Contact BSI
Derrick Daye
888.706.5489 Email us
Luxury Branding

The Anti-laws Of Luxury Marketing #22


Brand Strategy Alienware

22  Do not
implement group synergies

Implementing group
synergies is one of the most obvious ways to improve the net financial result
of a brand. But, as Ford discovered with Jaguar and GM with Saab, in luxury, it
is the best way to destroy the dream of the brand. For some pennies saved, you
lose your pricing power – one of the strongest points of a luxury strategy.
This is well known in the luxury market – as proven by the number of luxury
brands that have been almost eliminated by group synergies implementation — where
improving the net financial result is the ultimate goal.

Luxury brands face this threat each time one is acquired 
by an organization who does not
understand luxury strategy. One example is Dell’s acquisition of Alienware in
2006. Founded in 1996 in Miami, Alienware was the success story of luxury
gaming laptop and desktop computers. In 2005, Alienware had a net profit of $170 million. To improve on already strong
profits, Dell decided to reduce production costs. This was counter to Alienware's business strategy which had built its success on using the best elements
among all suppliers – whatever the
cost. A strategy which earned the brand thousands of passionate and loyal customers. Discounts were never offered nor needed. Willing to implement ‘group synergies’, Dell
cancelled all of the agreements with top-end suppliers, relocated production to Poland, created new distribution agreements and offered discounts on the
corporate website. The result: Alienware remains a premium brand, but has lost its aura –
and its pricing power. This is why luxury groups such as LVMH maintain the
independence of their brands as much as they can.

Contributed to Branding Strategy Insider by: JN Kapferer, excerpted from his book, The Luxury Strategy with permission from Kogan Page publishing.

See all of the Anti-laws of Luxury Marketing here.

Sponsored ByThe Brand Positioning Workshop

FREE Publications And Resources For Marketers

Recommend this story

Subscribe, Follow and Stay Connected to BSI


Leave a Reply

Submit your comment

More posts in Luxury Branding

Smartwatches Test Luxury Brands

Luxury Brand Strategy

The Anti-Laws Of Luxury Marketing #24

The Anti-laws Of Luxury Marketing #23

The Anti-laws Of Luxury Marketing #22

The Anti-laws Of Luxury Marketing #21

The Anti-laws Of Luxury Marketing #20

The Anti-laws Of Luxury Marketing #19