D
Deleted51979
Guest
Since most of you guys here focus on consumer goods and "traditional"/mass marketing methods, I thought it would be a good idea to provide you with a macro-level view of the so-called "Luxury Strategy." This is the most successful marketing & management strategy used in the luxury sector (cars, yachts, jewelry, resorts, etc.) to date and is what allowed a number of small but profitable European companies to grow into global billion-dollar enterprises during the late 20th century.
Note: Though the “Luxury Strategy” has primarily been used (and has been more successful) in the usual luxury sectors listed above, it can be used in any saturated/competitive sector where one wishes to differentiate himself. Best Example: Apple. Having said that, from here on I will be focusing on the application of this strategy in the luxury goods sector and NOT the luxury services sector.
This strategy is based on the synonymous book The Luxury Strategy by two professors of HEC Paris (Europe's luxury research center) and one of which used to be the CEO of Louis Vuitton in the 1980s when it was still a rapidly-growing ‘local’ company.
2. Price.
3. Place.
4. Promotion.
For a brand to be truly luxury, all four ‘Ps’ must follow a luxury strategy. If even one luxury ‘P’ is not followed (for the most part) then the brand is following what is known as a ‘mixed strategy’ (example: Nespresso).
So what do you guys think?
Note: Though the “Luxury Strategy” has primarily been used (and has been more successful) in the usual luxury sectors listed above, it can be used in any saturated/competitive sector where one wishes to differentiate himself. Best Example: Apple. Having said that, from here on I will be focusing on the application of this strategy in the luxury goods sector and NOT the luxury services sector.
This strategy is based on the synonymous book The Luxury Strategy by two professors of HEC Paris (Europe's luxury research center) and one of which used to be the CEO of Louis Vuitton in the 1980s when it was still a rapidly-growing ‘local’ company.
Luxury’s Four ‘Ps’ (product, price, place, promotion)
1. Product.
- Quality, timeless products made to serve a certain purpose (no matter how small or insignificant that purpose may be) that are highly beautiful.
- Tied to a heritage, unique artisanship/know-how and a specific culture.
- Products should take the role of social markers, thus providing the owner with a certain degree of status in any social setting (as long as the brand and/or the product are recognized by others).
- Luxury products are not perfect products. They may be of superb quality but it is their flaws that distinguish them (similar to a worshipped piece of art). I like to refer to this as ‘imperfect perfection.
- At least one part of each product should be made by hand.
2. Price.
- Products should be offered at a price that cannot be justified by their mere function(s).
- This high price is justified by a number of intangibles such as: the perceived rarity of some of the materials used, the culture to which the luxury brand is tied to and maintains a constant connection with (i.e. Ferrari and Italy), the ‘unique’ manufacturing and testing methods used to create each product, the rarity surrounding a product due to the low number of pieces made, the prestige surrounding a well-known brand, etc. A ‘test’ to see if a brand truly is luxury is if it can ask any price it wants for a product (only applies to already established brands). In the book, this is referred to as pricing power.
- The average price point of a luxury brand should increase overtime. This is done by constantly releasing pricier and pricier products.
- Though luxury products are most often quite expensive, it is their price in relation to the price of other ‘comparable’ non-luxury products that makes them expensive, NOT their absolute price.
- A relatively high price alone is NOT enough to classify a product/brand as luxury.
- The price of a luxury product should NEVER be communicated. This includes ads, as well as not using price tags at the brand’s points of sale (if legal).
3. Place.
- Distribution is restricted and controlled. Usually, products are only sold in the brand’s own stores (think Hermes) OR through a qualified network of authorized dealers (think Rolex).
- Service should always accompany a luxury product, whether through exceptional customer treatment or personal product delivery, for example.
- A luxury brand store should be thought of as a sacred temple where everyone is welcome, but only those who believe in the brand and are willing to pay the required price can join.
- The store must enhance the image of products by elevating them as objects of art.
- The appearance of the store, as well as the management of client relations, should signify the brand’s price level (not too ‘cheap’ but not too ‘expensive’ either). The ‘trap’ here is for a store to appear so luxurious that buyers are intimidated to walk in.
4. Promotion.
- In the book this is primarily referred to as ‘communication’ and consists of (list is in order of increasing significance): paid advertising (mostly magazine ads and billboards in strategic locations), some influencer marketing (where known influencers/bloggers review the brand’s products), brand content (videos/short films, as well as pictures and small bodies of text on social media and the brand’s own website), sponsorship of sporting and cultural events as well as exclusive parties/galas. The most important form of communication for a luxury brand though is word of mouth; which funny enough, is primarily encouraged through the exclusive parties/events mentioned above.
- The goal of luxury brand communication is not to sell more products, that is the result of ‘the dream;’ which is what happens when the brand and its products are respected and talked of in a dream-like way, leading to each individual identifying with the dream that the brand can offer (i.e. Rolex watches and the dream of success).
- Thus, communication is used not only to create this ‘dream’ but also ‘recharge it.’ Because every time the brand sells a product, a piece of the dream is lost and the brand is partially weakened.
- Everything a brand does should be PR-able (personal/public relations). It is said that a brand which is not often mentioned in the press or displayed/talked about in films, music, or any type of pop culture is not truly a luxury brand.
- No, or little, passive mass advertising (i.e. TV). The only clear exception to this is perfume, but even perfumes released by true luxury houses such as Louis Vuitton do not usually follow a luxury strategy.
For a brand to be truly luxury, all four ‘Ps’ must follow a luxury strategy. If even one luxury ‘P’ is not followed (for the most part) then the brand is following what is known as a ‘mixed strategy’ (example: Nespresso).
So what do you guys think?
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