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6: Developing Brand Equity

Brand is an essential component of luxury, to the extent that the brand is considered before the product. Luxury brands are so strong one need only speak the name to evoke the dream, and customers very often seek to obtain the brand first and select the product afterward. The knowledge that a gift is "from Tiffany's" is appreciated more than the item itself.

There is no luxury without brands

Historically, luxury was not branded. A gilded statue, a pearl necklace, and an ermine coat were all luxury items regardless of their maker. This indifference remains today in certain product categories: a yacht, a mansion, and a private jet are all marks of distinction that are indifferent to brand.

Largely, this is due to availability. At the turn of the twentieth century there were fewer than 2,000 cars in all of France, so having a car at all signified great wealth. Today, everyone drives, and it is no longer a distinction to have "a car" but instead to have a specific brand.

Aside from its function as a signified or wealth and quality, luxury still needs to be rare and exclusive. When it becomes ordinary to own an item, there must still be a particular species of that item that remains extraordinary for the difficulty of obtaining it.

The brand is also the idea of luxury itself, which enables luxury brands to penetrate markets where the concept of luxury itself. In cultures where the language lacks a word to express the concept of luxury, the brand becomes that word. That is, the people do not grasp but luxury is, but sense that the few luxury items they see embody certain qualities that mundane products do not possess.

Consider the popularity of Chateau Lafitte among the Chinese elite. They do not come from a wine culture, and it is entirely a foreign product, and may have some difficulty comprehending why a bottle of wine can command a price in excess of a thousand dollars. Yet they order it at restaurants, recognizing and wanting to borrow on the distinction of the brand.

The author presents another tidbit from a survey, in which luxury consumers were asked to agree or disagree with the statement that "Luxury is first and foremost a brand." China comes first with 92% agreement, followed by South Korea (85%) Hong Kong (82%), then Russia (75%), France (71%), Spain (70%), Italy (57%), Germany (57%), the UK (55%), the United States (53%) and, finally, Japan (43%).

Managing luxury by the brand

For any product that is not a commodity, its brand is important to its success. This is especially relevant to luxury brands, which are the opposite extreme to commodities. The demand for luxury goods, and their extreme prices, are based on differentiation.

For standard products, the value of brand derives from the expectation that it will fill a single promise, which makes them transportable - if they are assigned to a new manager or sold to a different company, their value will not diminish over the long term so long as the new owners demonstrate their ability to keep the promise - though there may be some short-term doubt in the market.

Because luxury brands are linked to heritage, identity, and human creative talent, they are not as easily transferred. The promises are not as closely linked to their functional benefit, and prestige is not something that can be so easily conferred on a new owner, or maintained once it is given.

The authors fumble a bit with mathematics - price times sales and price times earnings of a stock, then make a statement about product prices (EN: The two do not correlate, so their argument is impotent, but it does seem to follow that the profit margin is determined largely by sentiment rather than objective value - and sentiment is harder to control. Moreover, because luxury brands have huge margins, they depend heavily on sentiment, which is easy to lose and hard to regain.)

Products and experiences

When considering the value of a luxury brand, we must remember that functional benefits are of lesser importance. Luxury brands confer esteem on their owners (luxury-for-others) and stimulate the senses and the imagination (luxury-for-self), neither of which is linked to the attributes of the product.

For a few products (jewelry), the benefits are delivered by the product regardless of brand - but for most, the benefits are derived from the brand. When asked about their preferred brand of champagne, the luxury customer does not speak to quality of the product (all luxury brands meet a certain standard), but of emotions and imagery associated to the brand.

Further, "a luxury brand is a brand first and luxury second," particularly for the luxury-for-others segment. IT has been established that poor product quality of a Ferrari is tolerated because of the esteem and legend of the brand.

This also explains why companies that produce high-quality products still find themselves unable to enter the luxury market. They may deliver a satisfactory product, but the experience (both of shopping and of ownership) are lacking.

A luxury brand is a real and living person

The authors (briefly) mention that luxury brands derive from the legend of their creator, as it is the embodiment of the deeds of their lifetime remembered after their death.

They also draw a parallel between the unique and exceptional nature of a person and that of a brand. In effect, the creator of a luxury brand is a hero in the classical tradition, and to own a product of their design is to have a direct connection to the person who created it.

(EN: This is a brief and not very well developed argument, which happens to be true of some luxury brands, but not all, and also happens to be true of some low-market brands.)

A luxury brand must radiate

By "radiate" the authors mean that the brand must be known and respected beyond its market. In particular, the luxury-for-others consumer derives no benefit from having a product that is not known or envied among those who cannot afford to purchase it.

Said another way, the person who buys a Rolex is far less concerned with the happiness they will derive from having the item than the esteem they will get from others who see them wearing one. As such it is important for the brand to make its superiority known to the masses, not just potential customers.

Another analogy is the tuxedo: the person wearing such a suit will be uncomfortable, but everyone who sees him understands the social meaning of that uniform. He gladly suffers discomfort to be the object of envy.

No life cycle for the luxury brand

A luxury brand is not launched, in all its glory, on the market: instead it is "progressively elaborated." It begins as something small and known to a select few, and familiarity spreads gradually among the ranks of the social elite.

Investors who seek to "launch" a luxury start-up with a bang often ignore this. The very idea of immediate acceptance is ludicrous for luxury brands.

Luxury brands are born quietly, and slowly mature to a more widespread acceptance. Once there, they may redefine themselves in order to survive as luxury, to stop short of gaining widespread demand that would lower them to the status of premium product.

The authors note that luxury brands can be resurrected after their death if the legend is not vulgarized. There are a number of luxury brands that disappeared at one time, but were later revived.

The core of the luxury brand: its identity

In traditional marketing, brands attempt to position themselves in comparison to other brands. Their appeal to the market is that they are better in some ways that their competitors because they have a feature the others lack, because they are cheaper or more durable, and so on. This is the cornerstone of mass-market brands.

Luxury brands avoid positioning, but instead seek to have an identity that does not make them better, but unique. The choice between two mass-market vehicles is made by a checklist comparing one to another, but the choice between two luxury vehicles is the legend, vision, or dream that the customer find appealing.

Said another way, a luxury brand looks to intangible characteristics rather than tangible qualities or functions. The goal of a luxury brand is to be true to its values and character, indifferent to whether others follow the same path.

The authors refer to the brand identity prism (Kapferer), which considers the physique, personality, culture, self image, reflection, and relationship.

Physique

This refers to the physical aspect of a brand that makes it possible to distinguish it from others. For example, a person who knows a fashion brand should be able to recognize the character of their products - the way the clothes are tailored - without seeing the label.

The physique of a brand extends to communications, shops and offices, and even personnel. When you see an advertisement, visit a store, or speak to a person who represents the brand, its physical attributes (including sharp, color, posture, etc.) identify their origins.

Personality

A brand has a personality and a set of character traits, which in the luxury market is often derived from a real person (a designer or creator). Brands will seek to associate themselves to human qualities, it may wish to be friendly, accommodating, seductive, intelligent, or similar.

The authors haven't much to say on this, but seem to obliquely suggest that the personality of luxury brands is less mutable: they wish to be accepted for what they are, and do not seek to become what the market wants them to be.

Reflection

A brand has a "reflection" in the minds of those who perceive it. Everyone, even those who have never owned the product, is able to describe it through the image they have of the firm of its customers. It's not the personality of the brand, but the personality of the customer.

Consider that Porsche never shows a driver in its advertising: they want their audience to assess the brand independent of the depicted driver. Chanel, on the other hand, displays its clothing on elegant and sophisticated models, suggesting the qualities of a person that is expected to use the brand.

Self-Image

Self-image turns reflection on the customer himself - what his relationship to the brand reveals about his own character.

This is significant for luxury brands which seek to be considered to be an award or mark of distinction: the way that the owner of the product feels himself to be, or to be perceived by others. "I am exceptional or distinctive because I use this brand."

Culture

The culture aspect of a brand relates to the group to which the consumers of a brand belong, by virtue of association. In general, luxury brands seek to be associated to the highest echelons of society and aloof from the lower ranks.

Western luxury brands seek to associate themselves to the higher ranks of European culture. By consuming a stylish French product, a consumer identifies and aligns himself with the French aristocracy.

There is also some appeal of this sort in mass-market products. Consider that the name and logo of Raph Lauren's "polo" clothing and cosmetics indicate association to an aristocratic sport.

Relationship

Sixth is the relationship of the brand to its consumers: what does the brand do for those who use it? Chanel may liberate women, YSL makes them powerful, etc.

Building brand coherence

There is no definitive brand, only expressions of the brand. The maker communicates the way it wishes its brand to be perceived, and each customer forms his own perception of the brand based on a much broader range of information than the maker provides.

Customers are not as punctilious as makers in their perception of brand. They do not use diagrams to consider what they think of a brand, but merely react to the amalgam of information they have encountered. It would be highly unusual for a customer to schematize a brand using a blunt and direct instrument such as the "brand prism" previously described.

Because customers are relatively sloppy, brands must seek coherence: to ensure the same message gets through, and the maker's vision is shared. Mass-market brands do this through high levels of repetition of a fundamentally weak message; luxury brands do this through infrequent repetition of a strong message.

There is a distinction to be made between the essential and peripheral facets of identity. The authors speak metaphorically of siblings in a family: the traits that identify them as members of the family in spite of their individuality (they have the same nose, or a particular way of speaking) enable others to recognize them as part of the family, regardless of their idiosyncrasies. The same is true of brands.

It is critical for a brand manager to identify the essential facts of his brand and ensure that every manifestation of the brand strongly expresses them.

The author turns to a specific example: Chivas Regal whiskey, suggesting that the 12, 18, and 25 year old brands all reflect the same core values (heritage, energy, masculinity), though the 18-year-old takes on an air of sophistication and glamor and the 26 becomes exclusive and luxurious.

Two modes of luxury brand building

Building a brand is building a perception. The authors distinguish two modes of doing so: inspired and aspired.

Inspiration is tied to the past and the present. To communicate the history of a brand, or to communicate its present qualities, is to inspire the subject to accept the basic facts presented to him.

Aspiration aims to the future. To share a vision that might be achieved through possession of the brand is to touch on the subject's aspirations - not to accept "that which is," but to imagine "that which could be."

New brands, which lack history, must appeal primarily to aspiration; older brands have a choice of inspiration or aspiration, but this is not mutually exclusive.

Building the luxury brand: the dream equation

Luxury brands appeal to the dream. "Imagine what it would be like to win/get/have something like this" sets aside consideration of price entirely. It spawns a vision of a post-purchase state without the tedium and sacrifice of the buying process. It is simply about desire.

Aside of setting aside questions of an item's price, or whether it is at all affordable, the process of imagination idealizes the experience: the experience you imagine that you will have when you own it does not often match the experience you actually have when you do own it.

Seen in that way, luxury brands face a paradox: the buying and ownership phases make the dream a reality, and reality destroys the dream - you are left with an object such as it is, rooted in physicality, stripped of any notion of what it might be like to have it.

In order to dream of something, we must be aware of it. The brand itself must be known to have the power to provoke desire, and it must be instilled with imaginative qualities.

At the same time, a dream must be distant from the dreamer - desire is stronger when the ratio of people who desire it to people who have it is low.

Mass-market brands succeed at the first, creating some level of desire to have the object, but fail at the second: to see the object of your dreams everywhere, worn and used by scruffy people, diminishes its ephemeral qualities.

(EN: Do common brands really succeed at the first? Advertising messages may depict an idealized vision, but more frequently show the item in the context of mundane reality and in the hands of unexceptional users - showing the way the brand fits your lifestyle, rather than the way it elevates your lifestyle.)

Luxury brands must avoid being seen too often in reality. The high price of a luxury item prevents widespread dissemination, particularly among the lower classes, such that when it is seen, it is associated to the few wealthy people who possess it.

The luxury brand compass: architecture of product roles

The authors return to the earlier notion of the brand as being modern or traditional, accessible or inaccessible, this time as the points of a compass rather than XY axes of a graph, then make a few random observations:

Luxury often talks about icons

Luxury brands represent the characteristics of the values of the upper crust of a culture. It involves "icons" in the sense of holy images that signify these grander concepts.

An iconic product is venerated, like a religious relic. It is not necessarily fixed or mummified, though it does change very slowly if at all.

Many luxury brands have an iconic product. Chanel makes many lines of perfumes, but "number five" is the icon that represents the brand, that is recognizable among others, but which represents the brand. It need not be the best-selling product, but it is the best-recognized one.

The luxury brand must also resonate today, be a key emitter of trends and tomorrow's tastes

Luxury brands often "surprise us" with products or acts that place them in a modern, trendy context, while still maintaining a sense of the established social traditions.

As an example, Chanel has licensed its logo to snowboards and surfboards, not as an attempt to drive demand among a younger demographic on a permanent basis, but merely to appear out of its traditional context, in a way that shows it is relevant to though not indicative of youth culture.

(EN: I'm not quite getting this, and the example seems more in the nature of rationalizing a mistake than illustrating a wise decision.)

The luxury brand must have access products

This will be discussed in greater detail in a later chapter - but for now consider the reasons a luxury brand might license non-luxury products.

This will be discussed in greater detail in a later chapter

One motivation is to provide a sample to a potential future customer. The young woman who cannot yet afford a gown can more easily afford a bracelet or a pair of earrings, to maintain her desire (regardless of whether she is able to afford the product in later life.)

Another motivation is to capture revenue from the "day trippers" who are not typical luxury consumers, but who treat themselves with luxury to mark specific occasions.

Generally, access products go not extend the ranks of their loyalists, who remain a closed sect.

The luxury brand must continually raise its status and prestige

Luxury products in the lower price ranges, which are targeted by the competition of premium brands, must remain above them to retain their exclusivity. Raising prices, restricting points of sale, and reducing availability can help them avoid being dragged into the mass market.

However, this is different to comparative distinction - the brand must not be perceived as luxury in reference to close competitors or it becomes a premium product. Its competition is therefore to elevate and outdo itself, maintaining its integrity.

It is particularly important in marketing communications to avoid proclaiming the same qualities as other products, or appeal to the common values of the mass market. For example, Porsche continually improves the speed of its vehicles in a world that is concerned with speed limits, radar detectors, and the insurance cost of getting a ticket. It seeks supremacy in a regard that defies these petty concerns.

Luxury brand equity in the digital era

The Internet is likened to a wave that has overwhelmed and encompassed all facets of social and economic life - having begun among the intelligentsia, and grown quickly to ubiquity. In that sense, it is much like a luxury brand that fell to the mass market.

Luxury, too, is about social and economic life, and is extremely affected by the Internet. The reluctance of luxury brands to leverage the Internet during its early years may have been a missed opportunity, but its reluctance to leverage the Internet now is in line with maintaining a discrete distance from the penny public.

The Internet is now a vulgarizing factor. The agencies that push luxury brands toward the Internet, social media, and mobile speak to popularization and increased sales on a level that would be detrimental to luxury brands.

It is not that luxury brands cannot leverage the Internet channel, but must do so in a manner that is consistent to a luxury strategy. In particular, the Internet can be leveraged to create brand awareness and promote the dream, but never to sell, not to become to familiar with the masses.

Mass-market and premium products, seeking to gain as many consumers as they can, find the Internet to be "fabulous" for selling their wares, promoting their functional benefits, and comparing themselves to other brands. But these practices are poison to luxury.

The very nature of the digital world is contrary to market, as it is based on universal access whereas luxury seeks to maintain a distance from the masses while being available to a few.

Defending the brand against counterfeiting

Counterfeiting is a serious concern for luxury brands, but at the same time a parasite that is endemic to luxury. Luxury brands create envy among the masses who cannot afford to possess the brand, and counterfeiting seeks to satisfy that envy by making it accessible.

From the luxury-for-others perspective, luxury is superficial: the perception of others grants esteem, and perception is easy to deceive: reproducing a logo, imitating the elements of style, or copying any of the more obvious visual aspects of a brand can be done very cheaply.

That said, counterfeiting is only profitable if a brand has achieved a significant awareness threshold: no-one is interested in buying a counterfeit of a brand that is not recognized. And in that sense, the existence of counterfeits is therefore proof of the health of a luxury brand and at the same time a threat to vulgarize it.

What is the impact of counterfeits?

The author identifies ways in which counterfeits are detrimental to luxury brands:

Why is counterfeiting growing?

The authors identify some of the factors that contribute to the growth of counterfeiting:

(EN: I'd add a cultural element to this list: relationships among people are increasingly brief and/or superficial, which makes counterfeiting more effective. If you know a person intimately, such as people in closely-knit communities do, it's very easy to recognize a fake because you know the person and can easily tell when they are presenting a brand that is a mismatch to their social class; but if you know them distantly, such as in a more mobile population, you have no sense of whether the brand is aligned with the owner, and tend to derive your belief about their social class from the brands they present.)

Who are the clients of counterfeits?

There has been research into the factors that motivate a person to intentionally purchase a counterfeit: the decision is based on the brand, not on the product.

(EN: I disagree. The demand for cubic zirconium and represents a desire to counterfeit a diamond, electroplating base metals with gold counterfeits solid gold, and staining pine to look like walnut counterfeits authentic walnut. Such practices are so widespread they may not be considered "counterfeiting" - but the motivation to purchase such items is exactly the same, and is based on product rather than brand.)

Typically, the buyer of a counterfeit item considers the price of the genuine article to be excessive, and feels that they are getting a better deal by purchasing a counterfeit, particularly when the counterfeit is well made. They have some level of respect for the genuine article, but not enough respect to insist on having the genuine article and to make the necessary investment or sacrifice.

In terms of personal characteristics, the buyer of counterfeit has a low social status, does not come from an affluent family, lacks self-confidence and self-esteem, has materialistic values, is imitative, looks more to the superficial aspects (such as the logo rather than a durable product), does not respect the law or social customs, and is influenced by celebrities.

(EN: This sounds like a stream of insults and generalizations, but I checked the original research and these are statistically supported findings.)

It is also suggested that there are specific motivations for knowingly purchasing counterfeit goods. The authors identify four of them:

The desire for counterfeit merchandise generally appeals to the lower middle classes - people that are genuinely successful value and respect the authenticity of the trappings of success, hence to fake a luxury good is to fake achievement. However, in some cultures (such as China) buying counterfeit merchandise is also an accepted practice among upper-middle class, and even the upper classes who could well afford the genuine article.

The authors recommendation to luxury brand manufacturers is to be ruthless with the producers and sellers of counterfeit merchandise, but to regard the purchasers of their product as potential customers: if they use a counterfeit, it is a sign that they admire the brand. There is a chance, albeit slim, that such people will matriculate into the upper classes and gain the ability to trade their fakes for genuine articles.

Counterfeiting as a way to diagnose the health of the strategy of the brand

On a positive note, the incidence of counterfeits identifies specific strengths and weaknesses in the health of the brand, such as:

Defend your rights and communicate frequently

A luxury brand should be quick to react to any instance of counterfeiting, and leverage the legal resources available to stop it.

Unfortunately, there are many countries that do not recognize, or only partially support, intellectual property, where it is difficult to pursue counterfeiters. In those instances, the press can be your ally - to make the problem known and to reassure clients that you are protecting the exclusivity, as well as to herd them to authorized outlets.

There is also legal precedent (LVMH v. eBay) for pursing Web site that facilitate the sales of counterfeit goods. (EN: The case is still in the appellate courts, where the settlement was reduced, then jurisdictional issues were raised, so it's not a solid precedent, but a sign that the legal system will support such actions.)

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