18. Don’t relocate your factories
Reducing cost prices is vital in the mass consumer markets, and this often means relocating factories. Luxury management does not apply this strategy. When someone buys a luxury item, they are buying a product steeped in a culture or in a country. Having local roots increases the perceived value of the luxury item. BMW, which is successfully pursuing a luxury strategy, builds all of its automobiles in Germany – apart from the entry line: the 3 Series – and is keeping production of the Mini in the United Kingdom. Keeping production of its models and engines in Germany is at the heart of its brand identity: every BMW is an authentic product of German culture – apart from which, producing them in Germany is perfectly viable, there being no difficulty in passing any such additional costs on to the client.
In addition, BMW has a factory in the USA for its current models (3 Series), and also produces some of the 3 Series models in Thailand and elsewhere; these relocated models are no longer true luxury products, but they do serve as access products – products designed to initiate customers into the brand – like the small leather goods at Louis Vuitton: as soon as they can, every purchaser of one of these locally produced 3 Series will want to buy a ‘real’ BMW ‘made in Germany’.
Not relocating factories is as much a question of creativity as of production. When you no longer have a manufacturing workshop near you, creativity takes a nose-dive, because you lose the contact with the raw material and the way of working to be able to sublimate it into a luxury product. Once prêt-à-porter’s production facilities were moved abroad, French haute couture gradually went into decline; but, on the other hand, locating manufacture in China is going to lead to the emergence of haute couture in that country, especially as China has a history of luxury clothing – for the emperor’s court – going back several thousand years, and of producing very high-quality fabrics, silk in particular.
Excerpted in part from: The Luxury Strategy: Break The Rules of Marketing to Build Luxury Brands by JN Kapferer and V. Bastien, in partnership with Kogan Page publishing.
Sponsored By: The Brand Positioning Workshop