This piece appeared today on Biz-Community as a reprint from B(R)AND magazine. I'm quoted in it which is why I'm posting it here.
Lessons in luxury
By: Di Paice
Lessons learned in the uber-luxury category can be used to woo the new luxe customer as the landscape of luxury changes.
The first problem with the luxury brands is how one defines them. The pervasive - but not the only - definition is shaped by the price of the high-ticket items that the luxury purchaser consumes. This is the definition favoured by Admakers International, a South African-based agency focusing exclusively on luxury products the world over. When they talk luxury, they're talking expensive vehicles, jets, luxury yachts and upper-end property. In that market, says Admakers' chairman Duan Coetzee, luxury as we know it is viewed differently.
“For them, a Mont Blanc pen costing R5 000 is not a luxury,” he says. “It's an expensive pen, but it's not a luxury brand.” The very rich, he is arguing, use Mont Blanc or its equivalent as everyday pens. To be classified as luxurious it would need some other component. “For us, luxury starts at around R250 000,” says Admakers CEO JP Fourie. “So our market begins where the so-called LSM 10 market tops out.” Admakers have handled brands like Porsche, Ferrari, Maserati and Rolls Royce, but the slightly more affordable car brands like Hummer, SAAB, and Cadillac that the agency also handles are still out of the reach of 95% of the general population: these brands represent the “lower strata” of the true luxury market, they argue.
In this market, television is still a viable medium of communication to would- be buyers. At this level, image is still important to the luxury buyer, says Fourie. “He wants to be seen as successful. TV comes into its own - it all rests on how you portray the vehicle, and the kind of people who drive it.” As you move up into the ether of wealth, the brands become more and more obscure, and their communication more tightly targeted, TV falls off the radar (“The strike rate is so low; Rolls Royce sold 17 cars in SA last year!”).
Using digital communication - unless it's an information website - is positively suicidal. Firstly, these people have several PAs who screen their email, so you're unlikely to get through to them to tickle their fancy, says Coetzee. Secondly, most of them are older and less computer savvy. Thirdly, uninvited mobile and email messaging is akin to spam, and the association of a luxury brand with this form of communication would harm it. Print and personal contact remain as viable a marketing communication method as ever. In the right medium and properly handled, the former can lead to the latter. For example, Admakers is currently marketing an exclusive property development on Palm Beach Florida. Properties are sold off-plan ranging from around US$ 1.2 million to US$ 12 million and are often bought on the strength of the marketing material alone. “It's all about impulse,” says Coetzee. “A property at this level represents the same financial barrier of entry to the uber-rich as a chocolate bar for the average housewife at a Woolworths pay point.”
The development is advertised in publications like Robb Report and certain financial titles. Readers who respond are visited with a personal delivery of an imposing box of expensive presents, including the latest model iPod that plays a Hollywood-produced movie featuring the development. Chairmen and CEOs of the top listed companies on the New York Stock Exchange and Nasdaq are also targeted.
“These are busy people. Why on earth would they take time to bother with the box?, one might ask.” Coetzee says the sheer size and presentation is effective in getting their attention. It is manifestly not mass market, and this in itself sends out a signal regarding the potential desirability of the product for luxury customers.
When price and genuine scarcity is the overriding factor in defining luxury, the cost of making and marketing luxury goods and services is prohibitive for brands that fall between the super-rich and the merely rich. Nevertheless, the creation and marketing of the uber-luxury products have aspects in common that can be applied to luxury brands that are not defined by a R250k base price.
#1 Luxury Rule: Design
The rich love beauty. A Ferrari F430 is not really a better cat than a BMW M3, comments Coetzee. It's only marginally quicker, it doesn't hold the road better, and it's less convenent than the M3. Yet the F430 demands four to five times the price of BMW. Why? “It looks a lot better!” Coetzee says triumphantly. “Secondly, it demands four or five times the price.” That's confident positioning.
#2 Luxury Rule: Scarcity
“Scarcity is a big brand driver. Ferrari made only 4 000 cars in 2007. BMW made hundreds of thousands. It's a strategy of limitation,” says Coetzee. Encompassed in the rule of scarcity is exclusivity: the rich want to do things not everyone can do; they want access to experiences, people, and places that are not ordinarily available, as Brian Berkman points out.
Berkman, a journalist and publicist by profession, has made it his life's mission to track down and explain luxury. Exclusivity also implies a relationship with the brand, he says. At its more extreme end, for example, Coetzee observes that “if you don't already drive a Ferrari, you'll find it almost impossible to get on the waiting list (to buy one)...”
#3 Luxury Rule: Price
Luxury goods have to be priced above the point where the upper end of the mass market can creep in. “Harley Davidson has lost the price point advantage and sales are dropping,” says Coetzee. “Honda and Yamaha produced better bikes and better looking bikes, priced slightly above Harley and the original Harley drivers are looking elsewhere.”
#4 Luxury Rule: Halos
Where the price is expensive but not unreachable, the hoi polloi start indulging, cancelling the scarcity value that largely contributes to luxury. “Some of the old luxury brands are becoming commodities. And then there are so many fakes,” says Gary Harcourt of brand consultancy HKLM, which handles several luxury properties. Many formerly luxury goods now inhabit a world between luxury and mass market, as the association between class and luxury becomes less clearcut. The producers of luxury now make ultra-luxury things, creating a halo of luxury around their lesser products. Hermes has done it with the Birkin bag. A Hermes scarf is sold somewhere in the world every 25 seconds, but the wait for a special order Birkin can be up to six years. Alfa Romeo did it with the Alfa 8C Competizine last year, making only 500 cars, which sold for around R1.5-million each. The next car down in the Alfa Romeo range is a million rand less.
#5 Luxury Rule: Association
Luxury brands associate with other luxury brands. Berkman gives a whimsical example of how when Hermes announced their colours for the 2008 season, Ladurre patisserie, fasmed tea room on the Champs-Elysee in Paris, created macarons in the same colours. Among other things, it generated plenty of press coverage, which brings us to Rule 6.
#6 Luxury Rule: Editorial
Luxury goods and services have editorial in the right media. Upmarket hotels and fabulous yachts, jet interiors and luxury or sport cars are so exquisite that editors cry out to feature them.
#7 Luxury Rule: Engage all the sense
“The more senses you can stimulate, the greater the chance of someone remembering in an overcrowded marketplace,” says Coetzee. “The challenge is to get people into a situation where you can stimulate as many senses as possible.” A very interesting example of sensory stimulation is the Teremok lodges in Johannesburg and Durban. Each suite has its own personality, with a different, mood-setting selection of CDs for each and a different fragrance and confectionery for each. “Soon all special hotels will not just has Molton Brown or Penhaligon products in their rooms; they will have specially mixed fragrances, and that will be part of the hotel branding,” says Berkman. “These are the lengths they must go to in order to differentiate themselves.”
#8 Luxury Rule: Consistence and persistence
“If you want to play in the luxury market, keep hammering away at the same positioning statement,” says Coetzee. “Take BMW, Mercedes, Audi, SAAB or Cadillac - the look is always the same in any communication. If you ask what the look of Kia, Mazda, Toyota of Nissan is, no-one knows for sure.” A final insight from Berkman: “The luxury experience isn't in itself getting champagne, Russian caviar and blini. What makes the difference is when you can pay for it, but they don't ask you to pay.”
© BRAND Magazine. Article reprinted with permission.