How to build a luxury brand Source: Warc Best Practice, March 2017 Downloaded from WARC
This paper explains how luxury brands need to adapt to an evolving market comprising digital opportunities, millennial shoppers, the concept of “affordable” luxury and the need for strong, personalized brand-consumer relationships.
- Traditionally, “luxury” is defined as “expensive” or “exclusive”, with luxury products being high margin, labour intensive and low volume, however, in an increasingly digital and globalised world, the industry has expanded with both new and established brands competing to offer luxury experiences and exclusive moments.
- Consumer-centricity is more important than ever, as the consumer’s own brand and what their choices say about them is just as crucial as what the brands they buy and wear represent.
- The growth of digital has led to innovations such as “Shopping the runway”, allowing consumers to buy what they see on the runway when they see it, and social media influencers and behind the-scenes videos are quickly becoming more influential than aspirational advertising in print media.
- It is critical to communicate the emotional value of luxury goods to justify the price tag and entice consumers, particularly for millennial shoppers, who often opt for experiential luxuries such as celebrity-chef restaurants, rather than material goods.
- Case studies include brands such as Burberry, Chanel and Shinola.
Luxury brands have traditionally stood for a strict dedication to excellence and quality. As a result, the industry cultivated a very carefully managed relationship between price on one hand, and goods and experiences on the other. For most, “luxury” is synonymous with “expensive” or “exclusive.” However, in an increasingly globalized marketplace and with the proliferation of digital technologies, the luxury consumer has a new face and evolving needs, and the competitive set has expanded – as has the industry itself. In today’s landscape, providing the customer with a luxury experience or an exclusive moment, both in-store and out, plays an increasingly important role, and both new and established brands who want to develop themselves as major players in the industry must find a way to play by new rules.
DefinitionIn economics, a luxury good is one for which consumer demand increases as income rises. Luxury brands, brands that sell luxury goods, have positioned themselves as prestigious in consumers’ minds due to strong associations with a high level of price, quality, aesthetics and exclusivity.
This paper will focus mainly on the fashion, retail and apparel/accessories categories, but the learnings presented here are applicable to luxury brands of all categories.
Where to startIn order to compete for a share of wallet, luxury brands must prove their worth and establish themselves as true must-haves for consumers. Whether the clothing they wear, the trips they take, the cars they drive or the food they eat, there have never been so many choices competing for a consumer’s attention and disposable income than there is today in the luxury landscape.
Traditional understanding defined luxury products as high margin, labour intensive and low volume, and luxury experiences as something that only the wealthiest could afford. High price tags were justified by offering consumers superior design, creativity, exclusivity, quality, craftsmanship and status. Today’s definition of luxury is much more of a moving target.
Luxury brands must tap into the modern mindset in order to stay competitive. Today's customer wants to buy things that make them look good to other people. They want to buy things that express who they are and who they want to be. Consumer centricity is more important than ever, as the consumer’s own brand is just as crucial as the brands those consumers buy and wear. What people wear, what accessories they use, what beauty products they use, what kind of car they drive, and what coffee they drink all say something about them. These choices have become just as important as the brands themselves. Thus, while quality is and always will be a table stake of luxury, emotional value and a strong, personalised brand-consumer relationship are of paramount importance in the ‘new luxury’ world.
In recent years, several factors have challenged the traditional luxury model, such as the rise of digital platforms, social mobility, the birth of affordable luxury and the impact of the millennial shopper. These factors have changed not only the profile of the luxury consumer but also the face of the luxury market landscape. Luxury consumers have taken on a new power in the relationship between brands and customers and are now much more active participants in the creation and evolution of the rules of the luxury game.
The onset of digital has given consumers infinite options at their fingertips, offering insider access to their favourite brands and enabling them to own a piece of the action in more ways than ever before. Brands also now have the ability to offer products to a wider range of consumers, even in locations where they do not have a retail footprint, and consumers can more easily ‘trade up’ to premium offerings or ‘trade down’ to less costly alternatives when making their purchase decisions. In response, many luxury businesses have changed their strategies, looking to harness the power of digital to drive growth in their business. In the early stages, it was e-commerce and electronic/mobile/social-marketing, but the industry has since evolved further, demanding new outside-the-box strategic plays, with new and innovative marketing tactics emerging every day. For example, “Shopping the runway,” is a see now-buy now operating a model that decreases the barriers for purchase and eliminates lag times between what a consumer sees on a runway and when they can purchase a product in-store. By leveraging social media influencers as style drivers, brands are able to create online communities of brand users and loyalists, who in turn recruit new users.
Additionally, strong brands are also using digital and social media to reach new consumers, both in terms of exposure and geography, and to give their customers, present and future, a deeper look inside than ever before. Behind the scenes videos, interviews with designers and glimpses into design studios are quickly becoming more influential than aspirational advertising in traditional print media. With consumer engagement becoming more frequent, successful brands must find a way to cut through the noise and build true and loyal followings and customer communities.
The notion of affordable or democratic luxury is something that is a relatively new, but important, development in the greater luxury space. Rather than focusing on select goods, experiences and consumer segments, brands have the option to diversify their offerings to cater for those who can’t afford couture, but who still desire a”luxury experience.” Their goal is to reach the ‘entry-level’ luxury consumer, while not diluting the brand or alienating loyal high-end consumers. For example, Mercedes and BMW are adding smaller, more affordable models to their ranges, and high fashion brands like Chanel and Dior can rope in a potential buyer by investing heavily in categories like cosmetics or costume jewellery. While this strategy isn’t necessarily a new development, it is certainly becoming much more central to successful brand strategy.
Luxury brands have always found themselves trying to understand and cater to “the modern mindset,” up and coming consumers who will soon be or have already become the new luxury consumer. Wooing this consumer will always be a focus and challenge for luxury brands, and today’s luxury challenge is the millennial.
The emerging millennial shopper poses a greater challenge to the traditional luxury model, as does a ‘new luxury’ diversification strategy. Having endured the economic slowdown of 2008, these consumers gain more happiness from a sense of meaningfulness in life rather than from material things. Instead of spending their money on luxury goods, these consumers often opt for experiential luxuries such as full-service spas, adventure travel and celebrity-chef restaurants. Additionally, they have an overwhelming urge to share their experiences, which makes social media all the more important for luxury brand strategy. The emotional value of luxury goods is critical to communicate, both to justify their price tag and entice consumers. While some brands are still adjusting to this new marketplace, others have successfully adapted to the changing luxury landscape,preserving their appeal.
How modern luxury brands are adaptingKantar Vermeer has been working with luxury brands around the globe for better understanding and emotionally connect with the modern luxury consumer. Each year, Kantar Vermeer collaborates with Kantar Millward Brown and WPP to publish a report on industry trends and a ranking of the Global Top 100 brands called BrandZ.
Leveraging this report, we have outlined some of the elements that we have observed as tactics to develop and built a successful luxury brand, based on our 2016 Top 10 Luxury Brands ranking.
- Showcase heritageHeritage is a key element to built a luxury brand. Established brands need to promote their legacy and new brands need to find their version of heritage. Heritage work is to explain a brand’s purpose for existing and gives a brand authenticity and authority. By communicating the story behind the brand, consumers feel more closely connected and will attribute more meaning to items they purchase. Moreover, communicating a brand’s background and what makes it tick offers a sense of transparency to the consumer, which helps brands to establish trust. Younger consumers value heritage more than any other age group, not only because they tend to be more conscious consumers, but also because they are not always as confident in the category, due to lack of experience or exposure. Promoting heritage is especially pertinent within this demographic in order to put the consumer at ease.
- Assert relevanceWhile brand history offers a solid foundation and purpose, it is also necessary for luxury brands to establish their relevance in the modern and future worlds. For some brands, modern relevance is not too far off from historical foundation: it is a relatively short leap for Chanel to connect the philosophy of Coco Chanel to its modern positioning of sexy and daring fashion. Other brands may need to build further off of their roots: Hermès does not hide its equestrian heritage but extends that symbol of quality to products as varied as delicate scarves, porcelain dinnerware, and wearable technology. For many brands, it’s a delicate balance between traditional and new media and finding the right mix to hit target consumers. Print ads are a great way to reach a more sophisticated consumer, while millennials look to social, digital and direct, personalised communication from brands. Often times, celebrity is a great strategy. Gwyneth Paltrow and Anne Hathaway may be regular wearers of Valentino, appealing to a higher-end consumer, but Kendall Jenner (Estée Lauder), Elle Fanning (Tiffany) and their peers are being used via social and digital media to introduce brands to a new generation of consumers. Dior garnered over 13,000 mentions in connection with Jennifer Lawrence on social media in January 2016 alone, proving the combination of celebrity and brand, when leveraged in the correct way, can be extremely advantageous. Regardless of approach, successful brands must make themselves relevant to today’s consumer, both young and old, and draw the brand’s story forward through time.
- Create an iconOnce a brand has woven together with its heritage, purpose, and unique essence into a credible story, a successful brand will distill that story into a set of icons. Icons serve multiple important purposes: they represent a brand’s story, are instantly recognizable to others, make a statement about the wearer, and create a halo for the brand. Historically, a brand’s logo served as its icon. However, today’s luxury shopper has pushed back against this trend. Today’s icons are as diverse as unique motifs, embellishments or even materials, all of which more subtly confer the benefits of a good icon. For example, the Cartier Love Bracelet expresses the brand’s point of view on love and makes a statement about the commitment and status of the wearer. The Love motif is now recognizable enough to extend to other products beyond the iconic bracelet and elevate the brand as a whole. A more emerging example is Canada Goose’s iconic parka. The coat embodies the brand’s heritage in rugged outdoor gear and is made with the brand’s signature goose feathers which serve as both utility and status. Ultimately, the parka will serve as a halo that will lend outerwear credentials to a wide array of products as the brand expands.
- Speak to consumers, not at themFor a brand to tell its story and build desire, it must interact with a broad spectrum of consumers. The caveat to that statement is that brands must give consumers the content they want to receive; via the channels they prefer. Giving the high price points of luxury items, widespread product interaction is not always possible nor is it particularly desirable. There are, however, proven strategies that can boost brand interaction while building, rather than diluting, a brand, such as branded experiences and limited collections. More luxury brands are producing video content – for example, live-streaming fashion shows or offering behind the- scenes footage – so that consumers do not feel separated from the fashion elite. Data shows that younger consumers have an increasing preference for behind-the-scenes videos, as it feels less like overt advertising and makes consumers feel more connected to a brand. Additionally, some high-end brands have been able to use limited collections or designer collaborations to introduce themselves to emerging clientèle. Prada strategically offers flash sales and limited editions to connect with aspirational consumers, respond to changing trends, while maintaining the exclusivity of the brand. Designer collaborations with mass retailers like H&M or Target allow high-end designers like Versace, Karl Lagerfeld, Marni and Isabel Marant to reach a wider consumer base while promoting innovation and maintaining a pristine brand image. And all of the collections sell out instantly! While this strategy poses some risk by putting a brand name on potentially more mass-produced manufacturing, it is hugely successful because the branding is distinct and the run is limited, making it truly special and exclusive.
- Give backAs modern consumers grapple with the interplay between spending and sustainability, many luxury brands are giving back to their communities via philanthropic or educational efforts. An overwhelming majority of consumers feel that luxury houses should be involved in philanthropy and many of them actually expect it. Thus, philanthropy and charitable contributions have emerged as essential elements of a luxury brand’s image and serve to highlight the brand’s values. Tod’s, the Italian luxury leather goods company, has donated $33m to restore Rome’s Colosseum. While Tod’s has obtained the right to use the image of the Colosseum until two years after completion of the work, the company’s founder, Diego Della Valle, has stated that the sponsorship was purely philanthropic. Bulgari’s B.zero1 collection has raised more than $50m for Save the Children, an organization that promotes rights for children and provides relief for children in developing countries. Bulgari’s donations go toward education initiatives and improving school infrastructure, a cause that has been promoted with the #RaiseYourHand campaign featuring a slew of models and celebrities. These charitable pursuits not only spread social and brand awareness, they give consumers something to buy into beyond just the brand itself. Additionally, giving back acts to increase the bottom line as luxury brands see a return in free media and social buzz.
- Create unique experiencesWhile offering an elevated experience to consumers is table stakes, some luxury brands are focusing on offering an authentic brand experience, both in-store and out. Though even a glass of champagne is enough to make a consumer feel valued and at ease while shopping, luxury brands are being more inventive to cater to their clientèle. Some luxury retailers are beginning to offer full concierge services to meet the needs of their jet-setting, global consumers. Others are offering personal limousines and emergency delivery services to ensure that shopping in-store is just as convenient as online shopping. Moreover, many luxury labels are investing in a digitised, in-store experience replete with all the modern digital trappings to engage with affluent customers of discriminating tastes. For instance, Gucci outfitted its flagship store in Milan with life-size video lookbooks and iPad checkouts that provide all the excitement of the runway while giving customers an immersive brand experience. Brands also strive to bring their overall experience, touch/look/feel, to consumers outside of the retail space. Chanel partnered with Architect Zaha Hadid to bring art and culture to cities around the world, with a travelling sculptural pavilion inspired by the brand’s distinctive layering of details within an elegant, cohesive whole. The Alexander McQueen exhibit attracted 661,509 visitors to the Metropolitan Museum of Art in New York City, making it the 8th most visited exhibit held at the museum.
- Invest in your talentThe people behind a brand, those in the weeds who are directly responsible for design, manufacturing, marketing and selling, are the backbone of a luxury brand. These individuals need to genuinely believe in the brand they work for and live that brand every day of their lives, both in and outside of the workplace, in order for that love to translate to the customer. Keeping employees happy and motivated, and showing them that they are part of a brand family, is the best way to humanize a brand.
Putting these thoughts into practiceAt its core, luxury is a state of mind. To occupy this state in consumers’ minds, brands must elevate themselves beyond quality products and demonstrate quality via a thoughtful purpose, meaningful communications, innovative experiences, among other avenues.
- Showcase heritage – in order to make a true connection with customers, successful luxury brands must tell the stories behind their brands. Established brands should tap into the legacy that they are built on, while newer brands must rely on the inherent purpose of their brand.
- Assert relevance – offer a product that fills a need, offer a lifestyle that consumers want to be a part of and connect to your customer where they live – it’s a delicate balance between traditional and new media.
- Create an icon – distil your story into a set of icons that embody your brand and that are easy for a consumer to identify.
- Speak to consumers, not at them – make your customer a part of the equation. Engage them, bring them into your brand, give them access and ask them to play a role.
- Give back – it’s no longer just about product and experience; brands must give back for consumers to consider them. Charitable pursuits boost brand loyalty and raise awareness, not just for social causes but for the brands themselves.
- Create unique experiences – offering consumers a unique, authentic, seamless brand experience, both online and offline, is key. And it’s as much about delivering outside of the retail experience as it is about treating consumers like VIPs in-store.
- Invest in your talent – without a strong team, a luxury brand cannot succeed. Your biggest advocates are within your ranks!
BurberryIn the mid-2000’s, when indiscriminate licensing of their signature check, lower priced products and counterfeit goods tarnished Burberry’s image, the brand sought to reassert its relevance and connect with their modern consumer.
The strategy implemented was aimed at rediscovering the brand’s roots in British outdoor attire and centralizing manufacturing to ensure consistently high quality. Moreover, Burberry embraced innovation: the brand began live-streaming fashion shows, engaging with consumers via unique social media campaigns, like the Burberry Acoustic and Burberry Kisses, and redesigned its Regent Street store to incorporate elements of their online store to create a seamless experience. The brand energy and relevance enhancement worked to increase sales, triple Burberry’s stock price and helped it become the most followed luxury brand on Facebook.
ChanelChanel created Inside Chanel, a story about the history of Chanel told in twelve chapters, to showcase the brand’s heritage and its brand identity. The story develops through short videos with authentic historical images, sketches or digital drawings. Some of the chapters offer, as well as the films, additional content organised in a photo gallery or another video.
ValentinoValentino Garavani created a digital museum of designs from five decades of the brand, to highlight its heritage and reach consumers online. The desktop application invites visitors to delve into campaigns, red-carpet photos and magazine editorials from the past, all displayed in a glossy digital gallery. Though the app celebrates Valentino’s legacy, it also serves thousands of students, young designers, and fashion people to see and study Valentino’s work.
Diane Von FurstenbergIn 2010, Diane Von Furstenberg and the Diller-von Furstenberg Family Foundation created the “DVF Awards” to honour and support extraordinary women who have had the courage to fight, the power to survive and the leadership to inspire. The awards ceremony not only honours achievements, but celebrates the brand’s philosophy to empower women to be glamorous, confident, and ultimately become “the woman she wants to be.”
ShinolaShinola, an American luxury lifestyle brand specializing in watches, bicycles, and leather goods, was founded in 2011 to reinvigorate the storied American city of Detroit by bringing back an industry that once brought it its glory: manufacturing. Despite being an up-and-coming luxury brand, Shinola has successfully established its backstory and communicated it to consumers. From having the word “DETROIT” included in the logo to their tagline “Where American Is Made,” it’s nearly impossible to hear about the brand without associating it with something red, white and blue. In doing so, buyers feel as if the Shinola watch they are wearing, or the Shinola bike they are riding, is a representation of their country. They’re proud to own it, and they like to share the story with their peers because it makes them feel American.
Warc Topic Page: Luxury BrandsWarc Case Studies: Luxury brandsWarc Best Practice: What we know about luxury brandsGlobal luxury goods trends report, Euromonitor Strategy Briefings, April 2016Warc Data: Consumer Data – Time spent by medium
Trading Up: Why Consumers Want New Luxury Goods – and How Companies Create Them, Michael J.Silverstein and Neil Fiske
The Luxury Strategy: Break the Rules of Marketing to Build Luxury Brands, Jean-Noël Kapferer and Vincent Bastien
The New Consumer and the Sharing Economy, Havas Worldwide (Warc)
Millennials: Fueling the Experience Economy, Eventbrite
Deluxe: How Luxury Lost Its Luster, Dana Thomas
Kapferer on Luxury: How Luxury Brands can Grow Yet Remain Rare, Jean-Noël Kapferer
About the authorLyle Maltz is a Director with Kantar Vermeer in New York City (kantarvermeer.com), a leading global marketing consultancy and part of the WPP Network of companies. He leads key global brand strategy projects and his industry experience spans various sectors, including luxury, fashion, media, licensing, non-profit and retail.
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