem of its brand, which should be indifferent to market and industry.
20: Do not test
Product testing is also a common practice in the mass market. Testing is part of product development, which brings the tastes and preferences of the consumer into the firm so that they may be served. Luxury does not seek a subservient role and is indifferent to the preferences of the masses.
If luxury considers the customer's tastes at all, it regards them in the nature of a student rather than an instructor. Luxury brands educate the tastes of their customers, not the other way around.
Even for premium brands, testing as a means to refine product design is questionable: it's easy enough to get a random sample of the population, slightly harder to get a sufficient number of people at a higher income level, and virtually impossible to get test subjects in the high income brackets - their time is valuable, and is not yours for the asking.
That said, it is legitimate for a luxury brand to "test" new products by means of prototypes: to provide a new product to an existing customer, to have a face-to-face discussion, and to consider what they have to say about it. This feedback can better inform the design of a luxury product, but certain standards can never, and should never, yield to the opinion of the customer.
21: Do not look for consensus
Seeking to satisfy consensus is the ultimate extension of testing: a brand that seeks to be popular will lower itself to meet the consensus of common people.
Luxury is outside of common taste. It seeks a discerning customer whose tastes are unusual, superior to that of the masses. By getting their product into the hands of the social elite, luxury can sway public opinion.
But one cannot lead others by following them, nor remain a luxury while catering to vulgarity.
22: Do not look after group synergies
When firms merge or one purchases another, management looks to eliminate redundancies and create synergy between the operations of the two firms.
Consider the damage done to Jaguar by Ford, to Mercedes by Chrysler, and to Saab by GM. In each instance, management sought to cut expenses by merging operations - and destroyed the pricing power of the more upscale brand. Outside of the automotive sector, consider the damage done to Alienware when it was purchased by Dell.
Successful luxury groups such as LVMH have maintained the luxury status of the brands they manage by keeping hem well apart, even though this means redundancy and inefficiency.
23: Do not look for cost reduction
Cost reduction is an obvious mistake that luxury brands should avoid: it is done to keep prices down, and is often indifferent to the impact on quality.
Luxury brands recognize that there is a high cost to providing high quality, and compromising on quality is entirely unacceptable to their customers.
(EN: A few random statements follow, redundant to some of the other sections of this chapter.)
24: Just sell marginally on the internet
The potential to reach a broader market at a lower cost is very appealing to mass market brands, who are generally excited to take advantage of the Internet.
Unfortunately, all the advantages of digital trade (open information, speedy acquisition, availability, accessibility, price reductions, automated service, crowdsourcing, etc.) are detractors to luxury.
As such, the Internet can be leveraged as a medium for selling the brand, telling its story, and kindling desire to own - but it cannot be used as a channel for sales and maintaining relationships with customers.