8: Qualifying a Product as Luxury

The authors begin by clarifying that "product" represents a the sum of benefits delivered to the consumer: a good, a service, or a combination of the two. (EN: Ultimately, what matters is the user's experience as a result of what is achieved by consumption. The pleasure of consuming tea does not derive from whether he owns the ingredients and makes it himself or purchases a cup in a cafe.)

When we speak of luxury products, it is in reference to the qualities of the product, rather than any peripheral matter, that cause it to be considered a luxury item, which the authors mean to explore in the present chapter.

No product without service

To consider a product to be a mere physical artifact is incomplete. The value to the user is in their experience of using the product, and in that sense the physical artifact is merely a delivery mechanism for a luxury experience.

When the product is a service rather than a good, it does not depart from the realm of material objects. The perception of a quality hotel is not merely in the way that the staff cater to the guests, but in the quality of the furnishings, linens, and other physical objects in the room.

In that sense every product is a blend of goods and services that deliver the customer experience, which must be considered holistically. Particularly for luxury goods, maintaining the highest standards in every aspect of the experience is critical.

In terms of distribution, we often attempt to oversimplify the nature of the product. Restaurants are an excellent example: it is clear that some operators focus on the product (the meal served) to the detriment of the service (the attentiveness of the staff to the needs of the diner) and often ignoring the environment (the decor of the dining area and the cleanliness of the restrooms). The same can be said of retailers - because the service of the clerks is "free" it is considered unimportant, when it contributes significantly to the experience of the customer and the perception of the retailer.

As an aside, the human element of products is of particular importance in luxury. That is, the brand is humanized, and the artifacts are often made "by hand." When the luxury customer is buying a physical artifact, he is buying the service of the artisan who made it, more so than the material of which it is made.

The luxury product and the dream

The authors contrast generic, branded, and luxury products in terms of the primary objective of the buyer.

The primary objective can be, but is not necessarily, the sole objective. The luxury product must usually satisfy functional needs and fulfill qualitative desires, but these are less important than the dream.

However, the distinction is difficult to make because function is objective and quality is measurable, whereas a dream is individual: it is entirely subjective and does not yield to quantitative measurements. A specific luxury brand may appeal to different dreams for different clients.

Because dreams are not comparative, it is possible to create new products in an existing market without entering into heads-on competition with existing products or cannibalizing market share. The luxury market is not totally elastic, as even those with great wealth have a limited amount of time to give attention to the things they might buy wit hit, but neither is the luxury market ever saturated.

The authors consider books: consumers have the alternative of hardbound or paperback, and a customer who purchases the paperback version is unlikely to buy it again in another format.

However, there is a very diversified luxury book market, which serves various needs:

It is possible for a single tome to satisfy all of these criteria, though more common for there to be various editions to satisfy the different dreams. It is also possible to sell multiple copies to the same customer: a paperback to be handled and read, a leather-bound to be displayed on their coffee table, a signed first edition to be kept under glass in their private library.

Another example is that of performance art. Watching a DVD of an opera at home delivers the experience, but lacks the richness of a live performance in the city (even the same venue) as it was originally performed centuries ago, and to be part of an audience of esteemed persons of refined taste and social esteem. The latter is a far more sensual and hedonistic experience.

Functionality and dreams do not follow the same economic models

Not only are functional concerns irrelevant to the dream of luxury, the two do not follow the same economic model, or even the same supporting logic.

The functional concerns follow serviceability, low cost, economies of scale, and return on investment. To increase the quantity and decrease the price, quality must be sacrificed to remain profitable.

The dream of luxury demands quality and exclusivity, regardless of price. As a consequence, luxury producers make greater profit on fewer units by increasing the price - and stimulate demand by increasing the allure of the product rather than decreasing its price.

In terms of marketing, luxury seeks to find a sufficient number of customers who are willing to pay for their product. Qualified customers are rare among the masses, but easier to reach by word of mouth from other qualified customers. Ironically, word of mouth is not only the most effective channel, but also the cheapest, such that luxury products need to make little investment in advertising.

It is typical of luxury products to be discovered. Becoming aware of them is likened to being granted secret knowledge by members of a closed group. Acquiring them is likened to an initiation or ordeal. So while mass market products seek to be known and obtained with minimal effort, luxury refrains - and accepts that eschewing these practices results in less ability to drum up sales.

The luxury product is sacred, not perfect

Luxury disdains the notion of "quality" that requires durability and ease of use. Consider the difficulty of cleaning fine silk, or the discomfort and noise of a Ferrari - these are considered faults to the mass market products, which would not be tolerated in non-luxury brands, but luxury abides them.

At the same time, luxury requires a level of holistic quality. Merely serving impeccable food does not make a restaurant great - the plates and flatware must be elegant, the environment must be agreeable, and even the ambient noise must be pleasant.

As such, the authors assert that "a luxury product should be thought of as a sacred product." It abides not in the material world, but in a superior spiritual realm of dreams and visions. The product need not be perfect, but merely suitable to conveying sensual pleasure, beauty, inspiration, or other intangible qualities.

Luxury product and competitive universe

For mass-market goods, the terms of competition are based on comparing one product to another that delivers the same function and similar characteristics: Chevrolet and Ford, Coke and Pepsi, Levi and Wrangler, are assessed by the same checklist of criteria.

The same is true even of premium goods, though the criteria tend to be less functional: choosing between a Vuitton and Hermes handbag rates each according to the esteem granted to the owner.

Luxury goods stand no such comparison: the person who desires a Bentley does not compare it to an Aston Martin, nor do they tend to compare it to a Rolls-Royce. They desire the brand as an object unto itself, or one dream among many.

It also stands to mention that luxury customers, unlike mass-market customers, are not faced with the economic choice of one or the other, because they can well afford to have both if they so desire.

This can also be taken further, where the competition for a luxury good is not against other luxury goods - the alternative to have a luxury item is simply not to have it, presently or at all.

This explains why waiting lists are so common and well tolerated in luxury - because the product is not required to a functional need, having it right away is not necessary. Its buyers have the luxury of time, and their anticipation does not diminish their pleasure. It is, in fact, an added measure of distinction that the owner can afford to wait, whereas people of lesser status cannot.

It's been established that the difference between luxury and fashion is time: fashion is seasonal and changes frequently. The dream aspect of luxury is not mired to its time, but may be futuristic or reminiscent of the past as an idealized vision.

Occasion of use and perception of value

The dream of luxury has no price, but the luxury product does. Even if the client is chasing an immaterial dream, he mist still justify the expense of the purchase, both before and after paying for it.

The author also considers that "cost per hour of use" is particularly explicit in mass-market products, in terms of the premium a customer is willing to pay for an article that will last longer. It is implicit to luxury, though not altogether absent.

However, the occasions for use are more important than the longevity of the item. Lifestyles have changed, such that there are fewer occasions on which a gentleman might wear a tuxedo, hence the value of the garment has diminished. Likewise, the decrease of formal dining in the home has diminished the desire for luxury tableware. However, a woman may carry a handbag or a man wear a watch daily, so their value is greater.

While it is easy to quantify the frequency of use, it is more difficult to quantify the level of importance. While a tuxedo is not worn every day, it is worn on very important occasions in which demonstrating social status is of supreme importance.

Lasting a lifetime and beyond

Durability factors into mass-market products in a functional manner: a product that holds up to more uses may have a higher price but a lower cost per use. However, durability in luxury goods relates more to their timelessness.

When a luxury client purchases a chair, he is not thinking of the amount of time he will spend sitting upon it, but more in the nature of owning it for decades, perhaps passing it on to heirs who will still value it fifty or a hundred years hence.

The demand for antique items applies this in reverse: a chair made two hundred years ago is valued today because it has lasted, and because it hearkens to a past time. The purchase of a new item considers its antique value long in advance of its becoming an antique.

Whereas mass-market items diminish in value with time and use, some luxury products increase in value over time. Even in a market as fickle as fashion, there is a significant level of demand for second-hand Chanel dresses; and even as automotive technology advances, an antique vehicle can fetch an astronomical price.

Prolonging the ecstasy of a privileged moment

There is also the special case of a luxury item that is used only once, then retained as a souvenir of the occasion on which it is used.

There is also some management of the moment in advance, though somewhat complex. Consider that many great wines or bottles of fine scotch whisky are purchased and then set aside, in anticipation of a moment in which they will be used.

There are even special instances in which the object is never consumed, one example of which are Japanese travellers who purchase bottles of expensive cognac and place them in display cases in their homes - they have no intention of drinking it, but delight in reminding themselves that they could drink it if they so wished.

Adapting to its time

Another aspect of time measurement is in the way that a product will seek to adapt itself to its time - consider that many firms that made luxury carriages collapsed as the automobile replaced the horse-drawn carriage, whereas others adapted to their time and persevered.

The author reflects on Vuitton, who was originally in the business of making travelling chests, but travel became more common, rather a luxury reserved for the selected few, Vuitton transitioned its label to other goods.

The authors wax poetic about the travelling chest itself:

This has changed significantly: travel is cheap and available to the masses, the voyage itself is faster, luggage is stored out of sight on the journey, and people stay for a very short time. Luggage is merely a container, and one with little visibility or significance.

To own a travelling chest in the present age is an anachronistic affectation, but is still displayed as an item of curiosity, and sometimes even used for its original purpose.

The author mentions that Vuitton trunks are still in demand today as curiosities or pieces of furniture, and that the trunks have serial numbers - such that when you buy and old trunk, you can find out when and by whom it was purchased.

(EN: Did some checking on this, and it's an interesting phenomenon: particularly when a trunk was once owned by a famous person, it increases the value, but even less famous owners are aggrandized in advertisements that indicate the trunk was "owned by a turn-of-the-century socialite" and speculations that the item had accompanied its owner on a round-the-world voyage. It seems significant that the buyer of such an item is connecting to the person who once owned it, and the buyer of a new trunk likely imagines he will achieve a sort of immortality.)

Structuring the luxury range

Where a luxury brand has a range of products, there is (or should be) an identifiable logic to the structure. Some examples:

A narrow range

Most luxury brands begin with a very narrow range consisting of a few items that are closely related, or a single item with a few variants.

The reason for this is that it is easier to maintain luxury status if a brand is very narrowly focused on a single area of competence.

Each product has its purpose

Some brands remain within a range that identifies a specific purpose. For example, a luxury brand of luggage would offer a shoulder bag, a one-handled bag, a rucksack, a carryon, a purse, an organizer bag, etc.

As such, the maker of a luxury product can satisfy a diverse range of needs without appearing to pander to the demands of customers.

Each product has its own personality

Recall the analogy that likens luxury products sold under a brand to children of the same family. Moreover, each product may share the same last name but have a unique first name, as is commonly done for sub-brands.

Price differences between products are significant

Another structure to luxury brands that stretch downward is that price is a differentiator: there are various levels of luxury, reaching down unto the premium market.

One word of caution is that the price points should not be too narrow to avoid confusion. The authors suggest a difference of at least 15%, and preferably more along the lines of 30%, to maintain separation of the lines.

Suitability to consumer types

While luxury brands do not wish to be suitable to the mass markets, there are different customer types in the luxury market: the core of regular consumers as opposed to the "day trippers" or the "aspiring future customers."

The entry-level and occasional-use products should offer the essential characteristics of the brand, modified to be appropriate to the client to a degree that does not compromise its identity.

Innovating through a new product range

Launching a single product is a complex decision for a luxury brand, hence deciding to launch a new range is even more so. Ideally, it is a statement of the strength of a brand (the original brand is strong and profitable, and the company is looking to grow), but it is more often a sign of weakness (the original brand is floundering and the company needs to find new sources of revenue). In particular, if the new range of products becomes a substitute for the current ones for its current clients, rather than complement them or reach different customers, it is a sign of impending doom.

The authors pause to differentiate between two kinds of ranges:

For now, the authors wish to focus on the central range, as peripheral ranges will be discussed in chapter thirteen.

For now, the authors wish to focus on the central range, as peripheral ranges will be discussed in chapter thirteen

There are instances in which a brand will launch a new range for the wrong reasons, such as:

The authors mention Luis Vuitton specifically as a luxury brand that fell into the premium ranks because of such a controversy: the firm felt that its core product (luggage and fine leather) had been vulgarized by counterfeiters and needed to move into new products (watches, perfumes, and scarves) - which were just as promptly counterfeited.

Next, the authors list a few of the "right reasons" to launch a new range:

The authors elaborate on the last point, looking again to Vuitton in 1986, before it fell from grace. In the US Market, Vuitton was seen as a "chic but casual" brand that could not cross the $1,000 price threshold, and could not break into the formal handbag market. Even attempting to upscale the materials failed to stimulate demand. Only by launching an entirely new line, with modern styling and less ostentatious branding, was it able to attract new clientele

Fortunately, this strategy succeeded - but had it failed, it would not have weakened the old line. Not only that, but the new line also became popular in other markets, which extended and supported the brand's core.

(EN: My sense is that in the US market, this was an upward stretch rather than a downward one. A company that attempts to launch a more expensive range and fails is still welcomed in its existing one - it may be chided for its precocious ambition, but prodigality is forgiven. However, a firm that attempts to launch a less expensive range, it damages the esteem of its core, whether the new line succeeds or fails, for having stooped.)

Don't sacrifice the past to the future

The authors call particular attention to the danger in sacrificing the past to the future - because "the past" is the legacy of a luxury brand, and "the future" may well be its decline.

There are three specific principles to heed:

Again, these principles apply to extending the core brand, not peripheral lines.

A mode of production as a lever of the imaginary

The production of a luxury product is at the center of its identity: the mass market is focused on the product and its price, but the luxury market is focused on the dream and the legend. In this regard, the authors suggest two principles:

The human hand must have a significant role in production

Every luxury product starts out small, and most are the work of artisans, producing the good by hand in a small workshop. The ultimate in luxury is a product that is made specifically for its client, and is one of a kind.

As the brand gains in popularity, the producer hires assistants and begins to standardize his offering. As it grows further, be begins to mechanize production and further standardize the product. The luxury brand must stop short of mass production and commoditization, or else fall from luxury.

This does not mean that sophisticated tools and machines are not employed, but they are perceived as the extension of the human hand, guided by a human creator, and not autonomous machines like the assembly-line robots of mass producers.

Likewise, some part of the process should remain entirely handmade - whether it's a component of the product or the final assembly of machine-made components - and this fact must be well publicized.

It is also necessary to have some sense of involvement of a master creator, not merely anonymous hands, in the final product. In the restaurant industry, it's well known that the chef does not prepare every meal himself - but he designs the meal, trains and directs the cooks, checks the plates before service, etc.

(EN: This may be a poor example, as the restaurant industry has become vulgarized. Celebrity chefs are television personalities, accessible to the masses, who may not operate a chain of restaurants but nonetheless have dozens, at which they seldom appear, and then never in the kitchen. Chef-branded restaurants are premium, fetching $50 a plate for diners who consume a meal based on the chef's recipe, prepared by people who were trained not by the chef, but by an assistant. Grand restaurants, which are luxury class and command ten times the price, are rare and on the verge of extinction.)

Production must not be outsourced, much less relocated

Outsourcing means a loss of control over the production process, cutting the connection to the creator that is critical to luxury. The company that makes the product is an intermediary with little contact with the terrain where the product is created.

Even if the brand is relocated, it loses its cultural specificity, and the effect of relocation is much worse as relocation breaks all ties to its origin. A luxury product is linked to a history, a location, and a culture - and extracting it from that environment drains it of its esteem. It cannot simply be transported to a place where it can be made more cheaply.

As an example: a French wine is esteemed for its production in a specific location, and cannot outsource or relocate its production facilities to California: in doing so, it loses its identity as a French wine, and its character is forever diminished.

Authenticity and location

The luxury product is connected to an artisan, a specific person, who belongs to a specific cultural universe. A French artisan will not work in the same way, nor produce the same kind of object, as will an Italian, Chinese, or German one.

It may be stereotyping, but nonetheless true, that there are certain qualities that are exaggerated in some cultures whereas others exaggerate their opposites. Italian culture values originality more than rigor, whereas German culture is the opposite. Japanese artists strip away every inessential detail and purify shapes to the extreme, whereas the Chinese artist will produce work in complicated and inessential details.

While the examples above are very broad, it is in reality far more narrow: the artisans of southern Italy produce work that is different in its character than those in the north of Italy. It is also true of periods in time, as we can often see in artwork where an artist attempts to paint or sculpt in a style that has not been practiced in centuries: his work can be a close imitation that has general features in common, but on closer inspection it is imperfect and botched because he does not truly understand the culture of a time in which he has not lived.

In the same sense, the craftsman who reproduces an item designed by an artisan can be tasked with fulfilling certain requirements, but is less effective and agreeable to those requirements that are at odds with his values - and will apply his own values to the choice any detail that is not meticulously communicated.

A product designed in France but produced in Korea will be inauthentic because it is pretends to be a French product - the Korean craftsman may painstakingly imitate the object, but the imitation will be imperfect because he is not French. An outsider may attempt to understand a culture, but will never be a member of it.

Having said this, the effect is less pronounced with services than with products. A luxury hotel or luxury restaurant can open a franchise in a foreign nation, and the staff can be meticulously trained and monitored to ensure they are delivering service under rigorous standards.

(EN: I can't agree, as it stands to reason that the effect may be even more pronounced for services because the patron is interacting directly with the individual who is providing a service. Authenticity is even more important, and imitation even more evident: a French restaurant in America that is operated by a Frenchman who has "brought over" chefs and wait staff from France, even though employees further from the customer such as dishwashers and line cooks are Americans, delivers an authenticity of experience that cannot be delivered by an French-style restaurant owned and staffed entirely by Americans.)

Licenses signal the departure from luxury

Licensing is similar to outsourcing, and worse in one fundamental regard: when another firm is licensed to place a brand on a product, the creator has less control over the product - he may evaluate it, and make a binary decision based on this evaluation in some point in time, but the licensee may make changes so long as he remains true to the letter of the agreement, which fails to capture the essence of the product.

As such, licensing is abdication of luxury. When a luxury brand licenses itself to others, the outcome is no longer a luxury product, but a "premium" product (at best) that bears the signature of the luxury brand, but not its authenticity.

This is even true in instances where license is granted to manufacturer which produces premium products. Consider the example of YSL branded watches made under license by Cartier. They well designed and well made, but were rejected by the luxury market - though they had considerable success in the premium market.

The challenge of luxury services

Most definitions of luxury tend to focus on products, as luxury services seem difficult to define. It seems an adjunct or a facet of an essentially product-centric concept: the process of shopping for a luxury product or interacting with the firm for service after the sale have about them some sense of quality that reflects the product that is at the core of the luxury experience.

Pure luxury services can most readily be witnessed in the tourism industry: a stay at a resort on the French Riviera or a private visit to a palace, museum, or winery is a luxury service without an accompanying physical artifact.

As an aside, it's mentioned that a 2005 survey of wealthy Americans found that they regard luxury items such as cars and jewelry to be a vulgar waste of money, but their dream of luxury is more tied to experiences such as staying in a suite at Ritz Carlton or a vacation to a Natura hotel in Chile.

The luxury vacation experience enables the customer to dwell for a short period of time in a dream state - a level of luxury he imagines to be the daily life of the extremely wealthy, and which is not his own.

A study at the University of Michigan identified three levels of service (good, better, and extraordinary), with key determinants:

Service does not rise to the highest of these levels of perception if it fails on the lower. For example, providing the finest French jam with breakfast does not qualify service as "better" if room service is half an hour late.

It's also noted that the front-line employees who deliver service can be crippled by lack of support on the back-end - the most attentive waiter cannot alone create the perception of exceptional service if he must deliver cold soup ion a chipped dish.

(EN: I recall seeing the advice to service managers to be highly attentive to the apologies that the front-line service people make to customers - and in this context that seems to make perfect sense.)

Outsourcing components of service is likewise a concern, even more so for service because there is often no opportunity or limited opportunity to intervene if the service provided by another firm is not up to standard. The stain on the tablecloth is damaging to the restaurant, not the linen service they hired to launder it.

The authors briefly list "ten facets" that distinguish service as a luxury:

  1. Place - The location itself
  2. Staging - The environment, atmosphere, and decoration
  3. Props - The tangible artifacts that accompany the service
  4. Staff - The expertise of those with whim the customer interacts
  5. Relationship - The personal interaction between clients and staff in one experience
  6. Consistency - Being served by the same staff over time
  7. Personalization - Receiving what is needed rather than a standard service
  8. Familiarity - Conformity to the "rituals" of a given service
  9. Empathy - Staff who react to the customer's needs as they become apparent
  10. Prediction - Staff that can anticipate what is desired without needing to be told.

The authors note that many of these qualities also apply to interactions with a firm that provides a luxury product.

Naturally, luxury services are expensive and guarantee exclusivity to clients. Not only does luxury grant a level of esteem to the client in the perspective of those who cannot afford it, but it also gives the a sense of belonging to the class of person who can.

(EN: It is much overlooked, even by these authors, that the other customers in a service environment also have an impact on the quality of service. A restaurant cannot maintain an air of luxury if the dining room is filled with swine who have deplorable table manners. Companies often shrug this off as something they cannot control, but in truth they can do so in the way that they communicate and enforce policies such as a dress code.)

Luxury service comes at a premium price, and delivers excess, much in the way that luxury products do. The primary challenge is that it is much easier to control and inspect products in a workshop than the behaviors of personnel who provide service to clients, and ensure they remain at the highest levels.