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ABSTRACT [3]

THE LUXURY BRAND [4]

WHO IS THE LUXURY CONSUMER? [5]

THE LUXURY CONSUMER BEHAVIOR [5]

BRANDING BENEFITS [ 11 ]

BRAND SIGNATURE [ 12 ]

PRODUCT INTEGRITY [13 ]

EXCLUSIVITY [ 13 ]

LUXURY ENVIRONMENT AND EXPERIENCE [ 14 ]

MARKETING OF LUXURY BRANDS [ 15 ]

ARTICLE: THE GLOBALIZATION OF LUXE [ 22 ]

CASE STUDY - GIORGIO ARMANI [ 23 ]

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Luxury as a concept is defined within the scope of socio-psychology as a result of its connection
to a culture, state of being and lifestyle, whether it is personal or collective. When linked to
brands, it is characterized by a recognizable style, strong identity, high awareness, and enhanced
emotional and symbolic associations.

It evokes uniqueness and exclusivity, and is interpreted in products through high quality,
controlled distribution and premium pricing. These core factors have led to the development of a
$ 180 billion global industry with an uninterrupted growth for over two decades. These elements
have also led to the summarization of luxury as a µdream¶, leading to justifiable curiosity and
interest (Okonkwo, 2009)

Conceptualizations of luxury are typically derived from either a consumption perspective

(Vickers & Renand, 2003) (Vigneron & Johnson, 1999) or from an application as a product
branding device (Jackson, 2001). There has emerged a strong strand of literature that seeks to
explain luxury consumption, particularly in terms of having a symbolic function that operates at
the individual and collective level. As such, luxury is identi¿ed in terms of its psychological
value, its function as a status symbol (Chadha & Husband, 2006) (Nia & Zaichkowsky, 2000).
and as a highly involved consumption experience that is strongly congruent to a person¶s self-
concept. From a product perspective, luxury brands are frequently de¿ned in terms of their
excellent quality, high transaction value, distinctiveness, exclusivity and craftsmanship (Fionda,
2008). Y Jackson proposes the following as the core characteristics of the luxury product:
exclusivity, premium prices, image and status which combine to make them more desirable for
reasons other than function¶ (Jackson, 2004).
Within the luxury offer, there is an ever expanding offer of luxury categories. There are four
principal categories of luxury goods: fashion (couture, ready-to-wear and accessories), perfumes
and cosmetics, wines and spirits and watches and jewelry (Jackson, 2004). More recently, the
categories of luxury automobiles, hotels, tourism, private banking, home furnishing and airlines
have been added (Chevalier & Mazzalovo, 2008). The focus of this study is the luxury fashion
goods category. Firstly, this focus is justified on the basis that it accounts for the largest
proportion of luxury goods sales, with a 42 per cent share in 2003, (The Economist, 2002). and
the strongest product category growth in 2007. Secondly, previous studies have suggested that
the branding of luxury fashion goods is more complex than other sectors by virtue of the speed
of change within the sector (the majority of luxury fashion goods are dormant at the end of the
fashion season),Y Okonkwo, 2007) (Moore & Birtwistle, 2005) as well as the scale and number of
fashion items that are marketed using a single luxury brand name. Thirdly, the marketing of
fashion goods is typically more complex and costly as a result of differences in product numbers,
operating scale and the tendency for luxury fashion companies to take direct control of the
distribution of their goods within markets. As such, these costs and the complexity of managing
the marketing of this category of luxury goods have previously been shown to exceed those of
the other luxury brand categories. 8,12,14,15 Y

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When we say µluxury consumer¶, we don¶t mean only female fashion victims whose purses are
stashed with endless cash and unlimited credit cards. Although women are highly influential in
luxury buying decisions and constitute a large proportion of the luxury consumer market, men
and children are also important luxury consumers. Today¶s luxury consumer is different from the
wealthy consumer of the past. Unlike in the past when wealthy consumers were easy to
understand and satisfy, it is difficult to place the current luxury consumers in a box of definite
descriptive characteristics. As one luxury brand manager rightly said, today¶s luxury consumer
cannot be segmented. This is because the luxury consumer has evolved beyond the µhead-to-toe
designer-clad single-brand loyalist¶ to a smart and savvy discerning consumer. The current
luxury consumer is highly sophisticated and brand literate. They are fashionable and aware of
their tastes and preferences. Their choices of luxury products are based more on an
understanding of their own style needs and less on the µbrand-name¶ factor. They also have an
attitude that is a personification of youth, assertion and adventure, irrespective of their age. This
attitude is reflected in the fact that today¶s parents and their children dress alike. Also older
consumers can now look years younger through advanced cosmetics, giving them the freedom to
appear like youths. The consumer market has consequently become loosened and diluted. For
example, consumers of all ages including those in their forties, fifties and sixties, can be found at
the payment queue for roller blades at Decathlon in Paris. Also the fitness and well-being craze
now means that grandmothers, mothers and daughters can be found wearing the same clothes
and accessories, and shopping in the same stores. These factors make understanding today¶s
luxury consumer imperative and is responsible for the current huge market of Trend Trackers
and Analysts (Okonkwo, 2007). Y Y
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The reason for the purchase of goods, regardless of category, is to fulfil consumer needs. When
people pay for products or services, they are actually looking for solutions to problems and
needs, and luxury goods form a part of those solutions. They are objects of desire that consumers
view as a means to solving multiple problems and fulfilling multiple needs. Some of these needs
are related to the consumers¶ real or aspirational identity, personality and lifestyle. Luxury
brands help consumers define and accentuate the type of person they are or who they would like
to be and also assist in communicating this definition to others. This is one of the roles of brand
association in the luxury sector.

The concept of branding begins and ends with the consumer. The relationship between
consumers and a strong brand is a type of bond or pact that starts with a psychological process in
the mind of the consumer and is manifested through product purchases. This relationship is
highlighted even more between luxury brands and consumers because of the profound role of the
branding factor in the development of luxury goods. The source of the attachment of consumers
to luxury goods is the role of luxury brands as symbols of personal and social identity.
Consumers offer their trust and loyalty to luxury brands with the understanding that the brand
will deliver its promises and exceed their expectations. These expectations include the
fulfillment of both functional and symbolic needs. The functional needs are the tangible and
practical benefits of a product such as the time-keeping function of a wristwatch. The symbolic
needs involve intangible benefits linked with the emotional and psychological dimensions of the
consumer. These include fulfilling ego and self-esteem needs, reinforcing social status and
projecting a self-image. The self-image extends from the consumer¶s true-self, that is who they
truly are; their ideal self, that is who they would like to be and their social-self, that is who they
would like others to think they are. Although both tangible and intangible benefits are derived
from luxury brands, the principal value of luxury brands to consumers is the intangible benefit.
The intangible level brings the branding aspect of luxury goods into prominence and is reflected
in consumer preferences and the decision-making process. It is also on the intangible level that
the relationship between consumers and luxury brands moves from logic and
functionality to what has been interpreted as irrationality.
This analysis can be applied to any category of goods, but since this book is concerned with
luxury goods, it will be related to the luxury goods sector. Each of the points above is further
expanded according to the requirements of luxury goods:

1) 
YYYLuxury consumers buy more than luxury products and services. They
buy a complete package of experiences, feelings and identities made up of the product, the
service and the brand¶s characteristics.

2) 
YYYLuxury consumers purchase luxury goods whenever the opportunity
arises. Luxury goods purchases often don¶t result from convenience as they are constantly
desired and often fall within the priority of luxury consumers.

3) 
Y Y Y Luxury consumers do not buy luxury fashion goods when they are
required because the desire for luxury goods is not fuelled by basic needs. Luxury products are
µcravings¶ and sometimes µwishes¶, rather than functional needs, therefore there is a continuous
yearning to possess them. Luxury goods are objects of desire and desires exist on a continuous
basis.

4) 
Y Y Y Luxury consumers buy their products mainly in major fashion
centres of the world where luxury fashion is prominent in consumer lifestyles.

5) YYYThe majority of luxury consumers prefer to shop in the physical stores
in order to benefit from a complete product selection and also enjoy the luxury retail atmosphere.
However, other shopping channels such as the Internet and Mobile shopping are gaining
increasing influence in the luxury arena and consumers are continuously shopping through these
channels.

6) Y Y Y Y Luxury consumers buy luxury goods as frequently as is
practically and financially possible for them. They often do not evaluate the buying decision of
luxury goods on a logical basis. As previously indicated, luxury goods are objects of desire,
meaning that if consumers can help it, they would fulfil this desire on a continuous basis.
7) YYYY
Y YLuxury goods are highly relevant to consumers as a
stamp of their personalities and lifestyles. As a result, the products are used frequently.

8) YY!Y

Y YThe post-purchase evaluation of luxury products is
almost a non-representational occurrence. This is because the appreciation of luxury goods
extends beyond the products¶ functional attributes to include abstract and symbolic benefits. As a
result, the evaluation focus is on the role of the luxury product in the life of the consumer and the
satisfaction that it provides. Since the symbolic role of luxury products is continuous, their post
purchase evaluation remains

9) YY YY

Y YLuxury goods traditionally last for a lifetime and
are rarely disposed of. However, an interesting occurrence has developed in the luxury goods
sector in the last five years that has made luxury goods disposable. This occurrence is called the
µfast-fashion¶ phenomenon later discussed in Chapter 7 of this book. Fast fashion means that the
design turnover of luxury products has become higher and the product lifecycles have become
shorter. As a result, the µIt¶ fashion items change every few weeks. Consumers in a bid to keep
up have also become smart and savvy in their luxury goods purchase cycle. They now sell their
µused¶ or µsemi-used¶ products for substantial amounts (sometimes close to the original price tag)
in order to purchase new ones. Several second-hand dealers who trade in these items are
cropping up in different global markets. This factor, however, does not diminish the value of the
products or their brands.

10) Y Y Y Y Y 

Y The decision for the future purchase of
luxury goods has already been made. The future is now! To further illustrate the decision-making
process of consumers, Schiffman and Kanuk (2004) identified three main levels of influence
which is illustrated in Figure 3.2.
The Input stage is mainly influenced by the strategies behind the marketing mix such as the
product, pricing, retail channels and promotions. Other influencing factors are branding elements
like the brand personality, brand image and brand awareness; and social groups like family,
friends and colleagues.

The Process stage operates on a more intangible level, characterized by psychological and
emotional elements such as perception, personality, attitude, and motivation. The Output stage
involves the use, evaluation and disposal of the goods.

]]]]]
Uche Okonkwo, Luxury Fashion Branding(page 61-62-63)
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[[[[[Brands are assets to the companies that own them. This asset comes in an intangible form
and results in added financial and social benefits for businesses. To get a clear picture of the
asset worth of brands for companies, let¶s take a look at the following illustration. In 2006,
Interbrand placed a brand value of US$17.6 billion on Louis Vuitton, making it the most
valuable brand in the luxury goods industry and the seventeenth most valuable brand in any
product category in the world. This figure is exclusively attributable to the brand and excludes
the company¶s assets, earnings and revenues. This means that if Louis Vuitton ever decides to
sell its brand (which is highly unlikely, by the way), its brand name and associations alone could
fetch the company more than its book price (its balance sheet worth). The case is similar with
other µhighly valued¶ luxury fashion brands like Gucci, Armani and Rolex. In some cases,
companies with strong brands are sold at up to 600 percent of their balance sheet worth.

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A true luxury brand exhibits 10 core characteristics as indicated below:

1.Y Innovative, creative, unique and appealing products;

2.Y Consistent delivery of premium quality;
3.Y Exclusivity in goods production;
4.Y Tightly controlled distribution;
5.Y A heritage of craftsmanship;
6.Y A distinct brand identity;
7.Y A global reputation;
8.Y Emotional appeal;
9.Y Premium pricing;
10.Y High visibility.

Other important elements of a luxury brand are an indelible impression, a recognizable style, fast
and high fashion design turnover, a strong country-oforigin link, especially a country with a
strong reputation as a source of excellence in luxury fashion (such as France and Italy). The key
tools of luxury fashion branding are £

   and   
 
. For example, when
you see a woven luxury leather bag or shoe, you¶ll likely think of Bottega Veneta. In the same
manner, tweed or pearls on a product is likely to evoke a Chanel image. This is because these
brands have differentiated themselves through these specific product attributes that also serve as
a signature for the brands. However, product differentiation forms a part of the tangible aspect of
branding which is a complement to the intangible aspects of branding as explained further in the
chapter. The intangible aspects of luxury branding include the psychological responses that
consumers exhibit towards luxury fashion that leads to an emotional attachment to specific
brands and their products and services. Emotional appeal connects with the consumer¶s sub-
conscious, sensitivity, intelligence and personality. This implies an intimate relationship and a
special bond between brands and their consumers. ]]]]]
Uche Okonkwo, Luxury Fashion Branding(page 103-106)
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[[[[Each of the companies recognises the importance of the brand signature and iconic products,
referring to them as the µ designers¶ style¶ , µ handwriting¶ or the µ brand DNA¶ . Each
considered these inherent to the luxury fashion brand. All of the brands produce or sell numerous
productcategories that need to be internal, consistent and coherent, which will minimise the
damage of confusing the consumer ( Table 4 , Q12). Each of the brands ensured that the whole
collection had a clear signature through comprehensible managerial direction initially, and then
repeated meetings to ¿nalise the products ( Table 4 , Q14). The iconic product epitomises the
brand signature
( Table 3 , Q12). In a number of the cases, the iconic products have close connections to their
heritage. The design is extended to the packaging and livery ( Table 4 , Q13). Each company
considered it vital that the packaging cohered with the brand image. All of the case companies
identi¿ed the importance of a design team ( Table 4 , Q15) and invested in eminent designers to
work on various products of their collections to µ « raise and punctuate the fashion element of
the brand¶ (Company D).
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This key theme emerged as signi¿cant in the case companies, and within each there
were several sub-categories, which included µ product quality¶ ( Table 4 , Q8) µ
craftsmanship¶of developing the luxury status of the brand. The price not only reÀ ected the
handmade
product and quality attribute associated with luxury, but also suggested the element
of exclusivity of a product, as high price creates a barrier of entry ( Table 4 , Q16). A
number of the cases employed strategies to increase exclusivity, including limited edition
products and ranges, and through strategic alliances.
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Exclusivity is inherent to luxury brand positioning ( Table 4 , Q17) as de¿ned by the literature.
Each of the case companies strictly controls the distribution and accessibility of the brands to
ensure exclusivity (Table 4 , Q18). Furthermore, the ¿ ndings revealed that exclusivity can be
controlled
through limited production runs and the number and typology of distributors in each of the cases.
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All the representatives identi¿ ed the signi¿ cance of both the store environment and superior
service to brand luxury creation. Firstly, the store environment is typi¿ ed by the À agship store,
which was considerednies recognise the importance of the right people working internally to
create the
brand, from management to the staff on the shop Àoor. Furthermore, within the organisation
there is a need for honesty, integrity, morality and teamwork, as without these the message
created would be false. In conclusion, each of these aforementioned components is considered
important
in the creation of a luxury fashion brand, as each add to the luxury brand image and positioning.
The research ¿ndings identi¿ed the interrelated components of a luxury brand through an
examination of the actions undertaken with each of the representatives of the case studies. This
builds on the ¿ndings of the literature, which either discussed luxury brands on a surface level or
considered the concept from a generic perspective rather than speci¿ cally to the luxury fashion
market.]]]]]
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[[[[[[[There are plentiful examples of attempts to achieve luxury status through continuity
with the premium, by increasing the prices without changing the strategy... and the failures are
equally plentiful. Another strategy for entry into luxury entails the acquisition of a luxury
company that you believe you can manage better than the current owners. These two types of
strategy, while they generally work well in the world of industry and mass consumption goods,
generally lead to painful defeats when applied to the field of luxury. We will take a recent and
clear example, since all the figures are public, and the sector and actors are known to all: the case
of Ford. In the late 1980s and early 1990s (the purchase of Jaguar took place in November 1989
for N2.2 billion), the Ford motor group decided to develop into luxury, creating a µpole¶ known
as Premier Automotive Group (PAG), through the acquisition of prestigious (Jaguar, Aston
Martin) or premium(Volvo, Land Rover) brands, and applying µFord methods¶ to make it a
profitable group.
In spite of several years of massive investment, PAG remained immovably µin the red¶; Ford
decided to throw in the towel and divest itself of its µluxury subsidiary¶ in 2007. While Aston
Martin was sold at a good price (around $1 billion) to a fan of the brand, Jaguar ± losing money
heavily ± had to seek out the Indian Tata group as a purchaser. In contrast, the Volvo and Land
Rover brands (LR was bought for N2.4 billion in 2000) suffered less: pompously renamed
µluxury brands¶ upon their acquisition by Ford, they are in fact µpremium¶ brands; a µFord¶
management strategy was therefore able to improve their results, whereas Jaguar and Aston
Martin, being genuine luxury brands, could only be seriously damaged by this kind of strategy.
Luxury is not µpremium at its best¶]]]]]]]
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÷2&YLUXURY ÷ ÷34YBREAK THE RULES
OF MARKETING TO BUILD LUXURY BRANDS (page 55/337)

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In consumer marketing, at the heart of every brand strategy you will find the concept of
positioning, of the µunique selling proposition¶ (USP), and µunique and convincing competitive
advantage¶ (UCCA). Every classic brand has to specify its positioning, and then convey it
through its products, its services, its price, its distribution and its communication. Positioning is
the difference that creates the preference for a given brand over the one that it has decided to
target as a source of new business and whose clients it is going to try to win over. When it comes
to luxury, being unique is what counts, not any comparison with a competitor. Luxury is the
expression of a taste, of a creative identity, of the intrinsic passion of a creator; luxury makes the
bald statement µthis is what I am¶, not µthat depends¶ ± which is what positioning implies.

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This is a provocative statement. For most people, luxury is the last word in hand-crafted or
craftsman-built products. It is true that in surveys into the perception of luxury, consumers from
all over the world were interviewed and the consensus was that µproduct excellence¶ is the
primary prerequisite of luxury. It would suffice to imagine a bisecting line between two axes ±
price and functional quality: at the very top right would be luxury. Now, in our view, nothing
could be further from reality. The aim of an upper-premium brand is to deliver a perfect product,
to relentlessly pursue perfection. But 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¶s 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 some of the famous brands of a
luxury watch, you would probably be warned that it loses two minutes every year. The flaw is
not only known, it is assumed ± one could say that that is both its charm and its guarantee of
authenticity. It is the specific and singular nature of their movement that is responsible for that.
For luxury watchmakers like adding complications, indeed seek them out in their endless quest
of art for art¶s sake. This is the µmadness¶ touch that goes beyond perfection and make people
collect them.

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One of the most respected brands in the world is BMW. This ever-growing brand has been
successful in creating a cult, a body of owners that are extremely faithful, devoted and
committed to their brand. It is in fact, according to the Luxury Institute, one of the µthe most
admired car companies in the world¶. What are the factors behind BMW¶s success ?
‡ A clear brand identity, observed to the letter since 1962, summarized in a slogan never
challenged since then, translated into every language ± µSheer driving pleasure¶.
‡ A stable, family shareholding. Since 1959 the brand has been owned by the Quandt family. It
believes in letting things take their time and accepts that it may lose clients in the short term to
increase the value.
‡ A very German enterprise culture, characterized by its engineering and its product cult.
Moreover, being descended from pioneers of aviation, there is a tremendous pride in this
company.
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When it comes to luxury, trying to make a brand more relevant is to dilute its value, because not
only does the brand lose some of its unique features, but also its wider availability erodes the
dream potential among the elite, among leaders of opinion. BMW is typical of a brand that is
able to grow without cutting back on its rugged features, which are in any event highly exclusive.
The Bavarian management has calculated that BMW¶s target accounts for 20 per cent of the
premium segment of the population ± only one person in five. This means that 80 per cent are
not at all attracted by BMW¶s values. The brand has preferred to exclude these 80 per cent and
base its growth on its true target, those who wholeheartedly share its values. Brand growth is
achieved by penetrating new countries, not new customer segments. In order to grow, the BMW
Group preferred to buy two other brands which on their own, like BMW, define a segment ±
Mini and Rolls-Royce; having taken good care to keep Rolls-Royce¶s identity separate from
BMW¶s.

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The prime objective of traditional marketing is volume growth. At Ferrari, production is
deliberately kept to fewer than 6,000 vehicles a year ± rarity value sells. So long, that is, as the
customer understands why the product is rare and is prepared to wait. Rarity can be managed just
like the relationship with the clientele; so it is not a matter here of poor sales forecasting but of a
deliberate strategy of resisting demand in order to be master of it.

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Luxury is a consequence of meritocracy. Once the exclusive privilege of the aristocracy, luxury
today is what rest ratifies our so-called classless societies, but on the basis of merit, no longer
simply on birth. So everyone is looking for ways to haul themselves up ± luxury brands are at the
same time a reward and a token of gradual elevation. To preserve this status, the brand must
always dominate its client. This is not the same as saying don¶t respect them: parents dominate
their children, but that does not mean that they don¶t respect them; on the other hand, if they treat
them as µbest buddies¶, making themselves out to be their equals, they lose their aura and
profoundly disturb their offspring.
Luxury is the domain of culture and taste. Even if many well-off buyers do not actually have the
codes themselves, they deduce from the limitless consumption of a luxury brand the fact that it
must be coded as a luxury. The luxury brand should be ready to play this role of advisor,
educator and sociological
guide. On this account it simply has to dominate.

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The luxury brand is something that has to be earned. The greater the inaccessibility ± whether
actual or virtual ± the greater the desire. As everyone knows, with luxury there is a built-in time
factor: it¶s the time spent searching, waiting, longing« so far removed from traditional
marketing logic, which does everything to facilitate quick access to the product through mass
distribution, with its self-service stores, self-checkout systems, the internet, call centres and
introductory offers. Luxury has to know how to set
up the necessary obstacles to the straining of desire, and keep them in place. People do
eventually get to enjoy the luxury after passing through a series of obstacles ± financial
obstacles, needless to say, but more particularly cultural (they have to know how to appreciate
the product, wear it, consume it), logistical
(find the shops) and time obstacles (wait two years for a Ferrari or a Mikimoto pearl necklace).
Luxury needs to excel in the practice of distributing rarity, so long as there are no real shortages.
It¶s quite natural: just as actual shortages stand in the way of growth, so the absence of rarity
leads to the immediate dissipation of desire, and so to the disappearance of the very waiting time
that sustains luxury. To create this obstacle to immediate consumption, it should always be
necessary to wait for a luxury product ± time is a key dimension of luxury, as with all desire.

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Modern luxury works on the open±close principle. Too much µopen¶ is harmful to the brand¶s
social function. In practice that meant that the brand became segregationist and forgot all
society¶s democratic principles. In stores, for example, it is necessary subtly to introduce a
measure of social segregation: ground floor for some, first floor for others. Armani set up
specialist stores for each of his product lines. Advertising and promotion is for all, but public
relations are ultra-carefully targeted, like the CRM for the privileged (personal invitations to
meet the designer, the brand perfume nose, or the head wine buyer).

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Nothing is more alien to traditional marketing than this declaration; in traditional marketing the
first thing to be done is to come up with a sales proposal, to have a unique selling proposition ±
the text is there to make the sales pitch. In luxury, the dream comes first. The explanations of the
salesmen are simply post-rationalizations. If you go to a Tag Heuer shop you are handed a thick
brochure the size of a book, which says everything there is to say about the Tag Heuer brand, its
origins, its finely tuned processes, respectful of a unique design, etc. Then it goes on to talk
about the various models, one by one«

The dream must always be recreated and sustained, for reality kills the dream. Every time a
flesh-and-blood human being buys a luxury product they destroy a little bit of the equity, they
increase the product¶s visibility ± and contribute to its vulgarization by putting it in the public
eye. The opposite applies when marketing everyday goods: there is an advantage for the market
leader, for the dominant market share, and therefore for maximum visibility ± it becomes a
reassuring purchase.

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Luxury has two value facets ± luxury for oneself and luxury for others. To sustain the latter facet
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 for themselves. In traditional marketing, the keyword is
efficiency, but over and above efficiency there has to be a return on investment. In advertising
for example, the media plan must concentrate on the target consumers and nothing but the target
consumers ± every person reached beyond the target is a waste of investment money. In luxury,
if somebody is looking at somebody else and fails to recognize the brand, part of its value is lost.
It is essential to spread brand awareness beyond the target group.

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It is a telling fact that advertisements for luxury products often show only the product, without
any blurb, and certainly no prices. In the luxury world, price is something not to be mentioned.
When you are dining in a top-class restaurant, do you select your dishes on the basis of price?
Besides, in many such restaurants the guests¶ menus do not show prices. In luxury, when an
imagined price is higher than the actual price, that creates value.

This happens:
‡ When someone is wearing a Cartier Pasha watch, everyone around them more or less knows its
price, but tends to overestimate it (on account of its aura of luxury). This increases the wearer¶s
standing.
‡ When offering someone a luxury gift, the gesture is all the more appreciated for the price being
overestimated.
‡ And lastly, when advertised, the price is that of the top of the range.

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Money is not a good way of categorizing objects or of stratifying them unless it has been
culturally coded.
This µanti-law¶ means that luxury is a what could be called a µsupply-based marketing¶. That is
why traditional marketing is in a state of confusion here: it is fully µdemand-based¶. In luxury,
you first 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. This is the opposite to what
applies in the case of a classic product or trading up, where the marketer tries to find out at what
price level there is room for a new product.

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In the standard market model, when the price falls, demand rises. With luxury, the relationship is
reversed. The point of this policy of systematically raising prices is that it gives the whole
company a sense of responsibility. Price is a decisive factor in bringing about a change in
mentality; indeed, we see quite profound internal changes in mentality, as every person in the
company in their own way is constantly trying to find new ways of creating more value for the
customer. It¶s all a matter of living up to the price.

)O%Y/ Y"Y
Y"Y YY
Y Y"Y
In traditional marketing, you launch a product at a skimming price, then when competition
comes onto the scene, you drop the price. In luxury it is precisely the opposite. A luxury brand
must always be seen to be restoring the gap, restratifying, and as such it is acting as a visible
agent of meritocracy. A brand that cannot grow in volume and profitability other than by
launching accessible products shows that it is no longer part of the luxury market.
For instance, the fact that Mercedes has launched its super top-of-therange under a different
brand name (Maybach) reveals its presumed change of strategy: Mercedes from now on will be
the maker of regular and premium automobiles, and the luxury range now goes under the
Maybach brand, not Mercedes any more.
)9%Y0YY!!Y
The luxury strategy is the very opposite of the volume strategy. If you pursue the strategy of
systematically raising all your prices, as illustrated by Krug, you have to be prepared to lose sales
and to lose customers. Most brands don¶t dare risk it, or else go running after customers; when
you get to that point you¶re no longer talking luxury but mass consumption ± which of course
can be extremely profitable as everyone knows.

):%Y/ YYYYY"Y

Using stars to promote luxury products is extremely dangerous. A luxury brand is courted by the
stars, in the same way as those stars are courted by journalists and paparazzi. As we already
mentioned when speaking earlier about the luxury brand¶s typical relationship with its
customers, it must respect them, but it also has to dominate them. Even the most famous ones.
Calling on the services of a star is tantamount to saying that the brand needs some of this star¶s
status just to survive, and admitting that it has none of its own. For the luxury brand, this is a
gross error of strategy, for it turns the relationship on its head. Only brand domination, standing
above everything like a god, is acceptable, not simply behaving like any ordinary mortal. If
celebrities are used to promote the luxury product, the status of the latter is reduced to that of a
mere accessory.
)'%Y!Y!YY
YYYY
the brand seeks to appeal and to create an affective relationship. For that it often uses music,
music that is as popular as possible, or at least appreciated by its target audience. The brand
follows people¶s tastes. The luxury brand is a promoter of taste, like art. It maintains close links
with art. But luxury is not a follower: it is creative, it is bold. That is why it is best for luxury to
remain close to the unpopular arts ± or rather the non-popular arts ± those that are emerging and
have yet to appeal to the majority, if they ever will.

)-%Y08Y!YYY

Not relocating factories is as much a question of creativity as of production. When you no longer
have a manufacturing workshop near you, creativity takes a nose-dive, because you lose the
contact with the raw material and the way of working to be able to sublimate it into a luxury
product. Once   ¶s
production facilities were moved abroad, French haute couture gradually went into decline; but,
on the other hand, locating manufacture in China is going to lead to the emergence of haute
couture in that country, especially as China has a history of luxury clothing ± for the emperor¶s
court ± going back several thousand years, and of producing very high-quality fabrics, silk in
particular.]]]]]]]]
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>>>>>>  is a universal language. No translation is needed. A consumer understands Louis

Vuitton whether he comes from Dubai, New Delhi or New York.
But like any language, !  comes in distinct dialects, reflecting the culture of a country, a
city or even a particular store -- and understanding such subtleties is essential to the future of the
$160.3 billion!  market, according to industry executives and analysts.
"A !  brand today has to be global but serve a local client," says Claudia D'Arpizio, partner
at Bain & Co. here. "A Chinese consumer may appreciate Made in Italy more than an American
one, while an American consumer may value a certain kind of service. What each consumer
equates as value is very . ]]]]]]]
Author:
Colavita, Courtney

Article from:
Daily News Record
Article date:
October 24, 2005
Case study
Giorgio Armani - the ultimate fashion brand

[[[[[[[[The Giorgio Armani brand owned and run by the founder designer Giorgio Armani has
earned the much hallowed space in the fashion industry through its superior design, relevant
themes and trends. It maintains the aura of a real luxury brand. Not only has Giorgio Armani
become one of the most respected and known brand names in the fashion and luxury brand
industry, it is also one of the most highly valued fashion companies in the world with a value of
nearly 3 billion Euros.

÷
Y3"Y YY"

The mention of the Annual Academy Awards ceremony brings to mind the glittering ritual, the
red carpet, and the galaxy of Hollywood stars. The Academy awards have become as much an
event about films and awards as it has about the celebrities and their fashion statements. One of
the regulars at the Annual Academy Awards event along with the stars and the glamour has been
the ultra premium and exclusive fashion wear from the Giorgio Armani stable - the Armani suits
donned by the leading Hollywood men and the Armani evening gowns and other haute couture
dresses worn by the celestial Hollywood beauties.

The Giorgio Armani company owned and run by the founder designer Giorgio Armani has
earned the much hallowed space in the fashion industry through its superior design, relevant
themes and trends appealing to the current crop of customers and by maintaining the aura of a
real luxury brand.

2

Giorgio Armani started the company of his namesake back in 1975. Being a designer himself, he
made apparel with his sense of aesthetics, beauty and luxury, a sense that appealed to the elite of
the society that today includes the royalty of Belgium, the royal families of many Asian countries
and even the opulent women from the Middle East and the high and mighty stars from
Hollywood among many other prominent customers. For almost 30 years now, Armani has been
a privately held company with the founder Giorgio Armani being the sole shareholder.

With many sub-brands designed under the parent umbrella brand of Giorgio Armani to cater to
the specific needs of different market segments, it has become one of the strongest fashion and
luxury brands in the world. Not only has Giorgio Armani become one of the most respected and
known brand names in the fashion industry, it is also one of the most highly valued fashion
companies in the world with a value of nearly 3 billion Euros.

Giorgio Armani is also very expansive in Asia Pacific with its multiple future growth markets for
luxury brands. For example, China is embracing premium fashion and luxury goods at an
increasing pace, and Giorgio Armani has been one of the forerunners to exploit the market
potential. There are approximately around 10-13 million Chinese luxury brand customers.
Giorgio Armani opened its Emporio Armani store next to Shanghai's historic "The Bund" in
2004 and plans on opening nearly 30 stores by the end of 2008.

÷
Y
Y#
!


Unlike the usual practices of branding that are normally seen in the consumer goods industry, the
branding philosophy in the fashion and luxury goods industry is quite unique and personality
based. Most of the famous fashion houses like Christian Dior, Yves Saint-Laurent, Gucci,
Versace, Giorgio Armani and many others were built on the personality of the founders. As
design is the most important ingredient of fashion and luxury apparel, the individual style of
these designers becomes crucial to creating and sustaining the fashion brand strategy. It is these
unique designs and patterns that reflect the personality of their creator that gives an identity to
the brand and helps to differentiate it from the crowd.

The Giorgio Armani fashion house, like many other fashion houses, has been built primarily on
the unique personality and identity of Giorgio Armani himself. The brand takes on the identity of
the founder through the designs created.

Though this aspect of the fashion industry provides fashion houses with a strong sense of
differentiation that can be conveyed in a tangible and visual form, it also poses a serious threat.
When an entire brand and fashion house are built on the basis of the founders' personality and
identity, it becomes a major challenge to keep the brand going after the demise of the founder,
something many of the fashion houses have realized in the recent past.

÷
Y3"Y Y
Y 


Whenever a brand gains popularity and acceptance from its target customers in its core business,
the next obvious step for the brand is to charter a new course by venturing into different product
lines, different segments, and ever different markets. This phenomenon seems common across
industry sectors.

Giorgio Armani with its iconic popularity amongst the elite of the society and the fashion literate
segment of the market has followed similar steps by extending the brand. Today the Armani
brand architecture encompasses one corporate brand and five sub-brands, each catering to
different sets of target customers and at different price levels.

÷
Y"Y3"Y Y! This is the main collection of apparel that consists of the
signature Armani suits, Oscar gowns and so on, which are of the ultra-premium price points and
essentially targeting consumers in the 35-50 year old age group.

Y !!?YThis is Armani's venture into a slightly lower market segment. This
basically caters to the segment of people who aspire to wear Armani apparel but cannot afford
the ultimate signature line, or to those who crave to add extra products to their existing
portfolios. The Armani Collezioni brand, with a price point of almost 20% lower than the main
line, provides an excellent line of affordable fashion.

 Y YTargeted especially at the young professional segment in the 25-35 year old
age group, the Emporio Armani brand provides contemporary designs that are relevant to the
target customers.

Yà This is the lowest range of Armani apparel. This is to the value segment what the
signature line is to the premium segment. Catering necessarily to the young adults in the 18 to 30
year old age group, the Armani Jeans collection provides a trendy yet fashionable and luxurious
line of apparel.

,6Y Y 
" This is the licensed brand of chain of retail outlets of Armani fashion
house. This serves as the ultimate testimony to the power of the brand. By providing the entire
range of its apparels and accessories, Armani Exchange provides customers with the complete
feel of the luxurious fashion of Giorgio Armani.

However, the Giorgio Armani brand architecture can be misinterpreted by the prospect. For
instance, the differences between Emporio Armani and Armani Collezioni are often quite
insignificant. Furthermore, in January 2005 the Armani group launched Armani Prive to stands
for its haute couture collection. Giorgio Armani and Armani Prive can cross borders creating
confusion in the mind of the buyer.

These sub-brands help Giorgio Armani to operate in many segments of the fashion apparel
market. But this is not all. Not only does Armani straddle many segments of the same product
category, but also many different product categories.

Leveraging its strong brand equity in the fashion apparel market, Giorgio Armani has ventured
into other related categories like eye wear, watches and cosmetics. These are made available in
each of the above-mentioned brand categories to ensure that it is available to the different
segments of the market. It is usually argued that eye wear, perfumes, watches and cosmetics are
strongly related to fashion and luxury and thus it is natural for fashion houses to extend their
brands into these categories. Giorgio Armani is a very strong example for this argument. By
leveraging its expert knowledge of the fashion and luxury industry, Armani has been able to
come up with winning concepts in the other product lines of cosmetics, watches, jewelry and eye
wear.

But Armani has not stopped at just these product categories: Armani has extended the brand into
multiple other categories such as Armani Casa (up-market furniture), Armani-branded Dolci
(confectionary), and Armani-branded Fiori (Flowers). And to add to this wide portfolio of
brands, Armani very recently struck a deal with a Dubai-based property group Emaar to come up
with a chain of 14 Armani branded hotels and resorts by 2011.

As is the trend in the fashion industry to operate in the entire spectrum from apparel, jewellery,
cosmetics, watches, perfumes and luxury hotels, Armani has been able to leverage its brand
equity to be present in most of these lucrative sectors.

Today, Armani group has a retail network of 60 Giorgio Armani boutiques, 11 Collezioni, 122
Emporio Armani, 94 A/X Armani exchange, 13 Armani Junior , 1 Giorgio Armani Accessori and
16 Armani casa spread over 37 different countries.

With so many things going on in the Armani stable, it might seem a pretty picture at the outset.
But this huge portfolio of brands and product lines creates a much bigger set of challenges to the
Giorgio Armani brand strategy in the future.

3"Y @YYY

!!"

÷
Y@Y!YThis phenomenon is classic and occurs for any company that is built
on the basis of a strong and charismatic founder and leader. As the main competitive advantage
for the company is the founder/leader himself, neither the founder nor the company would think
of life after the founder. Moreover, whenever the companies' success and survival depends very
heavily on the existence of a single person, such companies and its leaders should take proper
action from an early stage so that proper leaders can be nurtured within the organization.

The Giorgio Armani company is a classic case of founders' dilemma: Giorgio Armani, the CEO
and owner of the Armani brand is in his early 70s. However, the company seems not to have
made any plans for life after Giorgio Armani. In a recent interview, Giorgio Armani was quoted
as saying that the search for a corporate partner and a successor was "not for the today, not for
tomorrow but perhaps for after tomorrow". Though there have been cases where companies after
much effort have been able to stand up and live after the demise of their founders, those are the
rarities. Armani should formulate a structure in his company along with his key management
people to put in place a definite structure that identifies and nurtures future and upcoming leaders
who can carry on the business even after the demise of any single individual. This aspect gains a
bit more importance in the fashion industry as the personality, concept and ideas of individual
designers prove to be real competitive advantages. Keeping this in mind, Giorgio Armani should
tackle this challenge when there is still a considerable amount of leeway to play with.

Y !Y Y Y *

 The primary objectives of businesses are to earn profits
and to enhance shareholder value by maximizing ROI. One of the main reasons that businesses
invest in branding and brand management is for the same reasons. Strong brands, as is well
known, provide companies with a very powerful tool to enter newer markets with limited
investments by leveraging their strong brand equity. It gives companies numerous revenue
streams. Given this simple but strong fact, it is not a surprise that most of the strong brands in the
world have leveraged their brand equity and extended their brands into newer product categories,
newer markets and even newer market segments.

Armani, when analyzed in this light, has extended its strong brand equity a bit too far. Though
the core business of Armani is in fashion apparel business, it has extended its brand into
categories as different as luxury hotels and even confectionaries. The examples that immediately
come to mind are those of Calvin Klein and Pierre Cardin. One of the many reasons that these
brands diluted their brand equity was because they used their brand names on a very wide range
of products. One of the main factors that make fashion houses and their products premium are
their exclusivity. By franchising their brand names to literally everything, these brands lost a
significant portion of their strong brand equity.

Though Armani might have extended its brand to hotels because luxury travel is catching up fast
as a fad with elite travelers, managing the brand along these different dimensions could be a
massive challenge.
$""YY
YGiven Armani's portfolio of brands within the fashion segment,
as in many of the other markets that it operates in, effectively managing this portfolio of brands
will prove to be the biggest challenge in the future. As the brand moves into different territories,
interacts with different sets of customers, and represents different personalities, it becomes quite
a task for maintaining consistency across all of its marketing communications and other
activities. Though Armani has been using the corporate brand name in all its sub-brands, and
across all its offerings, it is indeed a double-edged sword. On one hand, this gives Armani a great
opportunity to build a very strong corporate brand but on the other, it gives rise to a huge risk of
diluting the brand equity. Given this strategic dilemma, Armani has to tread carefully in the
future. Armani should also realize that its existence is mainly due to its strength in the fashion
apparel business. As the brand extends through different landscapes, Armani should not lose
focus as new pressures on resources build up.

$"Y !Y   Armani is a rarity from a financial perspective as well.

Giorgio Armani has been the only shareholder of the company from its inception till now.
Armani has not taken any bank loans either. It has been one of those rare companies which has
managed to have very healthy operating profits and ploughed back almost 700 million Euros into
the business since 1999. Having this financial independence has helped Armani immensely as
the company tests newer territories. With no pressures from shareholders and without having to
bother about meeting quarterly targets, Armani has been able to operate quite successfully. As is
commonly known in the fashion industry, it takes a considerable time for the concept and
products to take root in the market. For any company to sustain this gestation period, it needs to
operate in an environment where there are no day-to-day financial pressures. Having this kind of
financial independence to operate in has been one of the key success factors for Armani.

But to continue as a one man company in the future could be quite difficult. With consolidation
happening in many industries, it might just be a matter of time that it catches up with the fashion
industry as well. When such a thing happens, it could pose a big challenge to the working style
of Armani and its continued success. In this light, Armani might want to think of other options
when it has a choice and before something is thrust upon it.
Sustaining consistent brand personality: One of the main aspects of a fashion brand is its
personality and its identity in the marketplace. Building and sustaining a personality that is
relevant and one that resonates with the customer base is one of the most difficult aspects of
building a strong brand. Armani, with its presence in diverse markets, a very wide brand
portfolio, and interacting with diverse set of customers, faces this huge challenge of building a
relevant and resonant personality. With the ever growing competition in the fashion industry and
ever growing brand portfolio, building and nurturing this personality will prove to be a very big
challenge for Armani in the future.]]]]]]]] Martin Roll, article: business & brand strategy,
http://www.venturerepublic.com/resources/Giorgio_Armani_-_the_ultimate_fashion_brand.asp

Uché Okonkwo, Guest Editorial, The luxury brand strategy challenge,Yà


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