Life Style Marketing

Signaling Social Status With Luxury Brands

A recent (2010) article summarizes research regarding the motivation of people at various levels of "wealth" towards the "need for status." The article provides some interesting insights and acknowledges some short-comings. For example, the authors point out that the merchandise samples used, taken from the websites of the brands, were based on what the brands were offering and did not necessarily reflect what was actually selling.

We noticed a few other points that the authors might consider in any follow up studies:

1. Wealth was defined in terms of income. This, one supposes, would be contrasted with net worth, which was not measured.
2. Status was defined as "tendency to purchase goods and services for the status or social prestige value that they confer on their owners." This definition, on examination, is somewhat circular since the term "status" is included in its own definition.
3. The authors suggest that wealth and status have been "inextricably linked" since the 18th century yet assure us that the dimensions of their taxonomy, the same wealth and status, are two distinct characteristics.
4. The primary sample for the study was apparently taken during "intercepts" at shopping malls. One might question if people who are shopping at a mall are a random sample of all people, or more likely, a random sample of people to whom shopping is more important.

One point (to use a metaphor) of the research was the relative importance of "brand prominence," defined at the relative size of the logo, in the consumer's decision process. Less knowledgeable customers are seen as preferring larger ("loud")logos. More knowledgeable customers are seen as preferring the information conveyed by smaller (quiet) logos and the "subtle design features" they recognize. This ability to "recognize" quiet and subtle signals is determined to be one of the characteristics of the "Patrician" segment's ability to predict the price of an item.

An interesting question is the possible relationship between a person's ability to read subtle signals and his/her ability to achieve higher levels of income. For example, there is a general relationship between levels of education and income. Which brings us back to the question of the two axes of the taxonomy are truly independent.

How a Brand Thinks

Marketers often recommend conceptualizing a brand as a person. In this mode of thought, various human attributes are attached to the brand. These attributes are often the ones research has indicated are most important to the consumer. A famous example (dating myself) was the creation of the Marlboro Man to embody the attributes male smokers valued. Another example is Betty Crocker. Most brand statements today include some version of a brand personality.

What is missing? Well, if you are an employee of the brand you may have a question regarding how you (as an example) a 23 year old MBA graduate working in sales, how do you get to the point where you can act like the Marlboro Man might act in a particular situation? Not that you have to wear chaps and carry a branding iron; but how do you display the character of your brand in your personal behavior?

Or if you are working in Nordstroms, how do you enact that brand personality? Or a Mercedes dealership's personality? This is where the concept of a "habitus" (http://en.wikipedia.org/wiki/Habitus_(sociology) comes into play. There are several steps in developing (let's use the more common term) a habit. For example, there must be memories of actually performing the behavior to draw on. These behaviors are rooted in a belief.

So when we ask the MBA graduate to "act the way the Marlboro Man would" we should have previously provided some insight into how the true (brand) Marlboro man thinks and what he he believes in. We should have provided insight into how and why the Marlboro Man translates this in a particular set of behaviors. Very importantly we would provide insight into why other, alternate behaviors would not be acceptable to the Marlboro Man, even if they would be socially acceptable to someone else.

And we would have provided our MBA graduate an opportunity to practice.

The point is that an employee can act like the brand only if he/she has been taught to think and feel like the brand.

Critical Success Factors for the Luxury Market

What are the factors critical to success in the luxury market? How does a luxury brand different itself from a "mass" brand? What does a "mass manufacturer" trying to move up-market need to worry about? This one-pager summarizes key factors to which senior management should attend.(http://www.premiumknowledge.net/assets/files/pdf/Luxury_Market_From_an_economist_POV.pdf)

Affordable Luxury is Relative

I like The New York Times. I consider the Times an "affordable luxury." In my part of the world the Times costs $1.50 a copy. That's about three times (3x) the cost of the local paper. I consider the Times worth the premium because the articles are well-written and well-researched. And the content is well-edited. If you were so inclined you could say it is a well-designed and well-engineered newspaper.

So I was surprised when a review of the new Porsche in the New York Times hinted that paying $138,000 for a new cabriolet was a bit excessive.  This price is only about 3 x the price of an entry level luxury vehicle, about the same relative premium the Times charges.

This led me to wonder how an observer decides when the price of something is excessive. I think we base our judgments on our own experience rather than the perspective of the intended purchaser.

A recent Elite Traveler survey reported that private jets owners had spent over $400,000 on hotels, resorts and spas in the ensuing year. There are at least two ways to view that number.

One is that the Elite Traveler reader  spends approximately 8-10 times on vacations what the average household spends in a year on everything. That could seem a bit excessive.

Another view is that surveyed households total living expenses are about the same percentage of household income as the average household's. (In fact they may be a bit less.) That could seem in line. And buying a Porsche instead of a Bentley Continental could be seen as a modest purchase.

In fact, so would buying the Times.

Brand as Story

Marketers of luxury products know their brand should have a "story."  But how do they achieve it?  What are the elements of "story" and what separates a good story from an average story?

We were fortunate to stumble across Story by Robert McKee, an authority on the art of story-telling. McKee defines and describes the elements that result in a good story well told.

It is not difficult to translate his terms and recommendations about story-telling into telling the story of a luxury brand.

I concluded "brand" is like the protagonist striving for an "object of desire." (The "object" is a condition, like happiness, truth or beauty.)  The protagonist is driven by needs (values) that only the object will satisfy.

The protagonist reveals his character (brand character) by making choices in his quest. The choices (say, regarding standards of material, elements of design, levels of service, etc.) reveal his character. The audience (i.e., the consumer) identifies with the protagonist and participates emotionally and intellectually in his effort.

The "story" analog raises many useful questions. For example, where does the consumer see and hear the "brand story?" What are the words, pictures, movements that convey the brand story?

You get the drift.

Throughout the 400-plus pages McKee uses very concrete examples from movies to illustrate his points. This allowed me to see how great stories (brands) are relevant across time and culture and why mediocre stories (and brands) fail.

Is your brand story a Casablanca (or, at this time of the season, A Wonderful Life)? If not, you might return that tie you didn't want and give yourself Story.

On that note: Happy New Year!

LifeStyle and Style: Marketing Eddie Bauer

The New York Times has an article about the new leadership at Eddie Bauer. Neil Fiske intends to make (or remake) Eddie Bauer into "a premium active outdoor lifestyle brand that combines a sense of adventure with style." Neil refers to this as the brand's "natural path."

This description caught our attention. It used both "lifestyle" and "style," two words to which we attach significance. We turned to our data which organizes affluent respondents into six LifeStyles which have varying levels of style consciousness.   As you can see in the chart, the three LifeStyles to the left (which place higher importance on style) are not frequent purchasers of Eddie Bauer. They also have low future consideration.

On the other hand, the brand does relatively well with the three LifeStyles to the right (which place less importance on style.)

What is the "natural path" for this brand? Should it build on its relatively stong connection with affluent consumers in the Dependable, Economical and Practical LifeStyle segments? In which case our data suggests the brand should emphasize "comfort," "simplicity" and "versatility" rather than "style."

Or is the brand's "natural path" to increase its penetration of consumers in the Unmistakable, Understated and Tasteful LifeStyles by increased focus on "style?"

Can Eddie Bauer do both without again appearing to "zigzag and drift?"  Can it compete on two fronts simultaneously against L.L. Bean and Land's End?

Two private equity firms  (Sun Capital Partners and Golden Gate Capital) have a reported $614M riding on the answer. And we have some additional data and insight to share if anyone is interested.

   

Luxury Copy Cats: Fat Cats versus Fast Cats.

The New York Times of Tuesday, September 4, 2007 carried two articles I thought related to the subject.

First was the front page story, Before Models Can Turn Around, Knock-offs Fly. This recounted examples of fast-moving suppliers  that "mimic" designs created by leading fashion houses and eager retailers who sell their goods . It highlights the fact that there are "aspirational" consumers who want a piece of luxury but are unable to (or don't want to) pay the price.

In the same issue, in the Business Day Section was an column On the Road which described how the companies that market private jets have created jet cards as a lower priced alternative to fractional ownership. (The service can be purchased in lower dollar increments.) Marquis Jet Cards now accounts for "most of of NetJets' growth."

NetJets created its own "knock-off" for the aspirational private jet traveller. This is a creative way for NetJets to leverage real (planes) and intellectual (procedures)  assets. Unless I am mistaken NetJets has established its own charter service, a way to make its brand of jet travel available with even less financial commitment by a customer. So you can buy, lease or rent.

NetJets has lower-priced competition at each of these "pricepoints." It will not win all the business in this fast growing market. It has "fast follower" competitors who try to copy its best practices. But NetJets has established the rules of competition by having a leading contender at each tier in the market.

I think Gulfstream must be ecstatic that it has such a creative marketing partner.

Perhaps designers should find lcreative icensing partners and get them involved earlier in the cycle. Just a thought.

Boomers and Gen X: The Difference Between Style and LifeStyle

I am preparing a presentation about the differences between marketing luxury to Boomers (1946-1964)  and Gen X (1965-76). I am reviewing our data from a population of over 3500 respondents with an average household income of $263K.

The presentation is for a well-known brand that is concerned that its offering may not be getting as much traction with the next generation of luxury buyers. Is brand "erosion" across generations inevitable?

The answer is "it depends on the brand." Take apparel. Ralph Lauren (at 10%) and Ann Taylor (at 15%) do equally well with both generations. In travel, so does Four Seasons (23-25%) and Club Med (9%). (I consciously picked brands at very different price points for the comparison. Money is not the issue.)

Why do brands like these do well across generations? 

We propose that (a)well-managed brands are LifeStyle focused (b) that the basic values of a LifeStyle stay consistent across generations. Style changes but LifeStyle doesn't.

We have made a comparison of LifeStyles between the generations. That is, we analyzed our data to determine if the six LifeStyles that differentiate the Boomers from each other also differentiate the Gen Xers from each other, and in the same proportions.

(If you have read earlier entires you know the six LifeStyles have titles descriptive of their underlying values: Unmistakable, Understated, Tasteful. Dependable, Economical and Practical).

For example, 16% of the Boomers live a LifeStyle we have labeled Tasteful. They want things that will express their uniqueness, are distinctive, and will show good taste. Do these same LifeStyle motives drive the consumption of a similar percentage of Gen Xers?

There is no statistical difference between the percentage of Boomers with Tasteful Affluent LifeStyle (17.7%) and that of Gen Xers (16.2%). The same pattern basically holds across LifeStyles.

Well-manged brands understand their key customer's LifeStyle. They know the difference between style and LifeStyle. They tailor only their styles to fit each generation . 

Luxury Brands: Heritage

"Brand”

In the world of Luxury goods and services no topic is more “sacred” or important. Great economic value is ascribed to brand. As a result great attention is paid to the “managing” these brands and the “branding’ of their products and services.

Historically there are two alternative brand strategies. On the one hand there is “leveraging” a brand. This usually means extending it into new products, categories, distribution, price points (usually lower) and geographies. The improved economic value results from increased revenues. Armani did this when it introduced AX. BMW succeeded with the 3 Series.

But it is not a risk-free strategy. Barney’s stumbled with CO-OP and Jaguar failed with X-Type.

On the other hand there is a desire to increase or husband a brand’s exclusivity by restricting its distribution, increasing its price points (or reducing discounting) and elevating the perception of the brand. The improved economic value results from increased margins. Ralph Lauren did this when it introduced its Black and Purple Labels. Rolex did this to protect its core line.

Hybrid strategies appear. Coach has gone somewhat upscale as it expanded across categories. Burberry is going down market as it expands across categories. It will be interesting to see how the cross between Cole Haan’s brand and Nike’s “technology” turns out.

Brand creation and management is both an art and a science. The “art” lies in telling (in words, pictures, design, alliances, distribution, etc.) the brand’s story in a way that is relevant to the LifeStyles of the targeted customers.

In outline of the story of a luxury brand has four elements

• Heritage
• Excellence
• Marque
• Emotional Hook.

In this blog entry, we’ll address the first.

Heritage.

Most luxury brands are of artesian origin by definition. That is, they began with the passion of an individual or group of individuals for craftsmanship, quality of materials, design, service or some combination of attributes. Initially brands were the “names” of the artisans or the locations they came from. These “names” evolved into “marks” that were “worked into” the objects made by the artisan. (The word “brand” is German for “fire.”) The original purpose of brands was to provide confidence in the origin/source of the product. The brand indicated the item was “authentic.” Authenticity is very important to today’s luxury consumer.

Because artisanship was conveyed through an apprenticeship process, brands tended to become connected to the locations where the master craftsmen worked and taught. Institutions like guilds (and their successors) tended to increase the shared learning within a specific community. 

Over time, brands developed geographic connotations. The geography could be as small as a street (the tailors of Savile Row), a city (perfume from Grasse in France) a region (Champagne) or as large as a country (Swiss watches).  Certain regions become known for the quality of their output in certain products. The combination of a brand’s name and its geographic origin implied, conveyed or promised a feeling or tangible benefit.

The geographic origin of a luxury brand has always been an important part of its “equity” or inherent worth.  Many luxury brands take advantage of this phenomenon by institutionalizing their original location and making access to it an element of the branding process.

• Lalique takes great pride in showcasing its original showroom in Paris and Berreta has created a brand museum in northern Italy
• Many fine Scotch whiskeys make tours of their original (or oldest remaining) distillery a significant element of their brand communication process.
• European luxury car manufacturers encourage owners to accept delivery of their new car at the factory. The event includes a tour of the production line, a visit to the brand’s museum and often a spin in the vehicle on a test track. (The “B” in BMW stands for Bavarian.)

Recently the practice of outsourcing production has presented questions for luxury brands, especially apparel brands. (Deluxe by Dana Thomas). For example, can a Prada handbag be designed in Italy but manufactured in China? Can the electronics in a Mercedes be designed in Germany but manufactured in Mexico?  In most cases luxury brands have decided to guard their geographic roots very carefully.

To be continued with History..