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Vincent Bastien
is one of the most experienced senior managers in the luxury business. For over 25 years, he has been CEO or MD of international companies including Louis Vuitton Malletier and the beauty division of Sanofi group (including Yves Saint Laurent, Nina Ricci, and Parfums Oscar de Ia Renta, Van Cleef & Arpels and Fendi). He is now Affi liate Professor at HEC Paris. He has just published The Luxury Strategy ( Kogan Page ed.) ABSTRACT Today luxury is everywhere. Everybody wants his products to be luxury. The concept of luxury is attractive and fashionable. There are luxury columns in all magazines and journals. There are TV shows on the business of luxury, and on luxury products and services. Even mass-consumption brands name many of their models Deluxe or qualify their experience as luxurious. New words have been recently invented and promoted that add to the complexity: masstige, opuluxe, premium, ultrapremium, trading up, hyperluxury, real or true luxury, and so on. There is a confusion today about what really makes a luxury product, a luxury brand or a luxury company. Managing implies clear concepts and, beyond these concepts, clear business approaches and pragmatic rules. The aim of this paper is to unveil the specifi city of management of luxury brands. Going back to fundamentals, one needs to distinguish it strongly from both fashion and premium or trading up . From this starting point, it sets out some of the counter-intuitive rules for successfully marketing luxury goods and services. Journal of Brand Management (2009) 16, 311 322. doi: 10.1057/bm.2008.51 Keywords: luxury ; marketing ; brand ; premiumisation ; fashion ; trading-up
INTRODUCTION
On 26 March 2008, the news was confirmed: the prestigious luxury brand Jaguar, along with the mythical brand Land Rover, were sold to the Indian conglomerate Tata, which had just announced some months earlier its own launch of the cheapest car in the world. The price paid by Tata for both brands (2.3 billion dollars) was half of the price paid by Ford in November 1989 (5.2 billion dollars), and several billion dollars have been invested by Ford
during those 9 years. This demise of Ford Corporation in rebuilding a profi table Jaguar is intriguing: all modern techniques of industrial management had been applied to Jaguar (re engineering, re-focus on quality, and so on). Modern marketing had also been introduced in the management of this brand to make it more competitive and attract more consumers. In the automobile industry, critical size is a determinant factor of profi tability, and Jaguar brand extensions were launched to reach this critical size in volume. Despite the introduction of marketing, or maybe because of it, Jaguar sales dropped from 130 000 to 60 000 in 5 years. In fact, all over the world, in most Luxury Groups, marketing is introduced fiercely: experienced brand managers, typically MBAs, well trained in classic marketing at Procter and Gamble (P & G) or Johnson & Johnson, are hired to promote their methodologies within the management of luxury brands. This is the beginning of the problem soon faced by these brands. Certainly, most luxury brands do market products that themselves are not luxury products: these trading-down extensions aim at leveraging the prestige of the name they carry in order to harvest the royalties of, say, masstige fragrances, eyewear, accessories, and so on. In these segments, classical marketing does apply, by bringing efficiency through methodologies and techniques inherited from mass products (segmentation, positioning, pre-testing, surveys of consumers desires and expectations, benchmarking, and so on). They have an allure of luxury but are not luxury. 1 The current problem is the growing extension of these classical marketing techniques to the core business of luxury brands. Extant approaches are simply not working: Jaguar, Calvin Klein or Cardin are some of the examples of this. Jaguar has never been profitable, although its perceived quality had been remarkably upgraded by Ford, as indicated by all J.D. Power consumer surveys in the United States. Calvin Klein has slowly moved out of the luxury market, as Cardin did before: these two brands are no longer luxury brands. There is nothing wrong in not being a luxury brand: Zara and Mango are very profi table, while being in the accessible fashion market. Our point is that in order to enter the luxury market, to build a successful luxury brand and to make it remain a luxury brand, one has to forget the classical marketing rules. The successful luxury goods marketers turn traditional marketing practices upside down to achieve profi table success. This has obvious consequences on the human resources policy of these brands.
resources in a very specifi c way. Growth that brings more sales and profi ts while keeping the brand luxury status also needs the strict obedience to this set of rules. At an operational level, the luxury strategy means abandoning some of the classic principles of marketing, as fruitfully practiced by P & G or L Oreal in the food and drug traditional markets or in masstige markets (mass fragrances). To become what it is now, transforming small family companies such as Ferrari, Chanel, Cartier, Louis Vuitton, Gucci, Prada, and so on into worldwide successes, luxury has had to invent its own marketing rules, which are too often unknown or forgotten, today, by many so-called luxury brands , and the word luxury itself seems to have lost its meaning and the clear perception of its implications. Going back to fundamentals, this paper highlights the specifi cities of marketing luxury brands: it cannot be just a set of rules, but must explain why these rules are a consequence of what luxury is, and its role in modern societies. 8 Luxury is a culture, which means that you have to understand it to be able to practice it with fl air and spontaneity. The reason why marketing does not seem to work with luxury goods the same way it does with everyday consumer goods, even top-of-the-range or premium consumer goods, is that the two are fundamentally different. If we want to be able to market luxury, we need first to understand what luxury is all about. Any set of new rules must be firmly grounded in scholarship. In this paper, we shall make a brief historical, sociological and anthropological detour to grasp the functions of luxury and hence, how to implement them.
people can always fi nd for treating themselves well by indulging in buying something better and more expensive. Trading up is very different from luxury, for it does not have the latters sociological dimension its function is not so much social stratifi cation as personal indulgence, improving brand performance thanks to emotional and experiential rewards. Typical examples developed in Trading Up are Victorias Secret, Belvedere vodka and Callaway golf clubs: none qualify as luxury brands.
It is a multi-sensory compression. Luxury being a social phenomenon, and society being composed of human beings, luxury, whether object or service, must have a strong human content and must be of human origin. This has two major consequences: (a) to qualify as luxury, the object or part of it must be handmade , the service rendered by a human to another human. Even the widely sold Lacoste shirt is handmade in the final part of its product process. (b) exclusive services are a sine qua non part of luxury management . Merits that call for personal honours, making each one of us a prince for a short while, are the key differences between the customer relationship management (CRM) of luxury brands and that of mass brands or premium brands.17
As a result, the luxury brand should tell a story, its own story, be it real (History) as for Coco Chanel and Ren Lacoste19 or completely invented from scratch as for Ralph Lauren or Tods. Stories create emotional involvement, build an appealing identity and travel fast like rumours.20 Be superlative, never comparative In luxury, the word competitors is irrelevant: can you imagine someone comparing the merits of Andy Warhol and Roy Lichtenstein? These are two different identities, stories, and so on, each one being the best of its own kind. In traditional marketing, there is this obsession with poaching clients from other brands. Lexus, the top-of-the-range Toyota brand, took as its primary goal taking customers away from Mercedes in the United States its target as a potential source of business. The Lexus brand introductory model was purposely designed taking the Mercedes E Class as the model to overtake; externally it resembled it very closely, though in fact it was superior to the E Class technically, and was substantially cheaper to buy. Hence, the launch advertising for its fi rst automobile in the USA in 1999: This is perhaps the fi rst time it has happened, that by choosing a 36,000 dollar car over a 72,000 dollar car the customer has been able to go uprange. Although in statistical terms Lexus claims to reign as the Number 1 imported luxury brand in the US car market, its behaviour betrays a strong lack of identity and an obsession with bypassing competition. This is typical of a premium brand, not a luxury brand. In fact, in Japan, Lexus is not perceived at all as a luxury brand: Japanese consumers feel it is a remarkable output of Toyotas engineers but associated with no vision or heritage of its own; whats the story beyond the product performance and the hybrid engine? There is none. Should you aim at the pursuit of perfection? No flaws, no charm The most over-used word in luxury is perfection : advertising campaigns on the latest models speak repeatedly of their perfection . It is true that in surveys on the perception of luxury, consumers from all over the world were interviewed, and the consensus was that product excellence is the primary prerequisite of luxury. In the United States, Robb Report regularly publishes a best of guide: for example, which is the best golf club, the best MP3 player, the best automobile. Lexus has almost no defaults, functionally speaking: it is a premium brand. The Lacoste shirt is held as the best polo in the world, its quality being far above that of Ralph Laurens own shirt. The aim of a premium product is to be a perfect product. It would take a touch of madness for it to be counted a luxury. Functionally, a Seiko watch is superior to many luxury watches it is more accurate (because it is a quartz watch) and shows the time directly and in a perfectly legible manner (because it is displayed on a digital face). If you were to buy a luxury watch, such as Patek Philippe, you would be warned that it loses 2 min every year. The fl aw is not only known, it is assumed one could say that that is both its charm and its guarantee of authenticity. It is the specifi c and singular nature of their movement that is responsible for this. Luxury watches like adding complications, and indeed seek it out in their endless quest of art for art s sake. This is the madness touch that goes beyond perfection and makes people collect them. Of course, if a luxury product is not a flawless product, the reverse is not true: adding flaws does not turn a regular product into a luxury product. Resist clients demands