The traditional tale of the luxury sector always had a happy ending; a recession-proof industry catering for those unaffected by financial downturns. But the story has taken a twist; with banks failing and bonuses evaporating, even the international elite is feeling the pinch. Luxury expenditure will decline by 6% globally or €211bn in 2009, according to Verdict Research.
In order to survive, luxury brands are being told to throw away their conventional, tried-and-tested marketing principles such as the “customer is always right”.
Professor Jean-Noël Kapferer and Vincent Bastien, authors of The Luxury Strategy, assert that the surest way to fail in the luxury business is to use such standard marketing techniques. They propose 18 “anti-laws of marketing” (see below), which they insist high-end brands should follow instead of upholding the status quo.
Kapferer and Bastien both have heritage in the premium marketing world. Kapferer is professor of marketing strategy at the HEC School of Management in Paris, while Bastien is the former managing director of Louis Vuitton Malletier and chief executive of Yves Saint Laurent Parfums.
Now they are calling on their former colleagues and employers to change their strategies before it is too late. For example, Kapferer and Bastien say it is dangerous for luxury goods to “pander” to customer wishes. While responding to consumer demand might make sense for most businesses, this is not true for luxury brands. They warn: “There are two ways to go bankrupt – not listening to the client, but also listening to them too much.”
Instead of attempting to transform consumers’ desires into products, the pair claim a luxury brand should be driven by a long-term vision that emanates from the mind of its creator.
Kapferer and Bastien cite BMW as a brand that has effectively shown “a 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”. For instance, the car manufacturer has refused to increase legroom space in the back because this would ruin the purity of the car’s line and so destroy its brand value.
Another marketing principle states that to poach clients from other brands, companies innovate with new products aimed at increasing penetration. The authors say this is a mistake because it will dilute the brand’s value. “Wider availability erodes the dream potential among the elite, among leaders of opinion,” they warn.
We’d never use a celebrity to advertise. If a brand can’t stand on its own two feet, then there is something wrong with it
Michael Wainwright, Boodles
Boodles managing director Michael Wainwright, who runs the 200-year-old family-owned jeweller with his brother Nicholas, says he sticks to many of the principles set out in the 18 anti-laws.
Rather than discounting, which Kapferer and Bastien think is a terrible mistake, Wainwright says he will think of new ways to shift stock. “We’d never have a sale if something wasn’t selling,” he says. “I’d rather break it up and reuse the components.”
He also agrees with the authors’ view that “the role of advertising is not to sell” but to build the “dream” of the product or service. Wainwright argues: “Our advertising is never a call to action. We are not advertising so we can sell more diamond rings, we are advertising so that when someone decides at some point in the future they want a piece of jewellery, they think of Boodles.”
He also agrees that another anti-law banning the use of celebrities in advertising is a good principle. Kapferer and Bastien suggest that using stars implies that the brand is weak and needs the personality’s power to shine.
“We’d never use a celebrity to advertise. If a brand can’t stand on its own two feet, then there is something wrong with it,” Wainwright asserts.
Many luxury experts disagree vehemently with the approach set out by Kapferer and Bastien. Guy Salter, the deputy chairman of Walpole – an invitation-only trade organisation for British luxury brands – says that taking the very “purist” line advocated in The Luxury Strategy is too late for an industry with so many companies involved. He warns: “The cat is already out of the bag; luxury is bigger than it was.”
He does admit, however, that after the boom years of luxury, there needs to be a level of quality maintained among brands if they are to continue attracting spending. Particularly important is to concentrate less on breathtaking “temple” stores and more on the brands themselves.
Salter says that luxury goods should not try to apply all 18 rules to their businesses, as they will only fit the highest-end, most exclusive brands. “I think if you genuinely applied them all across the board you would either go bankrupt or alienate half your customers,” he says.
He disputes Kapferer and Bastien’s theory that the company should disregard consumer preferences. “In my experience and from all the data we have, it is the consumer who is now leading the way. They are less loyal, less likely to take things on trust and make a whole range of complex decisions.”
Janet Carpenter, the general manager of Leo Burnett’s luxury division, agrees that luxury brands in 2009 need to show their premium quality by offering people a way of expressing their identity, rather than concentrating on being elitist. She says: “While I agree with some of the 18 points, this is based on a very traditional view of luxury. What we are finding is that luxury has become a lot more nuanced. It’s as much about people looking for new ways to define themselves as it is about exclusivity.”
Luxury is no longer simply about using the most expensive and inaccessible materials or craftsmen, she suggests. It can be about the methods used in production or having the highest standards.
“Nowadays there is so much more involved,
in terms of altruistic and ethical concerns. People are looking for different aspects that help them project themselves as more complex and more original people than just as simply owners of expensive things,” she says.
Mark Henderson, deputy chairman of luxury tailoring brand Gieves & Hawkes, agrees that to attain consumer investments, companies must understand what is the “perceived critical mass of the brand” and develop that core personality.
He cites Louis Vuitton as one example, specifically the brand’s famous luggage. For Gieves & Hawkes, he suggests that the brand’s critical mass is located in its suits; this, he claims, is why its bespoke suits operation is thriving at the moment.
To ensure standards do not slip, the company has joined forces with other Saville Row tailors to establish the Saville Row Bespoke Association, which is aimed at protecting and promoting bespoke tailoring.
Henderson says: “With this protection, I am confident that bespoke tailoring will still be happening in 100 years time.” While the brand does have some lower-priced made-to-order and ready-to-wear options, it is this bespoke aspect that Henderson believes gives Gieves & Hawkes the credentials to survive a recession.
Boodles’ Wainwright echoes this by suggesting that companies must act as curators of their legacy. He claims that he feels like he looks after the “family jewels”, which allows him to plot his strategy beyond a generation.
Wainright says that when some businesses become very large it becomes too easy for them to be “run by accountants” and cut on what might seem to be the more lavish aspects of brand building, innovation and creativity.
He states that, despite being an accountant himself, Boodles does the opposite and creates pieces of very high value – interesting jewellery on a speculative “slightly risky” basis. “We have to push the boundaries of design, even in a recession,” he says.
But Kapferer and Bastien say there is one area where luxury brands must absolutely not push the boundaries. They consider that selling luxury online is inconsistent with true luxury values.
While Kapferer advocates that true luxury brands should communicate online, he says there is not yet enough ability to personalise or create a multisensory experience on the internet for such goods to be sold online. Until this time, he argues luxury marques should not indulge in ecommerce.
Others, however, believe that day has already arrived and that reluctance among luxury companies to embrace digital channels is more to do with lack of understanding of the medium than shortcomings in the possibilities of technology.
Upmarket clothing brand Hackett’s marketing director Mark Owens says: “With advances in technology, you can give a richer experience and in some ways do things you can’t do in-store – it almost adds a fourth dimension.”
He adds that when customers come into the company’s physical stores, they will get a taste of the “Hackett experience” but that people want the convenience of shopping online. Wealthy customers may be cash rich but are often short on time.
Owens continues: “New technology can deliver things that people believe to be important and some of it provides what luxury brands are meant to be about – having a one-to-one relationship with people.”
While Kapferer and Bastien’s 18 anti-laws of marketing may help brands redefine their core identities at a time when they need to strip back their operations, Owens says that the future challenges for luxury will require more, not less, flexibility.
Owens sums up: “If customers want something, you have to accommodate them, to a degree. I accept that you have to stick to your principles but I think you also have to realise that the world has changed.”
Professor Jean-Noël Kapferer and Vincent Bastien’s 18 laws of anti-marketing explained
1. Forget about “positioning”; luxury is not comparative. When it comes to luxury, being unique is what counts, not any comparison with a competitor. Luxury is superlative, not comparative. It should be faithful to its own identity rather than worrying about where it stands in relation to something else.
2. Does your product have enough flaws? In the world of luxury, products must have character or originality. Flaws can be unique and so boost an item’s desirability.
3. Don’t pander to your customer’s wishes. Traditional marketing listens to consumers, transforming their wishes into global products. The luxury brand, by contrast, comes from the mind of its creator, driven by long-term vision.
4. Keep non-enthusiasts out. In traditional marketing, there is an obsession with poaching clients from other brands, leading companies to come up with new products that will extend marketing penetration. Trying to make a luxury brand more relevant dilutes its value. Wider availability erodes the “dream potential” of an aspirational product.
5. Don’t respond to rising demand. Rarity sells – as long as the customer understands why the product is rare and is prepared to wait. Use a deliberate strategy of resisting demand in order to be the master of it.
6. Dominate the client. This is not the same thing as saying don’t respect them but means the luxury brand should be ready to play the role of adviser, educator and guide. This only increases authority and, thus, desirability.
7. Make it difficult for clients to buy. The luxury brand is something that has to be earned. The greater the inaccessibility, the greater the desire. It should always be necessary to wait for a luxury product – time control is a key dimension of luxury.
8. Protect clients from non-clients, the big from the small. In the retail environment, it is necessary to set up a degree of social segregation; for example, the ground floor for some spenders, first floor for others.
9. The role of advertising is not to sell. In luxury, the dream comes first. Don’t try and make your ads direct response; they are there to sell the dream.
10. Communicate to those whom you are not targeting. It is essential that there should be many more people that are familiar with the brand than those who could possibly afford to buy it. Forget media efficiencies based on concentrating on target consumers.
11. The presumed price should always seem higher than the actual price. In exact opposition to traditional marketing, which tries to attract with a low price and then persuade the client to go up-range, in luxury, when the imagined price is higher than the actual price, that creates value.
12. Luxury sets the price, price does not set luxury. In contrast to tradition demand-based marketing, luxury is supply-based. In luxury, first you come up with a product, then you 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.
13. Raise your prices as time goes on in order to increase demand. In a standard market model, when the price falls, demand rises. With luxury, the relationship is reversed.
14. Keep raising the average price of the product range. In traditional marketing products are launched at a certain price, then when competition arrives, the price is dropped. In luxury, it is the opposite.
15. Do not sell. The luxury strategy is the very opposite of the volume strategy. In luxury, not trying too hard to sell is a fundamental principle in relationships with customers.
16. Keep celebrities out of your advertising. Calling on the services of a star is tantamount to saying the brand needs some of this star’s status and admitting it doesn’t have enough of its own. For the luxury brand, this is a gross error of strategy.
17. Cultivate closeness to the arts for initiates. The luxury brand is a promoter of taste but luxury is not a follower, it should be creative and bold.
18. Don’t relocate your factories. When someone buys a luxury item they are buying a product steeped in culture or in a country; having local roots increases the perceived value of the luxury item.
Source of 18 laws: The Luxury Strategy by JN Kapferer and V Bastien, Kogan Page 2009
Case study: Burberry
Luxury goods group Burberry has broken several of Kapferer and Bastien’s 18 anti-laws of marketing and now the British retailer appears to be suffering the consequences.
In quarterly results posted this week, the company reported that in the three months to the end of June, its wholesale business saw sales drop by 28% as retailers slashed the amount of Burberry stock they held.
It is only recently that the brand’s reputation has recovered from a period in the early part of this decade where it stretched itself to affordable items – one of Kapferer and Bastien’s biggest no-nos – which backfired when they were repeatedly seen on less-than-desirable consumers.
The aspirational side of the brand was under threat and it has taken some years, with ad campaigns starring trendy British models such as Kate Moss, to repair the damage.
The brand, long known for its quintessentially British gaberdine trench coats, worn by the likes of Audrey Hepburn, also faced a public outcry in 2007 for closing its factory in the Rhondda Valley in South Wales and shifting production to China, with the loss of more than 300 jobs.
The switch in location, again something seen as unacceptable by Kapferer and Bastien, became the focus of numerous demonstrations and the campaign became a cause celebre, backed by famous names ranging from actress Emma Thompson to Prince Charles.
Stung by the backlash to its move, Burberry donated the factory site and its contents to the Welsh people, claiming if sold, it could raise £1m. It stated the company was working with local and national groups to ensure the assets were taken advantage of in the best possible way.
According to Kapferer and Bastien, the problem with moving a brand’s production base is that it shatters much of the perceived value of a brand, including its point of cultural specificity. The justification from Burberry at the time was that “Britain, unlike France and Italy, is not a country that celebrates manufacturing of fine clothing”.
This attitude seems to go against Burberry’s promotion of itself as British, seeing as it carries “by appointment” royal warrants from the Queen and the Prince of Wales. Earlier this month it launched an advertising campaign featuring Harry Potter actress Emma Watson as the brand’s new face.
The group is currently undergoing reorganisation and is axing its underperforming lower-priced Thomas Burberry line and scaling back to focus on its core strength: classic and conservative items such as trench coats and high-quality handbags.
This renewed emphasis on core expertise is in line with the advice of The Luxury Institute, which advises brands to focus on the segment in which it truly excels rather than diversifying too far.
The effect of the move to China will take more time to analyse fully but Burberry’s immediate problems are similar to those of other luxury houses where volumes are dropping fast.
Burberry chief executive Angela Ahrendts admits the company is battling against “what remains a challenging environment” but claims the business is “well-placed to deliver long-term sustainable growth”.
However, with experts predicting the downturn will continue until at least the end of the year, the business should be taking careful notice of the 18 anti-laws of marketing to ensure it can recover along with the global economy.
Case study: luxury cars – the 18 laws in practice
Luxury cars have long been popular symbols of wealth. The brand names have traditionally been cited as demonstrations of a certain type of lifestyle, whether it is Bentley featuring in a Cypress Hill rap song or hip-hop artist Busta Rhymes singing the praises of a Lamborghini.
But the car market has been hit hard by the recession, with the whole automotive industry suffering catastrophic drops in sales. Now many of the most famous names in luxury automobiles are pinning their hopes on following Kapferer and Bastien’s 18 anti-laws, specifically those about heritage, prestige, brand cachet and design.
All the major car groups have tried to add luxury marques to their portfolios – Volkswagen bought Bentley, Lamborghini and Bugatti; BMW has snapped up Rolls-Royce; Fiat operates Ferrari; and Jaguar passed through the hands of Ford, before being sold on to Indian auto company Tata Motors. Toyota created its own luxury brand in Lexus.
Ford’s struggles to make Jaguar profitable in the years following its 1989 $2.5bn purchase, before finally admitting defeat and offloading the brand to Tata in 2007, are indicative of conflicts associated with trying to increase the penetration for a luxury marque, but maintaining the elusive and elite “dream” of the product.
Some felt that the invisible line separating Jaguar from less exclusive brands were blurred by reliability problems and the production of small Jaguars using Ford Mondeo engines. Without mitigating this by simultaneously innovating enough with the upper-end models, the brand became tarnished in the eyes of many.
Jaguar Cars UK marketing director David Steele admits: “Sadly, we haven’t been the Jaguar that people loved back in the Sixties for a significant period of time. We have had issues ranging from poor quality to complete unreliability. The cars of the past that were an inspiration became a thing of the past too quickly. We want to bring the style back into Jaguar and prove we are a prestigious luxury marque fit for the demands of the 21st century.”
Under Tata ownership, the new Jaguar XJ, launched this month, may go some way to revitalising the brand. Marketed with the strapline “The Icon Reimagined”, the car has received the thumbs-up from opinion-forming experts, impressed by its design.
With the XJ, together with XF, unveiled last year and aimed at luring BMW, Audi and Mercedes buyers, the struggling brand may be on its way to fulfilling the company’s hopes.
For extremely niche luxury car marques such as Ferrari and Lamborghini, strategy can prove simpler than for Jaguar. Each have unique functions and impracticalities that form part of their charm – living up to Kapferer and Bastien’s idea of embracing any flaws which add to their cult and exclusive status. Neither brand has the conflicts some other manufacturers face when trying to build from scratch a myth for luxury models that form part of a broader portfolio.
The German manufacturers appear to be less affected than their peers, having successfully parlayed their Teutonic virtues of efficiency, technological excellence and comfort into global selling points. BMW, Audi and Mercedes Benz collectively dominate the market, fending off Toyota’s successful Lexus. In May 2009, BMW overtook Lexus as the top seller of luxury vehicles in the US.
While Mercedes-Benz attempts to recover from its ill-fated marriage and subsequent divorce from Daimler, BMW is one business highly thought of by both the authors of The Luxury Strategy and Milton Pedraza at The Luxury Institute, who cites it as “one of the most admired car companies in the world”.
Kapferer recalls a story about the head of BMW in the US. After stating that his sales target for the next year had been 90% met almost automatically, he was asked if this meant he would have nothing to do.
“Far from it,” the BMW executive replied: “My job is to make sure that the 18-year-olds in this country decide that as soon as they have the money, they will be buying a BMW. I have to see to it that when they go to bed at night, they are dreaming of BMW.”