The present economic crisis has forced all companies to question their strategies and practices, and this has never been more crucial than for luxury brands and marketing.
What once worked as a means to sell products no longer works; it is time to reconsider the essence of luxury management.
As faculty at the HEC School of Management in Paris, it has been our job to analyse current practices, and it is our conclusion that the most striking feature of contemporary luxury management is the necessity to turn marketing on its head: classical marketing is the surest way to fail in the luxury business.
Instead of the marketing status quo we have proposed the “anti-laws of marketing”: 18 axioms that include: raise your prices to increase demand; advertising does not aim at selling; and – most importantly – do not pander to consumers’ wishes.
At a time of managerial consensus on the necessity to focus on the client, this might seem like heresy. And, for most brands and goods it would be. But not for luxury. The reason for this can be traced to the birth of the luxury goods business, two centuries ago: while the craftsman – or expert artisan – would go to Court and make the cloth or furniture his aristocratic client had in mind, the luxury goods business as we know it did not exist: the artisan was merely a supplier of bespoke products.
It was not until that artisan started creating objects the clients had not yet thought of that luxury became a distinct market.
This inverted the client-creator power structure: consumers started queuing to discover something new.
But does a guide for the tastes of the future start by interviewing prospective clients? Or by developing a personal vision, realising it, and educating elite clients who become role models? Consider the cases of fragrances and cars.
The doyenne of classic marketing, Procter & Gamble, has a Beauty and Prestige division for its licensed fragrance business where it applies the same rules as for its FMCG (fast moving consumer goods) brands.
Everything begins with market research aiming to identify specific consumer segments and their needs. The goal is to launch a product for each segment in order to build the brand’s portfolio of fragrances, but the problem is that the consumer expectations are often very much the same across brands.
Hugo Boss and Lacoste are two P&G licences, for example, that share the values of panache, youth, class, success and energy; they share a consumer base and thus the launch advertisements for the two brands are almost interchangeable.
This consumer-centric approach also produces a built-in obsolescence: its products do not last because they are based on transient consumer needs and stereotypes. The scent must have immediate appeal to maximise the chance of success: P&G takes no risks and uses the fragrances rated high in the trends.
But olfactive preferences are short-lived, and this fragrance building model leads to short-term success.
Fragrance licences grow sales by launching new products, year after year: but the older ones cannot sustain sales generated by the massive marketing investment at launch. To be profitable they need to reduce such investment but without a big marketing push, product demand often falters.
Luxury brands today are the trailblazers of tomorrow’s taste.
Once a consumer segment is identified it is too late to exploit it.
There is no surprise in existing demand. This is why all classic luxury scents – many still in the world top 10 of fragrances – were created through emotional intuition, from Yves Saint Laurent’s Opium, Thierry Mugler’s Angel, Jean-Paul Gaultier’s Le Male, and, of course, Coco Chanel’s N° 5.
Let us now compare the fate of Saab and Mini. Mini (bought by BMW with Rover in 1994) sold 250,000 cars in 2008; Saab (bought by General Motors in 2000) sold 93,000, and it is now bankrupt, despite the fact that its latest Saab 9-3 was seen as one the best cars in its category.
To boost the sales of Saab, GM took a classic marketing approach, asking consumers what they did not like about former models. As a result, they softened the radical design and used an Opel engine. The resulting Saab 9-3 looked more like rival products from Audi or BMW than a traditional Saab.
By contrast, BMW has retained many of the Mini’s historical characteristics despite consumer surveys repeatedly labelling them as faults: too small a boot, too low a car – but these quirks were integral to the unique kart design and style experience of the 1960s that made the car popular in the first place.
Of course, luxury companies should not ignore their core customers’ wishes entirely, but too much listening mitigates against the requirements to surprise and stand apart.
As a cultural creator, luxury brands should set their own high standards.
Listening to the consumer is the best route to a lack of differentiation, and failure to inspire the dream – the two levers of desire that are the only paths out of the recession in the luxury world.
Jean-Noel Kapferer and Vincent Bastien are co-authors of ‘Luxury Strategy – Break the Rules of Marketing to Build Luxury Brands’
