“The dream is not to own a crown. It
is to be a king” Gian Luigi Longinotti Buitoni.
Several years ago, during a project of designing an exclusive VIP
service for a large bank, I came up with an unusual way to attract
affluent customers and more importantly, hold them for the long run. The
basis for the new service concept was an insight into a major covert
expectation of most of the bank’s wealthy consumers: that rules and
regulation be bent in their favor.
After dozens of in-depth interviews it became increasingly percipient
that the attractiveness of the special benefits they had received was
important but actually secondary. An improved standard of service would
have been welcomed, but would not constitute a decisive factor in
assuring their loyalty to the bank. What these consumers really wanted
was a very high level of informality. For instance, they wanted the
branch to be opened especially for them at unconventional hours, if the
need arises. They wanted urgently required documents to be delivered to
their home during the weekend. They wanted procedures to be
circumvented. They wanted direct access to high rank executives. And so
forth. Analyzing their motivations I could see that these consumers
wished to use banking services as a means to feel elevated from the
ordinary. The psychological and social instrumentality took precedence
over the financial one. Following my advice, the bank extended a very
secret permission to branch managers 'to deviate from the rules, with
great apprehension and severe remorse'. This policy proved to have an
enormous influence on feelings of association and on loyalty.
This article is about the time proven principles for creating luxury
brands in order to attract affluents. Attracting wealthy customers is
potentially very profitable. After all, they have more money to spend,
that can turn into your income. However, succeeding in this task
involves a deep understanding of their psychological need, of their
lifestyle, of the role of brands in their world and in their
relationships as well as of their purchasing behavior and spending
patterns. Some of these are truly counter-intuitive and surprising.
But first, let's define what we are talking about and then let's
discuss to what extent and in what manner the rules of this game has
changed, as so many authorities claim in recent years.
Defining luxury
By definition, a luxury brand is an outstanding brand, justifiably
priced highly and destined, at least primarily, to a select group of the
social-economic elite. Luxury is not about unattainability though. After
all, you cannot profit from consumers that cannot buy your brand.
However, luxury is about the consumer outstretching herself a bit to buy
something extraordinary but rather expensive for her financial ability.
When you are used to flying business class it is no longer a luxury for
you, although you might be pleasantly aware that it is for many.
Alternatively, paying $5,000 to fly EOS' 48 passengers only, all premium
business class (every person receives lumbar support seating, in a 21
sq. feet / 6 sq. meter of personal "suite" for a combined work / rest /
dining area), round trip between New York’s JFK Airport and London’s
Stansted Airport – will probably be more of luxury to you.
Before entering a deeper discussion of luxury I think it will be good
to acknowledge two basic facts:
Luxury is relative. One man's luxury is often another's (usually
richer) everyday lifestyle.
The standard of luxury is mutable. Today's luxury is often
tomorrow's commonly expected standard. Luxury brands are under a
constant pressure from non-luxury brands trying to offer a similar
value for less, thus eroding the status of luxury.
Even not-so-wealthy people now feel deserving of a taste of luxury.
Thanks to technology, design and global competition, the standard is
rising continually. There is a huge trend of offering the mid-market
"popular" versions of products and services that were once the
exclusive domain of the affluents. These include: flights, cellular
phoned, laptop computers, vacation resorts, casinos, ski / golf /
tennis clubs, home cinemas, plastic surgery, professional-level
audio/video editing equipment, 4X4 cars, … and many other products
and services.
Much has been said lately about the changing nature of luxury these
days. While some of the proclaimed changes are no more than the result
of historical myopia, certain developments are worth noting.
There are now more layers of luxury than ever before to match
new levels of affluence. Generally speaking, buying power in the
developed economies as well as in the emerging economies has been on
the rise. We have more strata of wealth and more people in each one
of them. More billionaires, more multi-millionaires, more
millionaires, more super affluents (annual income over $150K),
affluents (annual income over $100K), and near affluents (annual
income over $75K). A Toyota Camry (around $25K) is considered a
luxury car at some level of affluence, at a higher level it's BMW 7
Series (around $115K), at yet a higher one it's Maybach 62 (around
$375K). Rolex is considered a luxury watch brand by many. Not by
buyers of Vacheron Constantin or Blancpain or Girard-Perregaux or
Roger Dubuis or Patek Philippe for prices that normally range
between $20K and over $2M.
Every luxury brand must position itself vis-à-vis a certain layer of
wealth or several ones. Sony felt the need to create Qualia, a more
prestigious brand, in order to cover well the new various strata.
Nissan created Infinity, Nokia created Vertu and there are plenty of
other examples of such changes in brand architecture.
It is a widespread view that luxury brands achieve their status by
being the dream of many but only affordable for a few. This is
indeed how it works for numerous luxury brands. Nevertheless, other
luxury brands derive their status from being esoteric, i.e. known to
only a selected few. Not many (alas, now more) know the gioielleria
attolio Condognato at the San Marco square in Venice that has a
cult-like following of celebrities and other moneyed mortals who
travel the world to visit it and purchase its superb jewellery.
Being discerning and in-the-know often defines an inner circle of
sophisticated luxury buyers, thusly differentiated from more coarse
others of similar affluence.
Some of the luxury buyers are now somewhat less interested in
purchasing uniform symbols of status / identity and they opt for
developing an individual style and expressing themselves in original
ways. Therefore, luxury has evolved and became more diverse and more
creative. The tension between the traditional (more safely genuine
luxury) and the innovative has always burgeoned forth luxury.
Currently, luxury leans more towards the innovative than the
traditional.
There are more "out of class" purchases now, both upwards and
downwards. This trend is not unrelated to the previous one. The
wealthy feel no obligation to always buy expansive (actually,
affluents typically look for the best deal on whatever they want to
buy, no matter how extravagant). The result is that we often see
combinations of luxury (a Bvlgary necklace) and non-luxury (Diesel
jeans). The no so wealthy have also developed an appetite for luxury
when and where they can afford it. So they buy Mizensir scented
candles for $60 or make a great effort to buy that pair of Manolo
Blahnik shoes they've been dreaming about for $800 for that special
party.
There's a trend towards spending more on luxury experiences
rather than goods, at least amongst wealthy Americans. Experiences
include entertainment (theater, concerts and shows, casinos, etc'),
social events, winning and dining, travel, SPA / massage / beauty
treatment. This trend is stronger among seasoned affluents who
already know that the attraction of objects wears out while
cherished experiences just get better with time as they are
remembered, told and re-told.
This trend also includes the purchase of goods that provide
experiences for the long run, e.g. home theaters. There's also the
experiential value added value to goods that please the sense
besides performing their function. Finally, the pleasure derived
from the purchase experience becomes almost as important as the
pleasure derived from purchased product itself and certainly a major
motivator for retail preferences.
There are more luxury hits now and fewer classics. Luxury used
to be defined in the tradition-driven past by classics. The
novelty-driven present, that is evident in the non-luxury sectors as
well, turns the success of luxury brands of the day into sweet but
short-lived. Take the revolutionary Stokke Xplory (around $750) -
the coolest ever piece of outdoor children's equipment. It's a baby
buggy, a stroller and a high chair in restaurants ingeniously
designed to keep kids away from car smoke. It's great. It was a big
success. Then rolled in the Bugaboo Cameleon (with a price tag of
$879). It has all-terrain wheels and shock absorbers to help
navigate and it morphs into a car seat, a two-wheeled beach walker,
or a pram that lets babies lie flat. See what I mean?
The unchanging nature of luxury
Despite all these significant developments, the nature of luxury has
remained unchanged in essence.
There are sixteen usages that consumers have for luxury brands, a
stable set of benefits that motivate us to buy. People buy luxury brands
in order to:
Feel special and apart from the crowd.
Feel superior and privileged.
Feel of value and importance.
Exercise ability and freedom ("I can afford it", "I can do
that").
Reward themselves for efforts and achievements.
Console one and recuperate from a setback or misfortune.
Signal status and command acknowledgement and respect.
Demonstrate refinement, connoisseurship and /or perfectionism.
Delight the senses, experience pleasant sensations and feelings
or create an infrastructure for future favorable experiences.
Participate in a certain group and lifestyle.
Signal affiliation and belonging.
Remind oneself of one's "real" (aspired?) identity.
Enflame hope and mobilize motivation and energy.
Indulge and pamper oneself, take care of oneself.
Feel loved, taken care of and even spoiled.
Show feelings of gratitude, admiration or great affection.
Luxury brands are specifically designated to serve as means for
consumers to fulfill one ore more of these tasks.
We can distinguish between three lasting levels of luxury. Most
luxury brands exist in only one or two of them, but certain brands
manage to co-exist in all (thus maximizing potentials for profit). This
is not a trivial accomplishment. The levels are:
- Signature brands – These are the most expensive brands in their
category. They are personal creations, one of a kind, signed by a highly
acclaimed authority or by an artist of supreme status (an outfit created
by Tom Ford, a home designed by Frank Gehry, a consulting project by Dan
HermanJ).
- Supreme brands – These are products that are produced in limited
series, often hand crafted (a Rolls Royce Phantom 101EX car, the service
at Tiffany & Co., or a night at the Ritz Hotel in Paris).
- High End brands – High quality mass production (from a BeoCenter2
music system by Bang & Olufsen to G Collection chocolate pieces by
Godiva).
There are three defining factors of luxury:
Luxury is nonessential. You don't need a Montegrappa fountain
pen to write. You can do without it, but you don't want to. Luxury
is desired, not needed. In luxury you are at your best. It makes you
life richer and more worth living.
Luxury is "hard to get". Its availability is restricted by high
price, by small series, by exclusiveness. If you are allowed at all
to try and get it, it demands an effort, a sacrifice. You cannot ask
for the Amex Centurion black card which attests that your credit is
absolutely limitless. You have to be invited.
Luxury is superb, inspiring feelings of wonder and excitement.
Just visit the exquisite Prada store in Tokyo. It represents an
outstanding achievement, it is a divine experience. You cannot but
admire the people that created it. You are so charged up that you
must share your experience with other.
The eternal principles
Finally, here are the ten eternal principles for developing and
managing a luxury brand:
A luxury brand is first and foremost a product and/or service of
superior quality (a quality gap from competitors is recommended but
not mandatory).
The products and services are not designed and planned according
to consumer tastes and expectations, even though they appeal and
cater to sometimes-hidden deep-routed desires. A luxury brand sets
its own standards and does not adhere to fashions. There is an air
of leadership to it; it is exceptional, unique, original,
artistic-creative, surprising, and novel (but never peculiar in a
ridiculous or potentially repelling manner). It challenges its
consumers (not too harshly) for their discerning taste,
sophistication, refinement and dare.
A luxury brand's most important value lies beyond the core
product function or practicality.
Luxury brands have something extravagant / excessive / redundant
and overly generous about them. Something that is clearly not
necessary: the use of unjustifiably expensive materials, performance
that is far beyond all needs and requirements, an exaggerated level
of service, …
A luxury brand always expresses zealousness for quality, highly
held values or even an ideology, a distinctive culture, together
with sense of hedonism, passion for life, and a free spirit. It does
that in all the facets of its being including products / services,
management practices, marketing communications, ...
A luxury brand will always be linked with the circle of those
who "run the world" at that certain period of time – and with the
success symbols of the time.
Behind a luxury brand there are often legends of eccentric
genius creators, mysterious production processes, secret formulas,
exceptional preparations etc'. Stories like these create mystery. A
luxury brand treats itself very seriously.
A luxury brand is never managed in a democratic way, but rather
with authority or even with dictatorship, by a genius creator or by
an inspired leader who demonstrates, inside and out, a strong
passion for the product and pedantry for every small detail.
A luxury brand must be rare or difficult to reach in some way.
The awareness to the brand and the desire for it sometimes
wide-ranged (while the numbers of buyers has to be limited) and
other times restricted to a few that are in-the-know. Even the
buyers themselves, must not be inclined / capable to purchase the
luxury brand too often. It is important to remember that the dream
feeds the desire. We can never dream about the accessible.
Luxury brand consumers expect to be distinguished from all
others, and to be protected from them (the No-Mix principle). At the
same time, they expect a special intimacy between them and the
company and its managers, as well as flexibility regarding rules
that are afflicted on others.
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Dr. Dan Herman builds luxury brands worldwide. He also leads training
workshops in which he teaches the principles and methods for creating
luxury brands, as well as mission focused marathons in which the
participants create such brands in a methodical and guided process.
