LUXURY – MARKETING: Because we’re worth it

04 December 2006 By db staff writer

“standfirst”>In an age of mass affluence there is no such thing as a typical luxury consumer, says Ben Grant. And it’s no longer just about money either

Luxury, according to the Oxford English Dictionary, is “an inessential but desirable item”. It is thus a concept that has evolved at a rapid rate – turn the clock back 60 years and many people considered hot running water to be a rather rarefied indulgence, but today it is something we all consider an absolute necessity. Rapid economic growth and technological advancement have resulted in an unprecedented level of expendable income for vast swathes of the population. The result has been a rapid democratisation of luxury; mass affluence whereby most consumers are able to make at least some purchasing decision based on desire rather than need.

Historically, luxury was exclusively the preserve of the very wealthy, something that, quite frankly, you either had, or you didn’t. As Liz Wilson, client service director for Brandhouse explains, the term used to be reserved only for “a rich lady who was able to afford luxury in every category, living in a luxurious house, driving a luxurious car, wearing luxurious jewellery and dining on luxurious food”.

This class of consumer, able to indulge in every aspect of life, undoubtedly still exists. But access to desirable but inessential products in certain categories has now become a reality for huge numbers consumers. It’s now a matter of what aspect of life inspires them to indulge. Be it fine foods, high fashion, classy hotels, Egyptian cotton sheets or triple-milled soap, consumers are choosing to splash out on certain purchases. Meanwhile, in the areas of life which are not considered a top priority, they focus on cutting expenditure down to a bare minimum so freeing up the maximum share of expendable income to indulge in their chosen pleasures.

The enormous growth in the budget aviation sector is a case in point; their hoards of passengers may be utilising a low-cost airline, but that by no means identifies them as low-cost consumers. In reality many of them are jetting off to stay in pricey boutique hotels or second homes, luxuries that they are able to afford only because they’ve cut their transport costs back to the bare minimum. Similarly, have a snoop at your fellow customers’ trolleys when you’re next in the supermarket; you’re likely to see that a huge number of shoppers are pushing around a basket that includes at least one product from the top-of-the-line range, as well as one from the discount selection.

According to a spokesperson for Diageo, “The consumer base [for luxury] is widening. This is making it difficult to categorise consumers by profile or typology. Consumers with increased disposable income … will pay up to a 200% premium for well-designed, well-crafted goods and services in categories that matter to them, and trade down in those that do not.” Or, as Jonathan Ford, creative partner of design consultancy Pearlfisher, explains, “In the world of mass affluence, where we have all got wealthier and more knowledgeable … the men’s room boy could be wearing the same Gucci shoes as the chairman.”

But what motivates these decisions? How do consumers decide which categories occupy a special place in their minds, making them worthy of a weighty premium? And how can brands position themselves within their category?

According to Wilson, the increasing level of personal wealth means that making an economic statement is a less important factor in brand selection. “Classic luxury brands were all about saying ‘Look how much money I’ve got’, but now it’s all about what it feels like, the experience.” The price tag is still, of course, high and the consumer is happy to pay that premium, but the price alone does not play too big a role in the decision to buy into the brand. The message that today’s luxury consumer is seeking to convey through their choice, says Wilson, is, “‘Look how much care and attention I take, look how much self-esteem I have’. It doesn’t have to be flashy and fancy.”

Emotional decisions
Rather than simply a display of wealth, the Brandhouse argument suggests that a brand’s luxuriousness is conveyed by a sense of feeling. “There’s an emotional moment surrounding consumption,” she argues, and this is particularly true when it comes to drinks. “It’s not a rational category. When it comes down to it, most drinkers [select a brand based on an] emotional decision. They love the brand and just want it instinctively, then use a rational argument to back up their selection. Emotion definitely comes first, then reason is second.” Establishing that emotional link is thus a critical factor in determining the status of the brand in the consumer’s mind.

Pearlfisher develops this theme further. The company divides consumers into an inner-directed and outer-directed mindset. The inner-directed are interested in the way a product or experience makes them feel, genuinely appreciating the quality of the product. The outer-directed attitude, on the other hand, is more focused on the statement that a brand choice makes to the rest of the world. The effect that association with the brand confers upon other people is the prime motivator for this group who buy into brands not because of what they are, but because of what they infer.

In a master blender’s ideal world, it would be wonderful to think that everybody who consumes their lovingly-crafted product had a true and heartfelt appreciation for its delicacy. But in reality, Ford suggests, this is simply not the case. The vast majority of luxury consumers are not connoisseurs, but instead they are of an outer-directed mindset; luxury brands are a statement rather than a sensual indulgence.

This revelation will probably have left the master blenders and the purists sobbing inconsolably into their snifters, but the marketeers should take note; the inner-directed imbibers may be very much in the minority, but they are crucial in setting the trends. “Brands must have their eye on the inner-directed attitude, focused on the experience and the quality. That will set the pace for where the trends will go, the followers of fashion will come to the brand soon after.” He cautions that attempting to appeal directly to the outer-directed mindset may generate impressive short-term gains, but the brand will soon fall out of fashion and be left for dead.

According to Ford, the key to finding favour with the inner-directed attitude is focusing on the experiential nature of the brand and establishing an emotional relevance. In an increasingly time-poor and cash-rich environment, consumers are desperate to savour products that they can believe in. For these trend-setters buying into a luxurious brand is not merely about the functional need to consume a product, it’s about finding something that they can connect with and form a positive mental association. In order to achieve this, he explains, it is essential “to know the moments that your brand can connect with the consumer on an emotional level. [For the modern consumer] luxury is not about high prices, it is about the emotion that the brand evokes.” It’s no good just looking good on the shelf, Ford argues. The brands that will be truly revered as luxurious are those that make the emotional connection through creating an experience that leaves a lingering impression on the consumer. Camus Cognac house president, Cyril Camus, says, “A truly luxurious product is a total sensory experience. Before you get to tasting the Cognac the look of the product, the weight and texture, the sound when you remove the stopper, they must all be perfect.”

This critical importance of the total experience of the product means that a new brand can catapult itself rapidly into the luxury bracket. It’s a theory that is borne out by the dramatic rise to prominence of Grey Goose, a brand that has made an unbelievably rapid ascent in terms of consumer perception and reverence. “Luxury is no longer just about the object,” says senior trade marketing manager, Martin Horner. “The product must have an emotional tie to the consumer,” he argues. “It must stir their juices and have real meaning and relevance to the individual.”

Once a brand has invested the time and effort in weaving a story that brings the product to life, it is critical that a consistent message is communicated at all times. There must be the same attention to detail every time the brand name is used, without exception. Says Wilson at Brandhouse, “Everything must add up to the same message, there must be total consistency. [Losing that consistency when it comes to] the little things will totally undermine the entire brand.” Mark Harvey, brand manager for Dom Pérignon agrees: “All customer-facing elements of the brand must be 100% in keeping with the brand message … and every detail must exceed expectations.”

Style over substance
A brand’s experiential qualities are crucial to conveying a sense of luxury and so too is its appearance. The presentation, and the perception that it conveys, is every bit as important as the product itself in terms of giving the brand that special something. The nature of luxury is constantly shifting as new ideals, assumptions and aspirations enter the collective consciousness. Ruinart UK’s managing director, George Atkinson-Clark, explains, “In Champagne there is only a limited amount that you are able to do with the wine. So, evolution of the brand must be made in terms of communicating with consumers, and that comes through principally in the packaging.” It’s important for a brand to adapt to shifting preferences in design and style, but not to flippantly react to short-term trends.

The overarching design ethic in recent years, across all product categories, can be boiled down to a single word – simplicity. From the minimalist ethos in home interiors to the soft lines favoured in the automobile industry and not forgetting (how could we?) the style icon of a generation, the ubiquitous iPod, consumers are drawn towards products that convey quality and desirability without the need for fancy, flamboyant or over-complicated design. Camus agrees, arguing, “Today’s luxury codes are very simple. Consumers do not want an ostentatious product with gold strips all over it.” In fact, such fussy, pernickety detail can be a major turn-off for many.

Refined understatement has undoubtedly been the stylistic theme for some years. But Pearlfisher’s Ford stresses that, while a brand must obey this code of simplicity, it should not be taken to mean a product must be totally stripped back. In fact, he argues, a little dash of audacity can work wonders, as long is it doesn’t overcomplicate the product. By way of example he cites Veuve Clicquot and Tiffany’s. Both brands adhere to the accepted codes, but have managed to assume ownership of colours, bright orange in the former case and turquoise in the latter, that are not exactly typical.

The ‘right’ places
The availability of the product plays an important role in the way that it is perceived, but that should not necessarily be taken to mean that it cannot be widely distributed, rather that it must be stocked only in the “right” places. “Where you sell your luxury product says a lot about your brand,” says Jean-Noël Girard, export director at Champagne Devaux. “It gives the buyer confidence if the product has what could be described as the ‘endorsement’ of a luxury outlet. It also imparts a more exclusive air [to the product].”

Harvey at Dom Pérignon similarly suggests that the key to luxury status is ensuring that the product is “not readily attainable”. In which case, how has the brand managed to retain its luxury perception when it has simultaneously generated strong volume growth? Simply put, he argues, “We only go into the right doors. You have to be very tough as a luxury brand, maintaining  a very strict distribution strategy. If it is perceived as readily available the luxury is lost.”

Not adhering to this rule was very nearly fatal to the Grey Goose brand. Having enjoyed a rapid and sustained growth after launch, the vodka somehow found its way to the back bar at JD Wetherspoon, not exactly a chain which conjures a notion of luxuriousness in the average consumer’s mind. When Bacardi-Martini acquired the brand, terminating the JD Wetherspoon listing was one of the first steps because, says Horner, “It didn’t fit with our strategy.”

The new owner has continued to push the brand among the leading style bars and is now focused on the top-end restaurants. “It’s a case of understanding [the core consumer’s] leisure repertoire and making sure that it’s available,” says Horner.

According to Diageo, tapping into the demands of today’s luxury consumer necessitates a reach far beyond the home market alone. “Our audience seeks to enjoy their favourite brands wherever they are in the world,” says a spokesman. “They are globally mobile … The obvious first stops for our luxury brands are iconic, capital and cosmopolitan cities as well as the fashionable travel destinations considered to have cultural cachet.”

With increased disposable income, luxury products are now within the reach of a far wider group of potential consumers. This naturally means that they must be made available in a greater number of locations, but the brand owner must be very careful to monitor these and make sure that the image of the outlet is of a sufficiently high standard to reflect the product’s positioning.

Time out
In today’s trading environment there is much confusion as to what represents luxury. The vastly different responses to the question “What does luxury mean?” (see box on page 38) bear testament to the uncertain definition of the term.

As one commentator points out, in an age where many consumers are as cash-rich as they are time-poor, for some, “The height of luxury is taking time out to enjoy a cold beer in front of the football.”

The experiential qualities that build a connection between brand and consumer; the alluring, desirable design; the perception of rarity conveyed by a controlled distribution network. These factors all play an important part in establishing a brand’s luxury credentials. But there’s one final factor that is an absolute necessity: the quality of the product itself. For if the content of the bottle is not up to scratch, it will be found out very rapidly.

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What does luxury mean?

• “It’s all about dreams and status.” Eric Benoist, Martell, Mumm, Perrier-Jouët
• “Luxury is buying something you don’t need but that you desire – because you can.” George Atkinson-Clark, Ruinart UK
• “It’s a combination of excellent quality and exclusivity,” Chloe Wenban-Smith, Roederer
• “Luxury is no longer just about the object – the product must have an emotional tie to the consumer.” Martin Horner, Grey Goose
• “Today’s luxury is all about simplicity; consumers don’t want fancy gold strips all over the place.” Cyril Camus, Camus
• “Luxury lies not in richness and ornateness but in the absence of vulgarity.” Coco Chanel
• “Nowadays luxury is a totally irrational, subjective thing. For some people the height of luxury is taking time out to enjoy a cold beer in front of the football.” Jonathan Ford, Pearlfisher
• “Luxury is an intrinsic thing; consumers have an implicit understanding that they’re buying into the very best … It’s about aspiration and dreams beyond the product itself.” Mark Harvey, Dom Pérignon
• “Glamour and luxury are basically the same thing, [a luxurious product] has that special look which speaks money and glamour.” Salvatore Calabrese, bartender
• “Luxury is firstly rarity; if it’s not rare, if others can do it, then it’s not so special.” Vincent Géré, director, Rémy Martin
• “Every advance first comes into being as the luxury of a few rich people, only to become, after a time, the indispensable necessity taken for granted by everyone. Luxury consumption provides industry with the stimulus to discover and introduce new things.” Ludwig von Mises, economist
• “Gaining and maintaining a luxury image is a carefully crafted combination of four interdependent elements – packaging, product, place [of sale] and pricing.” Jean Noel Girard, export director, Champagne Devaux
• “It’s about being special, different and extraordinary, something that’s only available to a small number of people.” Liz Wilson, Brandhouse

Relevance through reinvention

Does a luxury brand have to have a rich and established history, or should it be at the cutting edge of contemporary fashion? The majority of brands that the drinks business canvassed were adamant that evolution is critical – but it’s by no means a unanimous view.

Eric Benoist, international marketing director for Pernod Ricard’s new Martell Mumm Perrier-Jouët division, argues that keeping up with contemporary trends is critical in ensuring that a brand retains the right position in consumers’ consciousness.  “You must constantly work on the presentation, merchandising and display, and bring fresh excitement to the consumer by launching new products and extensions,” he says. A successful brand, he stresses, “must reinvent all the time. Luxury brands are based on very strong tradition, but they are constantly refreshing to make sure that they’re relevant to contemporary consumers.”

It’s an argument that Pearlfisher’s Jonathan Ford certainly goes along with. “Luxury is a moveable feast. It is changing all the time and today’s luxury is tomorrow’s commodity.” In a rapidly evolving environment of consumption, he believes that a brand that stands still will fall by the wayside.

“Everything needs refreshing from time to time,” says George Atkinson-Clark, managing director of Ruinart UK. The brand has just undergone a revamp that he describes as “evolution not revolution”, arguing that such developments are essential to safeguard a brand’s luxury status. “A brand that stands still is a brand that dies,” he cautions. Dom Pérignon, too, supports this assertion. “Luxury evolves all the time,” explains brand manager, Mark Harvey. “By definition, these brands should be setting the trends and must be ground-breaking.”

However, it’s a view that is opposed by one of the Dom Pérignon’s fiercest rivals. Chloe Wenban-Smith, brand manager for Roederer, certainly knows a thing or two about having a new demographic of consumers pick up the brand. The hip-hop community adopted Cristal as a symbol of the outrageously ostentatious bling culture. You’d be hard pushed to find a demographic further removed from Cristal’s very traditional core consumer – in fact, deep pockets and adoration of the brand are perhaps the only two common factors between the two groups.

Cristal’s new fan base was not won over because the brand made an active effort to engage new consumers. On the contrary, argues Wenban-Smith, it attracted these new followers because it remained true to its roots. “Cristal did not change. If you start changing things to try to satisfy some people or attract new consumers you’ll alienate the core consumer,” she argues, undermining what made the brand luxurious in the first place.

Gradual evolution seems to be an important feature in ensuring that the brand remains a luxurious proposition in the consumer’s mind. But, crucially, this should be carefully managed with subtle adaptations made to fit evolving cultural nuances – a short-term knee-jerk reaction to fit in with today’s hot trend will have disastrous consequences long-term.

© db December 2006 / Ben Grant

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