There's been a lot of talk lately about the impact of the economic downturn on luxury brands. Some have asked if we're about to see a number of so-called luxury brands come crashing down to earth with a bump.
Well, as Confucius famously said, "Even in a fair wind a turkey can fly."
Consumers are becoming much more discerning about the purchases they make and will interrogate the luxury credentials of the brands they are considering to a much higher degree. Luxury brands that pass the test will survive and ultimately win, both in the short and long term.
The issue is that in recent years luxury has become more ubiquitous. During the Non-Inflationary Consistently Expansionary (NICE) 1990s, a lot of premium brands sought to tap into consumer aspirations for luxury. Growing disposable incomes and an appetite for high-end goods created a new marketing concept: "masstige", luxury and premium goods for mass market consumption.
As a result, these brands tried to position themselves as "luxury", with the pricing to match. We had the opportunity to buy everything from luxury soap to luxury ready meals. While money was plentiful or at least relatively easy to come by, we were happy to pay.
But now, in the late 2000s, are we really buying luxury brands or simply consuming premium products and services that masquerade as something they aren't? They use the words and language of luxury -- as well as charging high prices -- but do the propositions stand up to real scrutiny or offer genuine value for money?
If not, we need to ask how we tell them apart.
Real luxury brands have their own eco-system. This is a set of behaviours or rules that cross product categories and defy the norms that characterise the product or brand category. Genuine luxury brands share a number of key characteristics:
- Firstly, they have real authenticity. Typically this stems from an inner conviction or belief that created the business or brand in the first place. For example, Hermes with its artisan approach to leather and saddles, BMW with rear wheel driving and Mont Blanc with highly crafted pens that can work at high altitude.
The authenticity of the design, craftsmanship or service clearly signal "luxury" to a potential customer. Patek Philippe watches even position the brand as an heirloom in waiting, with the "begin your own tradition" strap-line - Secondly, luxury brands are icons. They exude utter confidence in what they do and how they do it. This usually manifests as examples of over-engineering that signal to customers an obsession with quality or delivery beyond normal expectations.
For example, Rolex has created a watch to work at up to 200m below sea level and Range Rover's passion for performance ensures its cars can cover more than 40,000 miles off-road continuously. Examples of over-engineering also provide great alibis or reasons to believe in the authenticity of the brand. - The third key characteristic is scarcity or rarity. Increasingly, customers want to feel a sense of connoisseurship or discovery with the brand they choose. Gucci has recently suffered a dip in results which it attributed in part to over-exposure and too many entry-level products.
Interestingly, BMW has managed the clever trick of being the fourth largest-selling car marque in the UK without losing the brand cachet. The Kelly bag by Hermes is, of course, the best example of this -- openly publicising the long waiting lists and encouraging customers to wait in line for "their turn".
Using these principles and approaches, real luxury brands can retain their status and remain relatively unaffected by economic turbulence. They can hold their nerve.
The key is to avoid the temptation to chase sales by broadening their product portfolio, opening up distribution or even discounting products. This can cause real long-term damage to the reputation and brand. Pierre Cardin's lengthy period in the wilderness and gradual comeback to date are testament to that brand's overexposure in the 1980s.
For premium brands that run the risk of being caught out in the middle -- neither value for money nor luxury -- the solution is to quickly adopt a brand-building approach that focuses on key luxury brand behaviour. Companies like Audi and Duchy Originals must be looking hard at themselves and asking if they are truly luxury enough.
After all, certain elements are integral to a real luxury brand: building an authentic story; creating alibis that evidence that story; developing the notion of rarity or scarcity; and allowing customers to create a sense of connoisseurship. Only that will separate the wheat from the chaff.