Marketing from Mass to Class

Via CondottiAs many set their strategies at going head on to cater for the mass market, some look the other way and market for the few. Marketing top line brands is a very sophisticated matter but it is also a unique segment which offers the desired margins to sustain long term growth and profitability.

A visit to the Spanish steps is a must for any visitor to Rome. The best passage to get there is through Via Condotti off Via Del Corso. While seeing the majestic Spanish steps at the end of the street, one can only appreciate the many luxury fashion shops throughout Via Condotti. As all the main players of the luxury fashion world have a presence here, it is impossible not to notice the up market tourists with their entourage queuing up to enter any one of the shops.

While adoring the imaginative and quite dramatic shop windows, many are eventually flabbergasted with the selling prices of the items on exhibit. For many such prices are ludicrous. Why would someone ever consider making such a purchase? But then again why are customers still queuing up to enter the shops?

This is the same question many ask about premium priced products and services such as hotels, automobiles, gadgets, wines, jewellery and fragrances amongst several others. Many seriously question the value for money of such luxury goods when a lower price option exists. For many the acquisition of a product and/or service is simply cost. But then there are the vital few who perceive value differently.

The Law of the Vital Few

Many are familiar with the Pareto principle – also known as the 80-20 rule. It is an interesting phenomenon where theoretically 20 percent of something is responsible for 80 percent of the result.

In sales for example 20 percent of your customers are responsible for 80 percent of your turnover. Likewise 20 percent of your suppliers are responsible for 80 percent of your supplies. And most probably 20 percent of your workforce account for 80 percent of your payroll.

What this means is that the wealthy, which are a fraction of the global population, potentially account for most of the global wealth. Hence while many market for the masses, a few brands market for this affluent niche of customers. While many businesses are fire-fighting the global recession with challenging consumer demand, the luxury brands continue to top-up year-on-year growth and profits.

For example the French group Colbert that manages a number of renowned luxury French brands such as Chanel, Dior, Guerlain, Hermes, and Remy, recently reported an increase of sales in excess of 100 percent for all these brands over just a five year period. This all happened when the main news headlines were occupied with bank bailouts and a crisis in the Euro zone. Just imagine the long term potential of similar luxury brands with emerging economies such as Russia, China, India and Brazil amongst others.

A different definition of value

Luxury brand seekers have a completely different understanding of value. The value proposition for this selective customer segment is not based on getting the best price on the market. It is a much more sophisticated matter by understanding the following three motivations.

Functional Value

This is the objective component where the consumer is motivated by the physical attributes of the brand and what it can deliver. Case in point is Ferrari which positions itself as a fast car brand with its associations with F1. Another example is 5-star hotel chain brand Corinthia who are renowned for exceptional hospitality. The value proposition focuses on functionality as the consumer is prepared to pay a premium only if the brand can walk the talk.

Experiential Value

This is the subjective component where consumers try to connect and seek individuality. This value proposition projects a vision of a superior lifestyle through style, innovation and indulgence. For example this is the main motivator for luxury fashion brands such as Burburry and Luis Vuitton with their iconic designs and branding. Premium foods and wines are another clear example such as Spanish Bellota ham, a fine French Bordeaux wine, or some pricey Russian Beluga caviar.

Symbolic Value

This is the collective component where the consumer seeks a social connection by seeking to be part of the elite. The value proposition is mainly focused on prestige as it is not what the brand means to the consumer, but more importantly what it means to others. Branded polo shirts are a perfect example. The value-added of such a basic garment all depends on the logo embroidered on the chest as consumers choose their preferred tribe which they want to be associate with.

Building a successful luxury brand

After realising the significant potential of the luxury brand market and what mainly motivates luxury seeking consumers, it is now important to understand the main attributes that make a successful luxury brand. Brand equity is essential and it is mainly through the following characteristics that luxury brands maintain their prestigious position in the marketplace.

Heritage

Successful luxury brands have an amazing story to tell. They have a global reputation of world-class excellence. In many cases the association with a country of origin elevates this reputation. Popular examples are Italian leather shoes, Swiss watches, French wines, and German automobiles.

Environment & Service

Leading luxury brands have full control of their supply chain. The role of the supply chain is to maintain prestige and deliver a superior experience. Flagship stores are a critical medium to promote the brand on the high street. Consider Nespresso stores which are situated in prime locations and boast rich interior décor. You will certainly not find a Nespresso machine or coffee pod for sale on a supermarket shelf. Let alone George Clooney!

Culture

There is an internal commitment to the brand where innovation and quality are paramount. Even the personality and value of its creator can be felt. The late Steve Jobs certainly left his mark on Apple while we can also mention the late Gianni Versace, Giorgio Armani, and Enzo Ferrari. Even in football icons such as Bill Shankley (Liverpool FC) and Alex Ferguson (Manchester United) left their imprint on their respective football clubs and eventually the brand.

Clear Brand Identity

A winning luxury brand also has a unique and identifiable DNA. The brand has an emotional appeal and aspiration which matches its market position. You will certainly not miss the BMW logo on the front of each model which is rolled out as the brand represents ‘sheer driving pleasure’. Fragrance brands also make it a priority with their luxurious packaging and extravagant product launches.

Marketing Communications

Communication for premium brands is much more sophisticated as it is not mainly focused on selling but actually about promoting an inspirational lifestyle. Communication is mainly done through direct initiatives to the target market, the staging of special events, celebrity endorsements, and effective PR. Red Bull certainly set the standard for extreme events that link to the brand. Was Felix Baumgartner drinking a can of Red Bull while he was jumping from outer space? Certainly not but he surely got our full attention.

Product Integrity

The functionality and excellent quality of the product reflect the craftsmanship of the brand. Mont Blanc comes to mind as well as vintage wines. While have you ever heard someone talking about a faulty Rolex? If a customer is ready to pay for it, nothing short of excellence is expected.

Design Signature

The product is iconic and recognizable with its creative design. Burberry’s iconic check pattern is hard to miss. The iPod takes credit for making white headphones trendy as they were an integral part of the gadget’s advertising. While Mini and the VW Beetle are iconic with their unique and easily identifiable shapes.

Premium Price

Luxury products can be acquired at a premium price which is consistent with the positioning of the brand. Buying into the brand is considered as an investment. Even more it is a commitment to be associated with excellence. Ever heard someone complaining about the price of good quality chocolate or coffee? Even bottled water can be sold at a premium.

Exclusivity

Luxury branded products are certainly not produced for the mass market and therefore are made available in limited quantities. Limited edition and exclusive ranges are common practice to increase anticipation and possibly generate a waiting list. Ever wondered why certain products are only available in Duty Free shops within the confines of an Airport’s departure lounge? And why certain brands are very selective on which places of the world they permit the availability of their products?

The future of the luxury brand market

With further developments in emerging markets worldwide and major economies steering away from recessions, the potential of luxury brands can only grow further. In the meantime conventional mass market brands will continue to struggle in securing sustainable margins mainly because their value proposition revolves around the best market price while their success highly depends on acquiring much needed volumes. Important choices lie ahead for marketeers. What might have seemed ludicrous might not be so ludicrous after all. Very interesting times lie ahead.