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How can I succeed at
luxury branding?

How Can I Succeed at Luxury Branding?

Engaging consumers through sophisticated digital expieriences.

Ultra-wealthy individuals, making ostentatious purchases, of purely decorative products, via personal relationships, within channels available exclusively to the elite.

For a very long time, such was the face of luxury. Today, that face is all but unrecognizable. Luxury has evolved. From the consumer demographics, to the cultural attitudes and behaviors around purchasing, to the types products in demand, to the major category players—the traditional drivers of status, power, and prestige no longer apply. And if luxury brands are to take advantage of the category’s projected growth (three to five percent through 2025) and remain relevant to consumers, they need to come to terms with these seismic shifts.

That means developing a deep understanding of this new wealth-sensitive landscape. It means revealing the purpose behind their brand, and justifying their costs by offering products that provide value far beyond their price point to genuinely enhance people's lives. And it means engaging a diverse group of consumers through sophisticated digital experiences.

01 Be Wary of Signaling ‘Perceived Conspicuousness'

In 2004, Australian academics Franck Vigneron and Lester Johnson proposed a Brand Luxury Index (BLI) that measured perceptions of brand luxury based off five criteria, one of which was ‘perceived conspicuousness,’ or how valuable an item appeared to be. At the time, a high rating on the perceived conspicuousness scale was desirable. Today, it is much less so. In fact, consumers are increasingly averse to showing off expensive possessions.

In her book ‘Interpretations of Luxury,’ Finnish luxury researcher and strategist Linda Lisa Maria Turunen wrote that while luxury goods used to be defined through their symbolism of status and wealth, conspicuousness and heavy reliance on the ‘symbolic to others’ facet is challenged in contemporary society.

A Deloitte study bore this notion out, revealing that millennials are less interested than previous generations in outward displays of status. When millennials did make luxury purchases, they did so because they wanted to please themselves—not because they wanted to impress others or were influenced by a celebrity. Similarly, a Rokkan survey of people making $250K annually found 69% saying they felt guilty buying themselves a luxury gift.

Why the shift? When did luxury become a dirty word? Clues may lie in the name itself. Google “luxury” and you’ll get “the state of great comfort and extravagant living.” But delve into the etymology of the word and you’ll find it once meant lechery and lust in English, and excess, or offensiveness, in Latin. And when viewed through the lens of rising income inequality in nearly all regions of the globe, it’s not hard to see why consumers are viewing luxury as the dirty word it once was, and frowning upon purchases that signal wealth for the sake of itself.

Income
Shares
Across
the World

Excess showings of wealth have been met with widespread criticism, regardless of the category. In early 2019, former Bayern Munich midfielder Franck Ribéry posted a video of himself about to eat a gold-plated steak at a Dubai restaurant owned by internet-sensation Salt Bae. The online community responded with outrage. The soccer star responded with profanity-laced tweets. And his soccer club responded by fining him.

Another incident involved the Qatar royal family. No strangers to voracious displays of opulence, they experienced firsthand that lux was not above the law at Harrods in London, where two of their illegally-parked vehicles—a $1.5 million Koenigsegg CCXR and a $444,000 Lamborghini Murcielago—were ticketed and clamped. It was a stunning display for the public, made all the more stunning by the fact that the family owns Harrods.

In one of the more egregious offenses, Burberry burned $36 million worth of unsold goods to prevent them from being sold more cheaply elsewhere, which they viewed as devaluing the brand. The fashion house claimed the move was environmentally friendly because the brand captured energy from the burning. Still, environmentalists and critics roundly denounced the brand, calling the move tone-deaf.

The list goes on. Reality TV star Khloé Kardashian was shamed in March 2019 for posting an Instagram photo of her daughter True sandwiched between 14 Hermès Birkin bags worth over $160,000. “This photo could pay off all my debts,” one person commented. “Why not take some of your wealth and help [others]” another said.

A group of millennials and Gen Z’s agree: according to a survey by Ypulse, a leading millennial research firm, 81 percent of 13-34-year-olds thought “showing off expensive things you have bought on social media is not cool."

Even Chinese president Xi Jinping tried to rein in luxury in his country when he unveiled an anti-corruption campaign targeting extravagant government officials, many who have appeared on Forbes’ China Rich List. At the core of the crackdown were spending limits on entertainment and travel, which hurt international luxury brands like Pernod Ricard, Hermes, Prada and Swatch.

02 Put purpose behind your brand

Consumption and consumerism researcher Russell Belk has said the things we buy are an extension of who we are. Today, this philosophy rings especially true among consumers seeking to associate themselves with brands that stand for a cause, do good in the world, and make a positive impact beyond their bottom line.

A Nielsen study revealed that over half of consumers willing to pay a premium are influenced by sustainability factors, such as: the product being made from fresh, natural and/or organic ingredients (69 percent); the company reputation as environmentally friendly (58 percent); and the company’s commitment to adding social value (56 percent).

Consumers
willing to
pay a
premiun
69%
of customers

say their standard for good experiences are higher than ever

58%
of customers

say their standard for good experiences are higher than ever

56%
of customers

say their standard for good experiences are higher than ever

One brand leading the way is Tesla, which has risen to the top of the electric vehicle market virtually overnight. While the cars are undoubtedly luxury—a 2019 model X starts at $81,000—their true value lies in their purpose: to accelerate the world’s transition to sustainable energy. (And if that’s not possible, Elon Musk’s next trick will be ferrying us all to Mars.)

Designer retailer Net-A-Porter has also decided to do well by doing good. The 2018 summer issue of their magazine, Porter, was dedicated to raising awareness about ocean preservation in light of increasing plastic pollution. The issue was central to a larger campaign—created in partnership with environmental NGO Parlay for the Oceans—urging the fashion industry to become more sustainable (Porter itself pledged to become a plastic free publication).

Adidas also partnered with the organization to fight the same cause. That partnership was part of a bigger sustainability campaign that sees the brand using less water to make its products, less plastic to power its offices, and less energy and waste to run its business.

Luxury brands’ movement toward sustainability is so prevalent that an organization now exists for the sole purpose of auditing brands for their sustainability practices and awarding those who qualify with an environmental seal of approval: a butterfly mark. Louis Vuitton is one of several luxury brands that have earned Positive Luxury’s butterfly. While luxury once signified the most expensive product or experience, people in the developed world are now looking to self-actualisation and purpose as the ultimate luxury.

Positive Luxury’s website reads. “Luxury brands are inherently more sustainable; valuing quality across craftsmanship materials, processes and design over quantity.”

“The luxury industry has the capability to drive innovations and to make positive changes. This will eventually filter down and have a systemic impact on the way brands source, design and craft their products; as well as influence consumer behaviour and purchasing decisions.”

"Luxury brands are inherently more sustainable; valuing quality across craftsmanship materials, processes and design over quantity."
Positive Luxury’s Website

03 Sell Products that Help Consumers ‘Do More’ Instead of ‘Be More’

In 1988, American academics Gene Grossman and Carl Shapiro defined luxury as purchases that “bring value without any functional utility.” In the decade of excess, this definition proved to be true: people bought things that looked good, but weren’t necessarily the most useful, helpful or innovative in their category. But with continuous advances in tech, luxury consumers are increasingly looking for utility, functionality, and quality in their purchases, and investing time in researching their options.

Shanghai-based research, marketing and investment firm Hurun Report, which was an early publisher of the China Rich List, named Apple as the top brand given as a gift by Chinese men in the jewelry, watch and fashion category. Not Louis Vuitton, Cartier, Chanel and Dior. Apple.

In the vehicle category, Tesla is again a clear leader. By redefining the luxury car as a vehicle with superior features and a socially conscious mission, they have changed the conversation with consumers from “who you are” to “what you can do,” and made a powerful case for luxury as purposeful utility over show.

Canadian outerwear manufacturer Canada Goose is another brand that has seen tremendous growth in the last decade largely because its products—big, warm winter jackets made to withstand the harshest conditions—are a marriage between utility and quality. According to Statista.com, Canada Goose was between 2015 and 2017 the fastest growing luxury good company in the world with 42.6 percent growth. Their brand promise, “To build an adaptable wardrobe that will see you through the season’s changing moods,” resonates with functionality and sustainability. By comparison, Moncler’s promise—looks straight from the runway—rings hollow.

04 Engage a Heterogeneous Group of Luxury Consumers

Although the luxury marketplace is still accessible only to an exclusive group of buyers, that group has grown significantly more diverse. Socioeconomic changes around the world have ushered in a new luxury consumer class that represents buyers from various countries, cultures and subcultures—all looking to make their purchases meaningful.

According to management consulting firm Bain & Company, Chinese consumers will make up nearly half of the global luxury market by 2025—46 percent, up from 33 percent in 2018. Millennials and Gen Z’s will represent about 55 percent of the market by the same year. Muslim fashion is also growing rapidly. The market is expected to be worth $373 billion by 2022 (Global Islamic Economy report), and a quick Google search for ‘modest Muslim fashion’ reveals 13.5 million results.

Although the luxury marketplace is still accessible only to an exclusive group of buyers, that group has grown significantly more diverse. Socioeconomic changes around the world have ushered in a new luxury consumer class that represents buyers from various countries, cultures and subcultures—all looking to make their purchases meaningful.

According to management consulting firm Bain & Company, Chinese consumers will make up nearly half of the global luxury market by 2025—46 percent, up from 33 percent in 2018. Millennials and Gen Z’s will represent about 55 percent of the market by the same year. Muslim fashion is also growing rapidly. The market is expected to be worth $373 billion by 2022 (Global Islamic Economy report), and a quick Google search for ‘modest Muslim fashion’ reveals 13.5 million results.

Bain &
Company’s
Consumer
Report
CHINESE CONSUMERS
46%
Increase predicted in luxury market by 2025
MILLENIAL AND GEN Z CONSUMERS
55%
Increase predicted in luxury market by 2025

When Lisa Vogl, a Muslim photographer, found it difficult to find modest yet fashionable clothing for Muslim women, she created the Verona Collection, meeting demand in an underserved market and inking a deal with Macy’s to be the retailer’s first line for Muslim women. Even this category has subcategories: consumers in different Muslim countries have different preferences for modesty, and brands need to be paying attention.

What’s more, research group Kantar published a study revealing a $1 trillion blind spot in the LGBTQ community—a 32 million-strong group of U.S. adults who are frustrated brands treat them as an “afterthought.”

What this means for luxury marketers is that they can no longer stuff luxury consumers into one general profile and deliver the same message.

Brands must evolve their consumer strategy away from one-size-fits-all and toward a more complex yet rewarding strategy that sees buyers as distinct segments.

What may appeal to collectivistic cultures, for example, may not to individualistic cultures (see Rokkan’s position on the fragmentation of culture here). Luxury brands must acknowledge the differences among their consumers, understand those differences, and design products and experiences around them.

05 Move from Personal Touch to Immersive Digital Experiences

Traditionally, luxury goods were purchased through physical channels. Whether via referral or research, wealthy consumers would venture to a trusted retailer, where a high-touch experience would lead to a high-value purchase. It was a process as exclusive as the products and purchasers involved.

Not anymore.

As market research firm Mintel wrote in a report on watches and jewelry, “Despite the sometimes expensive nature of such purchases, many consumers are comfortable buying online and will continue to do so, highlighting the importance of digital for driving future sales.” And that trend holds true across categories.

Market research firm Forrester estimates that by 2025, nearly one fifth of all luxury sales will be online.

Forrester's
estimated
luxury sales
by 2025

Estimated Luxury Sales

  •  
  •  
  •  
  •  
  •  
254
8%
2016
312
12%
2020F
383
19%
2025F
Online Offline

With consumers placing more trust in online channels, how luxury brands serve up their products and services in the digital space will be a crucial point of brand differentiation. Specifically, brands need to look at their online presence less as a digital brochure and more as an immersive experience, leveraging technologies like augmented and virtual reality to create memorable interactions through the union of the digital and physical worlds.

BMW was one of the first companies to enter the world of AR when it introduced its AR mobile app, which allowed customers to see, configure, and sit in a BMW i3 or i8 in a life-size visualization. The AR was so realistic that users frequently ducked their heads to climb inside the vehicle.

Another compelling example is Dior’s creating a VR headset that transported users backstage to a Dior fashion show. Available for wear at select Dior showrooms, ‘Dior Eyes’ gave users a window into how models, makeup artists and others prepared for the show—making an otherwise exclusive experience accessible to a far wider audience.

The Brave Change

Seeing Advantage in Disadvantage

Luxury has become less about wealth and more about value. Less about a show of power and more about a force for good. Less about the few and more about the many. It is no longer a purchase aimed at acquiring things, but a thoughtful, utility-based buy that’s sensitive to income inequalities, material waste, and consumer diversity. Luxury has—in a very real sense—become more approachable, more relatable, and more egalitarian.


If luxury brands are to succeed, their strategy must reflect this new reality.

01. ENGAGING CULTURE

How do I get people to trust my brand?

03. UNLOCKING PRESTIGE

My brand feels expensive but not valuable

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