52 IP Luxury Brands.pdf-1

7/30/2019 52 IP Luxury Brands.pdf-1

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Luxury brandsHow to maneuver through this moment o austerity


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Earlier in this decade, luxury brands oundthemselves acing what was at rst a troublingphenomenon: the democratization o luxury.Hordes o consumers, enjoying upticks in theirnet worth, developed a seemingly insatiableappetite or products and services, whichassured them that they were special and thatthey deserved to treat themselves to itemso better quality and more exquisite taste.Luxury brands, used to serving a particular tiero customer, quickly learned to adjust. Manycompanies nestled into what seemed like acomortable and lasting relationship with theirnew ans. Others tried to urther distinguishthemselves rom upstart New Luxury brands brands that oered premium productsand services that were aordable to moremainstream consumers, but were spiked with asense o connoisseurship by ocusing on those

characteristics that have long dened luxury:quality, provenance, cratsmanship, innovation,scarcity, and a compelling story.

Now, it goes without saying that the world o luxury has been

turned upside downagain. Like regular Joe the Plumbers, most

luxury goods brands are acing the toughest times theyve had in

teen or twenty years. Sadly, those new customers, who spent

money during ush times on handbags and other high-margin items

(many o which were emblazoned with logos or identiable design

elements that constituted ree advertising) appear to be pretty

much gone. And not only are the newbies dropping luxury brands

like yesterdays newspaper, but even core customers high-net-

worth individuals or whom the downward-spiraling economicconditions are less consequential are adopting normative

behaviors and shunning any type o conspicuous consumption. Its

unseemly to buy and aunt bling, baubles, and It-bags right now.

Its just not done! Luxury shame has escalated to the point where

consumers are actually asking or unbranded (or sotly-branded)

shopping bags so that no one will know they just dropped US$ 600

on a pair o stilettos.

How on earth can a luxury brand maneuver through this

moment?

To begin with, its important to remember that this is just that: a

moment. It may be a painully long moment, and a particularly

harsh one, but the best luxury brands arent built or moments

they remember where they came rom, and they last or

generations. So stay away rom that price lever, because once

you push it down, you cant pull it back up. Consumers have long

memories, and your brand is worth ar too much to risk tarnishing.

A more brand riendly answer to this problem can be ound by re-

examining what you provide to consumers or their money. There

are a ew particular solutions that can help your brand eel more

appropriate, yet still aspirational, to those core luxury customers

and even to those newer customers or whom luxury goods are a

stretch purchase. These solutions are based on the simple act that

two luxury goods drivers which have become more important in the

category over the last decade will not go away: People will still want

to lead enjoyable lives with meaning, and theyll still want to eel

connected to the world around them.

It makes sense that, in a category that had undergone so much

change, these types o drivers would emerge. They speak to the

ultimate expression o true substance and quality the sense

o permanence that we seek to gain through our luxury brands.

Traditional luxury brands provided consumers with a sense o

permanence by promising longevity based on their heritage o

cratsmanship (You dont actually own a Patek Philippe. You

merely look ater it or the next generation.) As the world o

luxury expanded, consumers wanted more reasons to believe that

they werent making purchases theyd regret that the products,

services, and experiences they chose to spend their money on

would last. By working harder to address these permanence-related drivers, brands can begin to make their customers eel more

comortable with indulgences, big, or small.

Solution #1: Ofer bite-sized immersion

Luxury brands have always been master storytellers. Through

the narrative they provide, signaled through words, visuals,

environments, and service, they invite consumers to immerse

themselves in their world even i only or the moment that it takes

Luxury BrandsHow to maneuver through this moment

o austerity

Interbrand | Pg. 2


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to bite into and savor a piece o high-end chocolate. Presenting an

opportunity or immersion directly answers consumers desires to

eel that theyre truly enjoying their lives.

In reaching consumers who may want to indulge, but are watching

the stock market warily, brands can make that immersion and that

purchase more bite-sized. In taking this approach, luxury brands

need to ensure that what theyre oering is special and valuable, butnot through a price cut in the traditional sense. Canyon Ranch, or

instance, is a renowned spa whose mission is to inspire people to

make a commitment to healthy living, turning hopes and intentions

into the highest enjoyment o lie. Like many spas, it provides clients

who are able to aord a weeklong stay at the resort with a sense o

relaxation, rejuvenation, and escape that can be difcult to obtain

elsewhere (at least, that efciently and reliably). Canyon Ranch has

responded to the state o the economy not by advertising lower

prices, but by promoting a special opportunity to indulge in a two- or

three-night getaway to one o its exclusive spas in Tucson or Lenox,

MA, which normally require a longer stay; bite-sized immersion, at

an easier to swallow price.

Solution #2: Provide opportunities or personalization

A large part o luxury consumers willingness to pay premium prices

comes rom their expectation that a brand will go out o its way

to attend to their needs: customers must eel that theyre being

treated as valued individuals when theyre consuming luxury goods.

Personalization conveys this well, and the most eective type o

personalization is tied to a particular time and place. It will not only

make consumers interaction with your brand more meaningul, but

also provide them with a story that they can tell to others thus

creating a positive memory, one that will etch itsel in their minds.

An example o a brand that has accomplished this beautiully is

Le Labo, a ragrance company with stores in New York, LA, andTokyo, in addition to counters at high-end retailers such as Barneys

and Colette. One might argue that perume is a rivolous luxury

purchase: Its not terribly unctional in this day and age, and when

you buy it, youre oten buying an image, pure and simple. But i its

a truly special perume a denitive one thats truly meant or the

person who buys it or receives it as a git it can be extraordinarily

meaningul. Le Labo custom mixes each perume and afxes a label

to the bottle that includes the purchasers (or recipients) name, the

date, and the location, providing a link to the moment o purchase

and the store experience every time you look at the bottle. The

company also creates exclusive scents that are available only at

certain locations, making that purchase even more personal, special,

and memorable.

Solution #3: Demonstrate a clear conscience

For those core consumers who can comortably make luxury

purchases but eel they shouldnt due to changing social norms, the

best justication or indulgence is a sense that, by engaging withthe brand theyre considering, theyre contributing to something

larger than themselves. To provide permission or indulgence,

luxury brands should consider aligning themselves in a meaningul

way with a relevant cause. When this is done in an authentic and

signicant manner, it creates a sense o connection between the

brand, the consumer, and the rest o the world in a way that is

particularly powerul.

While many luxury brands have been holding events recently that

eature tie-ins to nonprot organizations, they could create an even

deeper sense o partnership. For instance, LVMH emphasizes its

role as a patron o the arts by not only supporting major exhibitions,

but also providing opportunities or young people to enjoy, learnabout, and pursue careers in art and music. The company takes this

role a step urther by promoting an authentic art o living through

donations to a variety o humanitarian and public health initiatives.

Brands can heighten awareness o signicant commitments such

as these by connecting each purchase to a charitable donation

or providing additional opportunities or customers to support

particular initiatives.

Luxury brands could also consider ltering product- or service-

related decisions through this lens. For example, Environment

Furniture, which uses reclaimed, recycled, or repurposed wood

and canvas materials in its eco-chic urniture collections, has

begun to careully evaluate every aspect o its operations to lessenthe environmental ootprint o its ofces and stores. It has also

joined the Tropical Forest Trust, an organization that works with its

members to eliminate illegal and controversial tropical wood rom

supply chains.

Re-raming the moment: rom New Luxury to New Aspiration

These solutions can be particularly eective today because they

address our desire or a sense o permanence in a more modern way.

When one considers luxury goods in general, one usually thinks

o the category as aspirational. Our denition o that word has

Bite-sized immersion, at aneasier to swallow price.

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historically tended to ocus on aspiration in the economic and social

sense: luxury goods as badges o social status, ways in which to enjoy

and show that youre enjoying a lie o privilege. But now that our

economic moment disparages this ocus, our denition o the word

has shited to settle upon aspiration in the emotional sense. Were

now recognizing that lasting memories o an enjoyable, meaningul

lie are what we have at the end o the day (whereas ones social and

economic status, as weve seen in the past several months, is not

necessarily here to stay).

In a way, this is a soter, more authentic version o aspiration that

creates a deeper sense o permanence. Consumers now seek a

sense o signicance and permanence not merely by purchasing

well-crated goods that they can pass on or generations, but by

creating their own unique stamp on the world around them through

a meaningully rich, ull, positive lie. I we need to look or a silver

lining in the eect o this economic downturn on the luxury category,

we can nd it in this: it reveals that the category, and consumer

motivations to engage with it, isnt nearly as shallow as some might

believe. Luxury brands should embrace this shit, and to the degree

that they can, help consumers realize these new aspirations.

In a way, this is a soter, moreauthentic version o aspirationthat creates a deeper sense opermanence.

Interbrand | Pg. 4


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Creating and managingbrand valueTMwww.interbrand.com

Dara Kennedy

Dara Kennedy joined Interbrand in 2008

as a Senior Consultant with the strategy

department in New York. She leverages her

experience in marketing, advertising, and

retail to help clients develop compelling

brands that solve important customer

problems.

52 IP Luxury Brands.pdf-1

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