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18 “Anti-Laws of Marketing”

29 september 2009

Luxury goods manufacturers are being advised to rip up the marketing rule book and embrace their heritage, prestige and brand cachet if they are to overcome a second consecutive year of sales declines, www.diamonds.net says. The traditional tale of the luxury sector always had a happy ending: a recession-proof industry catering to those unaffected by financial downturns. But the story has taken a twist. With banks failing and bonuses evaporating, even the international elite is feeling the pinch. Luxury expenditure will decline by 6 percent, or $300 billion, globally in 2009, according to Verdict Research.

In order to survive, luxury brands are being told to throw away their conventional, tried-and-tested marketing principles such as the "customer is always right." Professor Jean-Noel Kapferer and Vincent Bastien, authors of The Luxury Strategy, assert that the surest way to fail in the luxury business is to use such standard marketing techniques. They propose 18 "anti-laws of marketing," which they insist high-end brands should follow instead of upholding the status quo.

Kapferer and Bastien both have heritage in the premium marketing world. Kapferer is professor of marketing strategy at the HEC School of Management in Paris, while Bastien is the former managing director of Louis Vuitton Malletier and chief executive of Yves Saint Laurent Parfums.

Now they are calling on their former colleagues and employers to change their strategies before it is too late. For example, Kapferer and Bastien say it is dangerous for luxury goods to "pander" to customer wishes. While responding to consumer demand might make sense for most businesses, this is not true for luxury brands. They warn, "There are two ways to go bankrupt — not listening to the client, but also listening to them too much."

Instead of attempting to transform consumers' desires into products, the pair claim a luxury brand should be driven by a long-term vision that emanates from the mind of its creator. Kapferer and Bastien cite BMW as a brand that has effectively shown "a willingness to resist client demands when these did not correspond to the company's very precise vision as to what made for a true BMW." For instance, the car manufacturer has refused to increase legroom space in the back because this would ruin the purity of the car's line and so destroy its brand value.

Another marketing principle states that to poach clients from other brands, companies innovate with new products aimed at increasing penetration. The authors say this is a mistake because it will dilute the brand's value. "Wider availability erodes the dream potential among the elite, among leaders of opinion," they warn.

Michael Wainwright, managing director of Boodles, who runs the 200-year-old family-owned jeweler with his brother Nicholas, says he sticks to many of the principles set out in the 18 anti-laws. Rather than discounting, which Kapferer and Bastien think is a terrible mistake, Wainwright says he will think of new ways to shift stock. "We'd never have a sale if something wasn't selling," he says. "I'd rather break it up and reuse the components."

He also agrees with the authors' view that "the role of advertising is not to sell" but to build the "dream" of the product or service. Wainwright says, "our advertising is never a call to action. We are not advertising so we can sell more diamond rings, we are advertising so that when someone decides at some point in the future they want a piece of jewelry, they think of Boodles."

He also agrees that another anti-law banning the use of celebrities in advertising is a good principle. Kapferer and Bastien suggest that using stars implies that the brand is weak and needs the personality's power to shine.

"We'd never use a celebrity to advertise. If a brand can't stand on its own two feet, then there is something wrong with it," Wainwright asserts.

Many luxury experts disagree vehemently with the approach set out by Kapferer and Bastien. Guy Salter, the deputy chairman of Walpole — an invitation-only trade organization for British luxury brands — says that taking the very "purist" line advocated in The Luxury Strategy is too late for an industry with so many companies involved. He warns, "The cat is already out of the bag; luxury is bigger than it was."

He does admit, however, that after the boom years of luxury, there needs to be a level of quality maintained among brands if they are to continue attracting spending. Particularly important is to concentrate less on breathtaking "temple" stores and more on the brands themselves.

Salter says that luxury goods should not try to apply all 18 rules to their businesses, as they will only fit the highest-end, most exclusive brands. "I think if you genuinely applied them all across the board you would either go bankrupt or alienate half your customers," he says.

He disputes Kapferer and Bastien's theory that the company should disregard consumer preferences. "In my experience and from all the data we have, it is the consumer who is now leading the way. They are less loyal, less likely to take things on trust and make a whole range of complex decisions."

Janet Carpenter, the general manager of Leo Burnett's luxury division, agrees that luxury brands in 2009 need to show their premium quality by offering people a way of expressing their identity, rather than concentrating on being elitist. She says, "While I agree with some of the 18 points, this is based on a very traditional view of luxury. What we are finding is that luxury has become a lot more nuanced. It's as much about people looking for new ways to define themselves as it is about exclusivity."

Luxury is no longer simply about using the most expensive and inaccessible materials or craftsmen, she suggests. It can be about the methods used in production or having the highest standards.

"Nowadays there is so much more involved, in terms of altruistic and ethical concerns. People are looking for different aspects that help them project themselves as more complex and more original people than just as simply owners of expensive things," she says.

The ethical nature of premium brands does appear to be more important to luxury buyers than ever before. Fifty-four percent of wealthy consumers responding to a survey by The Luxury Institute recently agreed to some extent that luxury brands are produced in countries where workers are not treated fairly; 50 percent agree too many brands are produced in countries where manufacturing pollutes the environment.

Milton Pedraza, chief executive of The Luxury Institute, says that the recession is the perfect time for senior luxury managers to "rewire their mental model of the luxury world" and update inflexible, rigid enterprises in order to survive. Pedraza asserts that dictating product and service terms to consumers in a one-way conversation will no longer satisfy today's consumer, who is used to offering feedback at the click of a mouse button. He disagrees with Kapferer and Bastien, claiming that companies should seek to understand consumer needs, address their unstated needs and even anticipate future needs. He cites examples, including Toyota's luxury line Lexus, for its after-sales service, and luxury hotel group Ritz-Carlton for its powerful customer relationship management system, which anticipates customers' needs wherever they may travel.

He does agree, however, with the sentiment expressed in the 18 anti-laws that too many luxury companies, blinded by a search for growth, have expanded into categories and segments in which they have little or no expertise. Pedraza states that many of these products in non-core categories provide no competitive advantage. He points out that consumers are not stupid and can "discern between true and pretend luxury expertise."

The Luxury Institute study bears this out: 62 percent of wealthy consumers believe a luxury brand can only be an expert in a few truly related product categories. Furthermore, 40 percent believe that luxury brands are becoming a commodity. Consequently, Pedraza says the true economic return on resources deployed in these categories is negative, although, he claims, few brands bother to measure true profitability — another area in which the industry needs to make advances.

In a recession where even the super-rich are reevaluating what they buy, The Luxury Institute suspects there will be a flight to "authentic luxury." Pedraza proffers Hermes, Chanel, Harry Winston and Christian Louboutin as examples of those brands correctly focusing on luxury. They are seen as an investment despite the expense.

Mark Henderson, deputy chairman of luxury tailoring brand Gieves & Hawkes, agrees that to attain consumer investments, companies must understand what is the "perceived critical mass of the brand" and develop that core personality. He cites Louis Vuitton as one example, specifically the brand's famous luggage. For Gieves & Hawkes, he suggests that the brand's critical mass is located in its suits; this, he claims, is why its bespoke suits operation is thriving at the moment.

To ensure standards do not slip, the company has joined forces with other Saville Row tailors to establish the Saville Row Bespoke Association, which is aimed at protecting and promoting bespoke tailoring. Henderson said, "With this protection, I am confident that bespoke tailoring will still be happening in 100 years time." While the brand does have some lower-priced made-to-order and ready-to-wear options, it is this bespoke aspect that Henderson believes gives Gieves & Hawkes the credentials to survive a recession.

Boodles' Wainwright echoes this by suggesting that companies must act as curators of their legacy. He claims that he feels like he looks after the "family jewels," which allows him to plot his strategy beyond a generation.

Wainright says that when some businesses become very large it becomes too easy for them to be "run by accountants" and cut on what might seem to be the more lavish aspects of brand building, innovation and creativity. He states that, despite being an accountant himself, Boodles does the opposite and creates pieces of very high value — interesting jewelry made on a speculative, "slightly risky" basis. "We have to push the boundaries of design, even in a recession," he says.

But Kapferer and Bastien say there is one area where luxury brands must absolutely not push the boundaries. They consider selling luxury online to be inconsistent with true luxury values.

While Kapferer advocates that true luxury brands should communicate online, he says there is not yet enough ability to personalize or create a multisensory experience on the Internet for such goods to be sold online. Until this time, he argues, luxury brands should not indulge in ecommerce.

Others, however, believe that day has already arrived, and that reluctance among luxury companies to embrace digital channels has more to do with lack of understanding of the medium than shortcomings in the possibilities of technology. Upmarket clothing brand Hackett's marketing director Mark Owens says, "With advances in technology, you can give a richer experience and in some ways do things you can't do in-store — it almost adds a fourth dimension."

He adds that when customers come into the company's physical stores, they will get a taste of the "Hackett experience," but that people want the convenience of shopping online. Wealthy customers may be cash rich, but they are often short on time. Owens continues, "New technology can deliver things that people believe to be important, and some of it provides what luxury brands are meant to be about — having a one-to-one relationship with people."

While Kapferer and Bastien's 18 anti-laws of marketing may help brands redefine their core identities at a time when they need to strip back their operations, Owens says that the future challenges for luxury will require more, not less, flexibility. He sums it up as follows: "If customers want something, you have to accommodate them, to a degree. I accept that you have to stick to your principles but I think you also have to realize that the world has changed."