Branding Strategy Insider

Brand Loyalty Rewards For The Ultra-Luxury Shopper

When it comes to luxury store retailing, properly rewarding a customer who spends $200,000 a year could be as easy as a walk in the park, or Park Avenue. But recognizing those dedicated shoppers who spend upwards of $1 million a year takes more than diamond points – this kind of shopper requires sincere eloquence. 

It’s a high-class, and at times bewitching, problem. 

After all, identifying these shoppers is not difficult. Luxury comes with an implied level of unparalleled customer service, so the top-tier shopper often develops an intimate relationship with her sales associate. That associate in turn becomes a de-facto ambassador, loyalty mechanism and extension of the retail brand. 

The trick then is combining that on-the-ground intelligence with shopper data to identify a loyalty reward the luxury consumer finds of real value. These are shoppers who can literally afford anything they want, remember – there is no question of need. Rather, it comes down to delivering a one-of-a-kind service or experience that falls squarely within their values. 

This is not exactly a revelation – wealthy shoppers have long equated luxury with their life experience. But in the past couple of years, the top-tier consumer has been changing how she shops, opting for private services rather than buying on the sales floor, and having items shipped home instead of advertising her splurge on the street. This indicates that even the exceptionally affluent are sensitive to flaunting their wealth when so many others are suffering economic hardships.

Understanding these philosophical shifts is critical.

The Anti-laws of Luxury Marketing #18

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

The Anti-laws of Luxury Marketing #17

17. Cultivate closeness to the arts

In traditional marketing, the brand seeks to appeal and to create an affective relationship. For that it often uses music, music that is as popular as possible, or at least appreciated by its target audience. The brand follows people’s tastes. The luxury brand is a promoter of taste, like art. As we explored in earlier posts, it maintains close links with art. But luxury is not a follower: it is creative, it is bold. That is why it is best for luxury to remain close to the unpopular arts – or rather the non-popular arts – those that are emerging and have yet to appeal to the majority, if they ever will. Louis Vuitton has long been sponsoring concerts of contemporary music, for example bringing the pianist Maurizio Pollini to the Abbaye de Royaumont to perform music by the little-known composer Luigi Nono, rather than by a great such as Mozart or Chopin. Similarly, following the pioneering work done by Cartier, the Fondations d’Art Contemporain are now flourishing in all the great luxury groups. In this way they are making themselves patrons of emerging trends, where they are forming symbiotic relationships that serve their purposes – making luxury-brand objects that are themselves works of contemporary art.

That is why it is so important to develop this curiosity about the here and now among those working in the luxury business and to encourage them to visit art galleries, biennales, and exhibitions of modern art.

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

The Anti-laws of Luxury Marketing #16

16. Keep celebrities out of your advertising

In traditional marketing, stars of stage and screen are very often used in advertising: there is nothing like a David Beckham for selling sunglasses or shaving cream. Nestlé has also got in on the act, with premium brand Nespresso calling on the services of George Clooney, and Nescafé recruiting the famous English soccer player Ian Wright. Nestlé, the world’s number one in food marketing, knows what it’s doing.

However, using celebrities to promote luxury products is extremely dangerous. A luxury brand is courted by the stars, in the same way as those stars are courted by journalists and paparazzi. As we mentioned earlier about a luxury brand’s typical relationship with its customers, it must respect them, but it also has to dominate them. Even the most famous ones. Calling on the services of a star is tantamount to saying that the brand needs some of this star’s status just to survive, and admitting that it has none of its own.

For the luxury brand, this is a gross error of strategy, for it turns the relationship on its head. Only brand domination, standing above everything like a god, is acceptable, not simply behaving like any ordinary mortal. If celebrities are used to promote the luxury product, the status of the latter is reduced to that of a mere accessory. Louis Vuitton advertising with Mikhail Gorbachev, former USSR President avoids this:

•    first, the celebrity is not a fashion symbol but a man who changed the world;
•    second, his Louis Vuitton is not the hero, but only the witness of an exceptional moment (a strategic negotiation).

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

The Anti-laws of Luxury Marketing #15

15. Do not sell.

This isn’t arrogance, not at all. The luxury strategy is the very opposite of the volume strategy.

If you pursue the strategy of systematically raising all your prices, as illustrated by Krug, you have to be prepared to lose sales and to lose customers. Most brands don’t dare risk it, or else go running after customers; when you get to that point you’re no longer talking luxury but mass consumption – which of course can be extremely profitable as everyone knows.

Krug did lose some accounts, some importers, it is true. If not supported by the Rémy Cointreau management in the steps it took, Krug’s change in strategy would have been stopped as soon as the first big client walked away. In luxury, not trying too hard to sell is a fundamental principle in relations with customers. You tell the customer the story of the product, the facts, but you do not pressure them into making a purchase there and then.

We said a few words earlier about the campaign BMW had conducted on the internet in the US; a number of the most prominent film directors each made a short-length film around BMW, having been given completely free rein – not a commercial, but free expression. These films were made available on the internet and they very quickly did the rounds in the United States. Commenting on this decision, the marketing director at BMW USA said: ‘When it comes to luxury, the best way of reaching the very well-off is to let them come to you.’

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

The Anti-laws of Luxury Marketing #14

14. Keep raising the average price of the product range

In traditional marketing, you launch a product at a skimming price, then when competition comes onto the scene, you drop the price. In luxury it is precisely the opposite. A luxury brand must always be seen to be restoring the gap, restratifying, and as such it is acting as a visible agent of meritocracy.

A brand that cannot grow in volume and profitability other than by launching accessible products shows that it is no longer part of the luxury market. For instance, the fact that Mercedes has launched its super top-of-the-range under a different brand name (Maybach -- pictured above) reveals its presumed change of strategy: Mercedes from now on will be the maker of regular and premium automobiles, and the luxury range now goes under the Maybach brand, no longer Mercedes.

The Anti-laws of Luxury Marketing #13

13. Raise your prices as time goes on in order to increase demand

In the standard market model, when the price falls, demand rises. With luxury, the relationship is reversed. In the 1950s, Krug was one of the smallest champagne houses. Its champagne had an excellent reputation, was adored by the great artists and performers of the day, and particularly appreciated in Great Britain. In the late 1950s Moët & Chandon, on finding that Krug was being rationed (the product’s objective rarity made that a necessity), launched its new product that was destined to upset the status quo radically. Dom Pérignon was introduced at a price three times higher than that of Krug. In order to speed up the symbolic acceptance of Dom Pérignon, a quantity of it was dispatched to the Queen of England, and in 1961, in the very first film of the James Bond series, Agent 007 drank nothing but Dom Pérignon.

How was Krug to respond to that in order to regain its position at the top of the champagne hierarchy?

-Should it do nothing, believing that the superiority of its product would speak for itself – the truth being in the glass?
-Or, should it imitate Dom Pérignon, and at the same time improve it (a Lexus-type strategy)? This seemed an impossible approach for a house that had been in existence for 160 years, managed by the same family for five generations, and conscious of its mission.

The Anti-laws of Luxury Marketing #12

12. Luxury sets the price, price does not set luxury

Money does not do a worthy job of categorizing objects or stratifying them unless they have been culturally coded. This ‘anti-law’ means that luxury is what could be called ‘supply-based marketing’. That is why traditional marketing is in a state of confusion here: it is fully ‘demand-based’. In luxury, you first come up with a product, then you see at what price you can sell it; the more it is perceived by the client to be a luxury, the higher the price should be. This is the opposite to what applies in the case of a classic product or trading up, where the marketer tries to find out at what price level there is room for a new product.

There is one key consequence for selling: sales staff in a store help people understand, share the mystery, the spirit of places and objects, and the time invested in each item – which explains the price. Customers will be free to buy later.

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

The Anti-laws of Luxury Marketing #11

11. The presumed price should always seem higher than the actual price

It is a telling fact that advertisements for luxury products often show only the product, without any descriptive copy, and certainly no prices. In the luxury world, price is something not to be mentioned. When you are dining in a top-class restaurant, do you select your dishes on the basis of price? Besides, in many such restaurants the guests’ menus do not show prices.

As a general rule, the imagined price should be higher than it really is. It’s the opposite in traditional marketing. Renault announced its Logan model as starting at $8500, but with the full set of options this would bring it up to $11,000. Every seller tries to attract consumers with a low price, a so-called introductory price, then tries to persuade the consumer to go up-range. EasyJet offers the prospect of round-trip tickets from London to Paris at around $45, but the number of seats available at that price are quickly sold.

In luxury, when an imagined price is higher than the actual price, that creates value and this result:

•    When someone is wearing a Cartier Pasha watch, everyone around them more or less knows its price, but tends to overestimate it (on account of its aura of luxury). This increases the wearer’s standing.
•    When offering someone a luxury gift, the gesture is all the more appreciated for the price being overestimated.
•    And lastly, when advertised, the price is that of the top of the range.

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

The Anti-laws of Luxury Marketing #10

10. Communicate to those whom you are not targeting

Luxury has two value facets – luxury for oneself and luxury for others. To sustain the latter facet it is essential that there should be many more people that are familiar with the brand than those who could possibly afford to buy it for themselves. In traditional marketing, the keyword is efficiency, but over and above efficiency there has to be a return on investment. In advertising for example, the media plan must concentrate on the target consumers and nothing but the target consumers – every person reached beyond the target is a waste of investment money.

In luxury, if somebody is looking at somebody else and fails to recognize the brand, part of its value is lost. It is essential to spread brand awareness beyond the target group.

(Madonna and her Louis Vuitton bag pictured above)

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