Modes of Luxury Brand Building

1
Back to Luxury Fundamentals

2
 1 - In the beginning there was luxury

 Mass marketing was invented in the US and developed by large American groups
such as Procter & Gamble or Colgate

 Luxury strategies were invented in Europe and developed worldwide by French and
Italian companies

3
 1 - In the beginning there was luxury

 Highly original methods: in less than 50 years, small family businesses became great
global brands:
– Ferrari
– Louis Vuitton
– Cartier
– Chanel
– Bulgary
– Gucci
– Prada
– Ferragamo

4
 Luxury is a culture

 Which means you have to understand it to be able to practice it!

5
 Luxury concept is not a socially neutral one

 Debate between luxury as an insult to the poor and luxury as a source of skilled and
steady jobs

 Luxury is a major sociological issue with:

– Social stratification
– Notion of practical utility and waste
– Decisions related to the distribution of wealth

 Bernard Arnault:
– Luxury « the ordinary of extraordinary people and extraordinary of ordinary people »

6
 Luxury as a Social Marker

 Luxury for others : key social function

– The DNA of luxury is the symbolic desire to belong to a superior class, which everyone will
have chosen according to their dreams

 Luxury for oneself

– Luxury is an access to pleasure

7
 Luxury and Fashion

 Up to the turn of the 19th century, fashion belonged to the luxury world

 Semantic confusion between luxury and fashion

 Western societies need both luxury and fashion:

– Luxury, by recreating a social stratification that has done away with by democracy

– Fashion, by recreating the rythm of the seasons that was done away with by urbanization,
and a social differentiation while avoiding being engulfed by the anonymous crowd

8
2 – The end of a confusion: premium is not luxury

 The word « luxury » has become commonplace:

– Luxury
– Accessible luxury
– True luxury
– New-luxury
– Mass luxury
– Opuluxe
– Masstige
– Hyper Luxury

9
Luxury and Fashion Differ from Each Other in two
Fundamental Aspects

 Relationship to time (durability versus ephemerality)

 Relationship to self (luxury for oneself, fashion is not)

10
Luxury, Fashion and Premium Triangle

Luxury
Social elevation Priceless
Timelessness Gift
Dream

Quality/Price ratio
Social imitation Investment
Instant Seduction Realism Performance

Fashion Frivolity Seriousness Premium

11
 There is no continuous movement from premium
to luxury

 Ford car manufacturer case

 In 1989, Ford acquired Jaguar prestigious brand for € 2.2 bn

 Ford applied ‘Ford methods’ to make it profitable…

 …But luxury is not ‘premium at its best’ !

 In 2007, Jaguar, losing money heavily, had to seek out the Indian Tata Group as a
purchaser

 Ford has failed in its climb towards luxury, because it was a classic company

12
It’s not easy to exit luxury through a ‘downwards’
strategy

 Mercedes case (German Daimler Group)

 Smart : not a real financial success to this day

 Daimler-Chrysler merger: desastrous failure

– Cultural differences
– AND big differences between luxury management and premium management

13
 Price overlap between premium and luxury

 Lancôme vs Guerlain in perfumes

 Lexus vs BMW in cars

 This confirms that price by itself is no longer today a characteristic of luxury

14
 The accumulation of genres

 One house may sell both luxury products and upper range or even mass products

 Yves Saint-Laurent example:

– A luxury ‘griffe’ : haute couture

– A luxury brand : Yves Saint-Laurent Rive Gauche

– An upper brand : Yves Saint-Laurent Variations

– An upper brand for perfumes and make-up

– A mid-range brand for fashion and accessories

15
 The convergence of genres

 American Express card

– Amex standard
– Amex Platinum
– Amex Black Centurion

 H&M called on Karl Lagerfeld to create limited editions

 Lacoste organizes fashion show in New York and Shanghai

16
 Luxury sells Dream

• Dream fulfilment is what separates luxury from premium

 How different facets combine to build the
perception of luxury ?

Craftman
Rarity Tradition
(knowledge,
heritage) Selective
Distribution

Selection
Perennity
Still original
Exclusivity
Not for
everybody

LUXURY
Glamour

Prestige Inaccessible
High-priced
Seduction
Fashionable

Creative Leading
brand
Gives class

18
Two modes of Luxury Brand Building

 What are the 2 modes?

19
Two modes of Luxury Brand Building

 First mode
– Based on the creation of value, product quality with cult of product
and heritage, with spiritual legacy of its founder

 Second mode
– Is American in origin: lacking such a history of its own, it does not
hesitate to invent one

– Mr Ralph Lifshitz became Ralph Lauren

20
 Two modes of Luxury Brand Building
and Preserving the Dream
Epic of
the
product

History

European
approach

The Clients,
creator VIP’s
American
approach

Story telling
Experience
in stores,
at POS, 21
corners
 Building and preserving the dream

 Companies measure brand capital or brand equity:

– Awareness, level of consideration, behavior, ability to create loyal
customers

 With luxury, we do not talk of consideration, but of

DREAMS

 Luxury is access to a dream

 The fundamental paradox of luxury is that purchase

destroys the dream

22
 Dimensions of the dream

 One is the social dimension

– Luxury confers immediate class
– It refers back to the implicit hierarchy of society

 The second dimension is the intrinsic pleasure due to its

multi-sensory nature

 Without awareness, there is no dream, so the creator

must be media savvy

 If awareness is high, then it is the distance between the

number of people who recognize it and the number of
clients of the brand that creates the dream

23
 Managing the luxury dream
equilibrium
4 typical situations of dream value
= Brand awareness = % Purchasers
(%)
Lack of dream value Dream value

24
 Luxury brand architecture
Poles and product roles

 Luxury brand management implies a balance

between four poles

1. Reference to the past: Roots

2. Pursuit of Status: more prestige
3. Modernity: more trends
4. Accessibility

25
 Luxury brand architecture : poles and
product roles
More
status Always higher
For the sake of the
Playing with the gesture
icon:reinventions
The Creative surprises
creator Limited series,
More Brand More
roots values trends

Lines to open
up the brand

Accessibility
26
 Luxury brand architecture : poles and product roles
More
status Always higher
For the sake of the gesture
Playing with the Porsche limited series
icon:reinventions Creative surprises
Chanel No5 The Limited series,
creator Chanel staging surfboard

More Brand
More trends
roots values

Lines to open up
the brand
Sunglasses

Accessibilit
y

27
 Defending the brand against
counterfeiting

 A luxury product has a functional side and a dream side

 It is therefore possible, by counterfeiting the product,

to cheat on both aspects

 Significant weight of dreams opens up to counterfeiting

through two mechanisms:

– Visual terms: Chanel ‘double C’ on a T-shirt or LV on a

canvas bag
– Communicating to people who are not part of its target, a
brand automatically creates an in-draught to counterfeiting

28
 Defending the brand against
counterfeiting

 We may say that if there are no counterfeits of the

brand, it is because the brand is not luxury

 Jeanne Lanvin used to say:

«Counterfeiting is Vice’s homage to Virtue »

29
 2 - Luxury Brand Stretching

 Baccarat put its name to a range of hyper-luxury resort-

hotels

 Ralph Lauren luxury watches

 In parallel, premium brands are entering the luxury

world
– Samsung is offers an Armani phone, LG a Prada one

 Luxury market is made of brands that have grown

through moving out of their original sphere

– Gucci and Ferragamo, dealers in fine leather moved into

footwear and then into ready-to-wear
30
 Two business models for extension :
vertical or horizontal

 The pyramid or vertical model

– Most of the brands emerging from ‘haute couture’ keep to

the summit of the pyramid, but the business is made
mainly on very accessible products: Dior

– Other example: Armani

– Giorgio Armani,
– Armani Collezione,
– Emporio Armani, A
– rmani eXchange,
– Armani Jeans,
– Armani Privé (summit of the pyramid)

31
 Two business models for extension :
vertical or horizontal

 This pyramid model offers a rapid increase in

turnover and profits

 But danger for the 3 essential elements of luxury:

• Creativity
• Excellence
• Selectivity

32
 Vertical model for extension
Pyramid
Model Galaxy
model

Mythical Pure creation

brand with Unique, very expensive
true ‘Haute couture’ pieces
authenticity Fashion shows feed the Brand
dream

Roots Small series,

Exclusivity

Larger series
Licenses
Advertising All entries in the brand are
equivalent and represent a
Lowering of creation
facet of the brand
Market (Mass) 33
They must all be equally
creative
Two business models for extension :
vertical or horizontal

 The galaxy model is represented by Ralph Lauren

that sells everything

– Prêt-à-porter
– Accessories
– Perfumes
– Cosmetics
– Furniture
– Paintings
– Cafes and restaurants
– …

34
 Two models for extension : vertical
or horizontal
Pyramid Galaxy
Model model

Mythical Pure creation

brand with Unique, very
true expensive
authenticity Haute couture pieces Brand
Défilés feeds the
dream

Roo Small series,

ts Exclusivity

Larger
series All entries in the brand are
Licenses equivalent and represent a
Advertising facet of the brand
Lowering of
creation They must all be equally
Market (Mass) 35
creative
 How can we classify stretching?

 3 different parameters

– Price: higher or more accessible prices?

• Upward side : Purple Label couture line for women or Black

Label for men
• Downward side: Tiffany engagement ring

– Distance from the original core product : a Ferrari and a PC

– The maintainance of the level of luxury : Chanel T-shirt

36
 The notion of brand legitimacy

 Sociological definition of luxury

 Two eternal sectors

– Habitat (Versailles, Chambord, Baccarat)

– Dress, sub-divided into clothes (haute couture) and finery

(jewellery)

 It is these sectors that legitimize the others not the

other way around

37
 Brand’s sources of legitimacy

 Very specialized trades rather than transversal

competences

 Trade
– Lalique stays within the trade with crystal vases, jewels,
objects, cufflinks

 Materials and culture

– Fine leather goods for Hermès or Vuitton: no legitimacy in
haute couture, and consequently relative success

 History
– Baccarat jewels

 Lifestyle
– Baccarat luxury resort-hotels, coherence with the ‘dream
life’
38
 Leading a brand stretch: 4 steps

 Step 1: strategic vision or ‘big plan'

– What is your idea of the brand in the long run?

 Step 2 : researching brand extensions

– Based on brand sources of legitimacy (trade, materials,
history, lifestyle, culture)

 Step 3 : coherence with the identity (Brand Identity

Prism)

 Step 4 : risk evaluation

– In luxury, everything is in the execution : implementation

39
An example of stretching : Mont
Blanc

40
 An example of stretching : Mont
Blanc

 Step 1: strategic vision or ‘big plan'

– At the diagnosis and objectives level:
• Was there a future for a brand that only produced pens? (vs mails and cell
phones)
• Increase attractiveness and brand awareness via communication on other
products
• Develop their own, exclusive distribution
• They create gift, impulse and repeat buying opportunities

 Step 2 : Understanding the brand identity, its intangible

dimension

41
 An example of stretching : Mont
Blanc

 Step 3 : Explorations of possibilities, both on the

manufacturing and the market potential
levels

 Step 4 : risk evaluation

– Verification of the coherence of the projected realization
with luxury and with the facets of the brand identity prism

42
 An example of stretching : Mont
Blanc
 Increase attractiveness and brand awareness via
communication on other products

 Develop their own, exclusive distribution

 They create gift, impulse and repeat buying opportunities

43
 The risk factors of brand stretching

 It undermines the essence of luxury: the recreation of distance

 Are the risks unavoidable? NO

1. The quality of the execution, respect for the fundamentals of luxury

and therefore creative control are decisive factors

2. Loss of control over the brand

3. Relocations lead to a qualitative risk

4. Distributional stretching

5. Fragmentation of the advertising representation, of the brand’s

discourse

44