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The Tao of luxury branding

Of all the topics in marketing, luxury branding is perhaps the most counterintuitive. Luxury branding is to branding what quantum physics is to physics: a topsy-turvy world where many of the ordinary rules don’t apply – where customers can’t be persuaded by functional arguments, fortunes are spent advertising to people who will never buy your product, and raising the price can sometimes increase demand.

Story by Prof. Stefano Puntoni



That might not sound like your business, but luxury is still worth studying, as many of the tools used in luxury branding can be useful elsewhere. Even business-to-business marketers can learn a lot from studying this weird world.

Driven by supply

The main difference: mainstream branding is driven by demand (What do you need? We’ll make it for you.); luxury branding is driven by supply (You’ve never imagined anything this great. Don’t you want it?). For example, while consumer product companies conduct focus groups to decide every detail of their products and packaging, high-end clothing designers choose what colours will be fashionable, and then more or less tell the consumer what’s in style.

Premium brands operate in a world of relatives. It’s worth paying X for this product because its higher quality offers a better value. Luxury operates instead in a world of absolutes. Luxury brands do not discuss value. Either you are willing to pay for the best or you aren’t – and best is never defined relative to the price.

Exclusivity

A luxury marketing pitch tends to be image-driven. Luxury ads are often deliberately ambiguous, making it easier for consumers to place themselves in that fairy-tale world. To enhance this illusion, such brands tend to share several other characteristics as well:

  • Luxury is scarce. Fiat, the owner of Ferrari, could expand the assembly line to meet demand tomorrow. Yet management chooses to maintain a two-year waiting list simply to heighten desire for the product.
  • Luxury is famous. Of course, social status and the envy it generates are important benefits of luxury. That’s why luxury brands cultivate awareness among people who will never buy the actual product. The pull of luxury brands is strongest when everybody knows the brand but only the very few can buy it.
  • Luxury is expensive. Another way in which luxury brands express their exclusivity is through price. In luxury, prices are an expression of this exclusivity rather than functional value. Often, in fact, a higher price can actually increase sales.

Overall, luxury brands are about exclusivity. It’s in everything they do, from the product to the price. The practice of luxury branding involves making things hard for the customers – harder to find, harder to buy, sometimes even harder to use. Mainstream brands by contrast are inclusive: they want you to know everything about them and they try to encourage you to buy, and make everything as easy as possible for you.

“Because I’m worth it”

Of course, hybrid models are possible. Some companies will feature a luxury line to build awareness of a product but depend on a premium line to support the bottom line, such as a cognac company that sells very special bottles for thousands but sells mostly €30 bottles in airport duty-free shops, or fashion companies that might have 100 customers for their couture line but millions for their lipsticks.

Luxury brands are always about making the customer feel special. Even premium brands have sometimes had great success with a pitch that emphasises luxury-style exclusivity: think of the most famous hair colouring slogan of all time – “Because I’m worth it” from L’Oréal, which turned the relatively high price of the dye into part of the product’s appeal, conferring specialness on the woman who used it.

Marketing ordinary products

What lessons can marketers of more ordinary products learn from luxury?

  • Be mysterious. Luxury brands seldom volunteer information. This can work just as well in B2B branding. For example, one way McKinsey & Co can support higher margins is the mystique and aura that surrounds the company.
  • Be infallible. No one ever got rejected for buying an engagement ring at Tiffany’s. Similarly, as the saying goes, nobody ever got fired for buying IBM.
  • Be firm. If the offer can sustain it, B2B customers may actually be reassured by a refusal to negotiate or even to emphasise price: FedEx never has discount days. Even the opposite can work: sometimes playing hard to get can help to attract customers. Sigmund Freud, who arguably made psychoanalytic treatment a kind of luxury product, went so far as to argue that paying for treatment was an important part of the cure.

But perhaps the most important and the most positive thing to be learned from luxury branding is the scope it offers the imagination. Luxury brands don’t ask; they invent. When a Steve Jobs gives the world an iPhone or even when a designer decides that chartreuse is going to be one of the colours of the year, the world becomes a little richer – even if (for this year, at least) you’re looking in from the other side of the velvet rope.

Prof. Stefano Puntoni

Stefano Puntoni is a professor of marketing at RSM. His teaching expertise is in the areas of brand management, marketing strategy, and consumer behaviour. He teaches brand management in RSM's Executive MBA programme and marketing strategy in RSM's MSc Marketing Management programme. He is also active in open enrolment and customised executive education.

This article was first published in RSM Outlook winter 2016 – RSM’s alumni and corporate relations magazine. You can download RSM Outlook here.

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Companies , Faculty & Research , Marketing Management , RSM Outlook , 2016 Winter RSM Outlook