Luxury Brands – why so few are afforded the luxury!

Understanding the code, or the unwritten rules that play out in any category is mandatory for all brand managers. However, once having gained an understanding of the of code of practice demonstrated by the key players, brand managers have to choose whether they play by these rules or challenge the conventions. If one chooses to reinvent the rules it goes without saying they need to have a strong sense of how the target market is likely to respond. But challenging the conventions is the space challenger brands love to play.

However some categories afford far less flexibility than others. Luxury brands are one category where if you play with the code you may by definition no longer be ‘luxury’. The business models that drive luxury brand propositions are highly defining. For challenger brands identifying such rigid rules normally represents a golden opportunity. But in the case of luxury products sitting outside the category rules may work at odds with any sense of relevant positioning at the high end.

Jean Kapferer and Vincent Bastien in their book The Luxury Strategy outline the following operating principles that the best of luxury brands work to. These include:

– full control of the value chain
– full control of the retail experience
– highly selective distribution
– one-to-one relationship with clients at retail level
– high level of personalized services
– high level of craftsmanship
– exceptional level of quality
– no licenses
– no super-sales, no promotions
– always increasing average prices
– strong involvement with arts

Most of the principles above reinforce the critical attribute of exclusivity. Kapferer and Bastien remind us that products are perceived as luxury specifically because some people cannot access them. Products for which this rule is not met should not be called luxury products, but rather premium stylish products, for instance, or designer brands, or mass-prestige. For Kapferer and Bastien the ultimate test of luxury is the degree of incomparability a brand can foster, gifting it the freedom to set its own prices without reference to a competitive set.

However, whatever the model pursued it has to be sustainable, and as one can see from the business principles above the demands are high. It is why some brands such as Prada are shifting camp, relocating their manufacturing to lower cost countries and pocketing the dollars they are saving. Will it matter in the long run? Yes it will, and in fact over time you may find that the white space for any challenger brands simply resides within the established code of the category.

Peter Singline
Brand Scientist

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