Luxury and Design-based Industries. Products and services. Approaches and specificities Luxury attributes Comes from inspiration Has a strong human component Creates emotions Has a tradition, history, heritage Quality more than quantity Rare, unique, exclusive Sophisticated Based on rarity of the offer,’ scarcity Multistory Strong esthetics/ beauty component Finesse of craftsmanship, precious materials and Ingredients Luxury hierarchy 1 .
Absolute a. The client wants to be surprised b. The product is essential c. Exclusive sale d. Haute couture, Jewelry and watches, luxury cars, yachts, private planes 2. Aspiration a. Limited series b. Selective retail c. Strong symbols d. Ready to wear, accessories, restaurants 3. Accessible a. Industrialized process b. Price based on competition c. Communication d. Perfumes & cosmetics, accessories The greater the inaccessibility, the greater the desire.
Managing luxury brands = managing desirability Luxury derives from “lug” = light: the brand expresses the aura (the light) of the creator Charismatic persona: the brand founder or the artistic director who designs the products Maintaining the aura: By mythologies the founders (e. G. In boutiques, through digital media) Through luxury flagship stores (lolls proposals): Through the alchemy and the serialization of the place, branded products leave the world of ordinary goods and become luxury icons.
Luxury now creates social stratification in countries in which it did not previously exist Western: luxury creates a sense of differentiation, means distinction and ;elite” culture Emerging countries: luxury creates a sense of belonging Premium vs.. Luxury: Some upper range branded products are more expensive than the equivalent luxury reduces Luxury is relative (lactose luxury In china) Premium brands want to create the best product and compare themselves with other brands vs.. Luxury refuses any comparison (superlative) Product developed according to consumers’ needs vs.. Reduce defined by the creator Product are tested and checked to be liked by the target vs.. Luxury goods are not tested (they shape future tastes) Fashion vs.. Luxury Fashion creates an horizontal sense of differentiation (member of a tribe) vs.. Luxury creates a vertical sense of differentiation Fashion is about the contagion of desire vs.. Usury is about social elevation Fashion committed to short term cycles vs.. Luxury is timelessness (durable and increases in value with time) Art vs.. Usury Both : Importance of aesthetics Increasing value of goods with time Practical utility is of secondary importance Impossible to get a consensus art is the driver, source of inspiration and social guarantor of luxury. Mass production reduce perception of exclusivity, aesthetic, technical superiority, distinction and singularity, thereby threatening legitimacy Design vs.. Luxury: Design is what links creativity and innovation. It shapes ideas to become practical ND attractive propositions for users or customers.
The role of the designer is to breathe soul into the lifeless product of the machine Design based industries: averaging, struck, Melissa (plastic shoes, famous fashion designers invited, flagship store), allies Luxury experiences are the biggest market in luxury In the traditional luxury goods there are mainly 3 groups: LIVE (Louis button): wines and spirits, fashion and leather goods, perfumes and cosmetics, watches and Jewelry, selective retailing (shepherd) Kerning (Gucci): luxury and fashion Richmond: fashion and leather goods (Chloe), watches and Jewelry (carrier) and riding instruments (Montanan) Family owned businesses (Hermes, channel, Pravda) Most share in Europe and America, but growing in rest of Asia Tourists account for 40% of global luxury spending French brands were created before (Channel, Christian Dior).
Strong link with haute couture Italian brands are more recent and business oriented: mix of design and business from start, creative line, Giorgio Airman, Versa, Gucci Creative process: articulation design/ creative team and management team; fashion cycle Retail presence: department stores, flagship stores in key location, key role of reconsidering Wine & spirits: Major players: Adagio, Backyard, live In this moments strong brands are getting stronger, quality and tradition are leveraged to educate consumers, champagne represents around 30% of luxury wines market Distribution is fragmented, marketing is secondary American wine critic Robert Parker Duty free operators, hotels, restaurants, clubs, mass merchandisers The relationship luxury marketers, whose point of differentiation is a combination of design innovation excellence and market execution. Five design based values held by luxury winemakers: Remaining true to craft Expressions of place Stylistic consistency Living up to the brand’s heritage and remaining current ChiГteat Maraud case New world wine producers: USA, Australia, New Zealand with modern production techniques, with diversified product portfolio of branded premium wines, huge investments in marketing programs Distribution is made exclusively through a limited number of negotiates Connoisseur’s brand vs.. Usury brand Connoisseurs: Knowledgeable consumers who have been purchasing the chateau Maraud for a long time Refined taste, deep expertise and intrinsically motivated Stable market More loyal Luxury brand consumers: Wealthy consumers who purchase Chateau Maraud because it is a prestigious luxury brand, rare and expensive Not really knowledgeable about wines May switch luxury brand Role of Robert Parker Reduces search costs Reduces consumer’s psychological risk Reduces consumer’s perceived risk Simplify the role of the retailer More affordable wine? Yes Product extension Competitors have done it Access aspiring customers and convert them No Chateaus maraud is doing well Risk of over extending the brand Trading down No marketing or distribution skills Lessons for other industries: Brand value: land or brand name?
In luxury, high temptation to extend (or dilute) the brand Role of external evaluators Control of the retail is essential Services Experiential luxury (hotels, restaurants, travels, spas) has grown 50% faster than luxury goods Service as a complement to a product Made to measure Personal shopper Vii room/lounge Valet parking Examples: hospitality (Ritz, el bull’, wellbeing); private banking Jewelry Major players: Carrier, TIFFANY, Bulgaria Retail: own stores (Stern, De Beers) Multimedia stores Segmentation: up to 5000; 5000 to 50000; above De beers: World’s leading rough diamond company Prior 1990 : quasi monopoly with 70% of the world market Spent 150-200 millions on advertisement for diamonds 1990 – 2000: new competition from Soviet Union and Australia. They terminate contract De Beers and produce low quality diamonds Then they start to focus on demand stimulation rather than supply Adding value through marketing and branding: highlight the distinctiveness of a De Beers diamonds 2001 : retail Joint with LIVE to develop a retail strategy Now, they have retail stores IN England, France, Ukraine, Russia, Japan… 007: launch of a website with e commerce capability Lecture 2: Creativity & Innovation Creativity: new idea; invention: new idea + implementation; innovation: new idea + implementation + market success Innovation is not invention Invention is the result of research and R&D Invention may never become an innovation Innovation is an invention adopted by users and that creates economic activity Top 10 R&D spenders are not the TOP 10 Innovative companies Innovation is key in all luxury : fashion designers, patents (L’Orealal), new processes, new tastes (wine); restaurants, hospitality Types of innovation: Production or service (allies, Renault cars, Elaine – service) Process innovation : molecular cuisine (liberal)
Organizational innovation: way to deliver product or process Source of supply (Melissa – plastic) Business model: product to service, free services, subscription (mod operandi, apple – ‘tunes) Innovation = multidimensional Elaine Product: sweet bacon Process: molecular cuisine Service: cotton candy served on a pillow Business model: pre set menu & menu as a souvenir Drivers for innovation: Demand or market pull: development of new products and processes as a direct result of market demand Technology push: utilization of known technologies to develop innovative products and processes Design for innovation: sign Design is key or important for 33% of growing firms The top performers gave design a high strategic significance Most companies that don’t use design compete mainly on prices Examples: Melissa, allies (cents dad chain) The role of the creator Case Averaging Reading: Design driven innovation is the creative process of transforming regular consumer goods respectively commercial products into something outstanding, using ground breaking innovative design and by that differentiating those items from competitions.
Three phases: Absorption: embodies an exchange of ideas of the main influential forces of the reticular industry in order to determine the future of the product design Interpretation: outcome of the absorption phase is presented and explained to the unaware public prior to its centralization Addressing: creating a competitive advantage of the innovative product by providing further information which are presented during the purchasing process. Design driven innovation : violation of design industry norms by not following procedures such as tech push (Adoption of design along with technology changes), “market pull” (adoption of product to consumers demands), “in/out licensing” of patents and internal R&D standard recess.
Overall, the R&D process and ultimately the resulting outcomes are rather based on the interactions of a boundless community of influential actors such as architects, suppliers, photographers, critics and many other professionals. These actors determine the products identity and meaning, long before it takes a final form. Furthermore, the maestros of innovative design are not mainly designers, as one would assume, but rather executives delegating and leading the process in close cooperation with artists such as designers. What is the financial impact of design driven innovation in the cases presented by averaging? Michael Graves (kettle for Allies), also designed a knockoff mass market version. The brand value of allies along with the design icon recognition, were the critical variables creating and increasing consumers’ willingness to pay.
Innovative design product allows companies to sell at high margin prices and designers to express their vision, resulting in a win win situation. Case El Built: What are the attributes of luxury that can be found in liberal? Where can he be positioned in the luxury hierarchy? Strong scarcity, exclusivity of the experience, constant effort to innocent, create and the push effect of its services are the main seasons to classify liberal restaurant as luxury brand and service Scarcity: serves only 8000 clients out of 2 million requests a year. Feeling of anxiety making the dream seem out of reach. Unique experience: introduces emotions in cooking. Surprise customers with the unexpected. Modern techniques and approaches, customers can experience unique moments.
Innovation and creativity: creativity, leadership and charisma of the chef are present and a defining influence across all the experience. Costumers. ” I do not cook for millionaires, I cook for sensitive people”: aspiration. What is the creative process of liberal Development team to create never made recipes. Team used foreign ingredients, pioneering techniques (deconstruction), revolutionary equipment. Molecular gastronomy, rare combinations of tastes and mass market consumption Research and development laboratory “el taller”. Creative process become more internalized and enriched. Only 8 or 9 people dedicated to research, generate, analyses and reflect.
Some of the team search all over the world and traveled abroad, attending specialized coursed, seeking new foods, techniques and different designs. The reflection phase also involved small and daily changes to the recipe in order to improve it according to the customers’ feedback. Research, learn and put these research and learning into practice What should come first: creativity or customer? Costumer pays to be challenged and surprised, achieving a truly unique experience. In liberal creativity comes first. If you know nothing about what to expect, it is like magic Lecture 3: Internationalization & sustainability Internationalization Increased purchasing power in the world Increased traveling Luxury consumption higher in rest Asia and Europe Europe:
Creates 70% of luxury products Exports 50% of the products that it manufactures Strong cultural dimension French: cultural, high prestige and long tradition Italian: sensual, seductive, esthetically: fashion and design English: aristocratic, excessive, transgressing Emerging markets Consume luxury Luxury used as identifier Symbol of success Cultural and social language Travelers and tourists represent a large part of the market: 54% in Hong Kong 25% in Europe In Portugal Tourists represent 55% market Angola, Brazil, china, Russia represent 80% of the tourists sales Live Entering now in the hospitality industry Asia is the biggest market Paris, Londoner, MilГo cicadas com mass luxury stores (Europe) Shanghai Tang Managing creativity Brand image and sources of brand equity?
Strength and weaknesses of the brand’s existing personality and image? First global Chinese lifestyle brand Joint with Richmond 0 development of relationship with international celebrities Try to be appealing for both wealthy Chinese and non Chinese. Start lines of licensed products (aware, fragrances) to increase sales and create wider audience Shops opened in high end hotels and airports Brand was confusing for customers Overpriced Why unsatisfactory results in building a global luxury brand Overestimation of American consumers Cheaper alternative in Chinatown Too high rents How is it positioned relative to other luxury brands? Made in china: mass produced products, dubious quality and cheap prices.
SST sought to change this perception and establish itself as a truly Chinese brand in the global market Sustainability: why does it matter? The affluent and educated customers care: responsible consumerism, particularly women Alternative sustainable business models: renting, luxury products: dress, bag Luxury means the very best. Products that damage the environment are not considered the best in class by consumers Brands set trends, lead the future and tell consumers what to care about all time Brands need to shape the future proactively WFM: iris: non profit independent research organization. It gathers information through questionnaires and through other company public documents Luxury products last longer: longevity 0 luxury products as an alternative to mass consumption.
Buying luxury as an investment rather than a treat Lecture 4: luxury brand and product management; the role of communication Luxury is the opposite of necessity key luxury marketing mix elements: Product (substance) Anything that can be offered to a market that might satisfy a want or a need In luxury product and service are indivisible, deliver excellence Brand (symbol) Name, sign, symbol intended to identify the goods or services of one seller and differentiate them from competitors Promise, meaning, consistently delivered. A contract Branding = creating a difference through intrinsic and symbolic value Communication (encoding & decoding) The definition and essence of luxury Resulting of going apart, making a leap: a big gap Luxury basic equation:
High visibility > restricted access High awareness > low penetration Manage the gap to maximize desirability (manage distance and rarity, nurture the dream) Luxury (absolute meaning): evokes the inaccessible life of the happy few Luxury (relative and dynamic): a needlessly expensive item yet so desirable My luxury (intimate) Sociological: Representing and incarnating social stratification Creating distinction, social marker Psychological Giving oneself a pleasure and a dream of exception Hedonistic and cultural The dual nature of luxury: intrinsic and symbolic value Intrinsic value (it comes first) tangible Product attributes: performance, durability, craftsmanship, quality of material = functional value The substance and starting point to building brand identity Craftsmanship is substance Symbolic value intangible Emotional values: brand story, heritage, layers of memories and emotions embedded in the products or services; associated with the social distinction (luxury as a marker) symbol nurtures desirability The specificities of the luxury business model Luxury is not more of premium Luxury builds up sales slowly and stays intemperate (longer seller vs. best seller – comparison with fashion) Fundamentals of the luxury business model
Full control of the value chain, up stream Control of distribution: luxury is retail Excellence Passion for materials, details, products Hand made partly , strong human content Not about volume, about the non ordinary, rate, exclusive Avoid licenses One to one relationships with clients Rooted, with heritage, authenticity, ID French savoir ever Italian dolce vita (Chinese ancestry) Never idealized (id = country of origin, symbolic value) Systematically increase price (proudly) Nurture and manage willingness to pay It is the business of elevation = unique/ special management rules to sustain the gap anti laws of marketing) Luxury Social elevation Timeless Self distinction Priceless Hedonism Superlative Social tribal Imitation Ephemeral Frivolous Premium Performances/ price Investment Comparative Seriousness Luxury marketing anti laws Forget about positioning, think identity only Luxury is superlative not comparative Luxury is unique Luxury is an expression of taste, of a creative identity, of the intrinsic passion of a creator Do not look after the product that seduces too many people Make it difficult for your client to buy Do not pander your customers’ wishes Luxury: the king is client. But it doesn’t mean the brand should not care about it’s clients nor listen to them It means that it should Do nothing that threatens its identity Resist clients demands when they don’t match the brands very precise vision The luxury brand comes from the mind of its creator and is driven by a long term vision. Not from listening to the consumer It is not the price that creates luxury.
It is luxury that creates the price Increase the average price to grow demand Do not communicate to sell but to dream Communicate to create the dream and recharge the brand’s value (luxury basic equation: awareness > access) Luxury communication is situated upstream of the purchase Luxury communication thinks brand first: Classical marketing: client > brand Luxury: brand > client Product and brand are spoken of in a dream like way Sufficiently vague: Many people can identify Each one can find their personal intake and share of the dream Artistic, highly coded (sourced from the brand’s soul Keep up with the time without loosing its style Never direct Highly allusive Reactivate legends and launch new icons Language is mostly non verbal Primarily visual and sensory Trigger desire 9 systematic signatures of a luxury brand
Logotypes – aesthetic signature Visual symbol adding to logotype Brand color Cult of detail Hymn to craftsmanship Brand style Nurturing the dream: There is no luxury brand without storytelling Feeding the myth (authentic or fabricated – Ralph Lauren) Every image needs to nurture the brand’s universe Ensure stability of the aesthetics over time Never Judge the effect of luxury communication by measuring the immediate impact of a sales campaign Layers of luxury communication Mass media advertising In store ( store staging) Targeted advertising (selective media) Editorial content Owned (collection shows, digital) Earned Brand ambassadors Collection defiles, art shows, creator, exclusive events Public relationships Concentrate on a strong universe, developing a strong image closely linked to brand ID Focus on events, not on competitors Top prestigious events No celebrity advertising.
Instead brand testimonials/ brand ambassadors Communicate well beyond your target Beware of celebrities Do not manage celebrities Do not manage consensus Don’t talk about money No price No discounts or savings No financial results Luxury brand identity Heritage: reflect the alchemy of history, trade and people that distinguish places and rand’s Heritage: a) people (founder, creative director); b) place of origin (rottenness); legends/myths (icons, stories); products (masterpieces of quality) “start quality’: products that speak to the ages but feel intensely modern. Creating a memorable experience for their customers. Luxury borrows from religion and art, being intrinsically creative.