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Luxury Branding

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.

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Jason Lombard on November 18th, 2009 said

Great article.

One quibble however. BMW’s stateside facilities are reserved for the X5 and X6 Sport Activity Vehicles, not the 3-series as mentioned in the article.

Link: http://www.bmwusfactory.com/#/manufacturing/1968/

The 3-series is built in Munich, Germany just a stones throw from BMW’s Global headquarters.

Daniel Faintuch on November 19th, 2009 said

As the article points out later, the rule really should’ve been “don’t relocate the factories that manufacture your core products”. For side products that don’t have enough recognition to be able to damage the brand, offshoring still remains a viable option.

Daniel Faintuch

Patrick Blaauw on December 10th, 2009 said

BMW Thailand sells (CKD versions) of 3,5 and the latest 7 series built in a high tech factory outside Bangkok to by-pass the high import duties of +200%. Special, low volume models such as coupes, convertibles and M badged models are still imported (CBU).

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