Surviving In The Luxury Industry Finding Your Train Ticket

Discussion Summary!Albert Einstein was once on a train. He couldn’t find his ticket after searching through all his pockets and bags. The conductor approached him and said something to the effect of, «Dr Einstein, everyone knows who you are. We know Princeton can afford to buy you another train ticket.» To which Einstein replied with something along the lines of, «I’m not worried about the money. I need to find the ticket to figure out where I’m going.» Like Einstein, a luxury brand should worry not about getting money from present or future investors, but about where the business is going. When the Brand figures this out, I am confident the money will come, if needed. Youcef DRIDI

« It is essential to employ, trust and reward those whose perspective, ability and judgement, are radically different from yours. It is also rare, for it requires uncommon humility, tolerance and wisdom.» - Dee W. Hock

A Brief History of Luxury (1/3) Luxury was born in the dawn of humanity, when we started to bury our dead: •  It was the Answer to the human craving for

immortality and metempsychosis (transmigration of the soul)

•  From Ancient Egypt and its Pharaohs, Classic Italy, French Renaissance to Modern Times, two aspects of luxury:

1.  Splendor during life 2.  Highly ritualistic approach to the afterlife

Luxury is a term derived from « luxurie », which means « lasciviousness, sinful self-indulgence  »

A brief History of Luxury (2/3) For obvious economic reasons, Luxury was reserved to a small elite. It has always been a major sociological issue: •  Some looked upon it as pointless extravagance •  Others saw it as a powerful driver of artistic and

technical discoveries •  All times debate between Luxury as an insulte to the

poor and luxury as a source of skilled and steady jobs, art, culture, products and services

•  For each civilization though, Luxury gradually spread throughout society and eventually reached everyone, partially at least.

« Some people think Luxury is the opposite of Poverty. It is not. It is the opposite of Vulgarity » - Coco Chanel

A brief History of Luxury (3/3) The 19th Century had a profound impact on Luxury in Western society, at all levels: •  Adam Smith was very favourable to trade and to

luxury as the driver to economic growth •  David Hume separated Luxury and Morality,

providing a philosophical justification for the latter •  General democratization and industrial revolution

made it gradually accessible for all. Luxury is not isolated from the rest of the economy anymore.

•  The beginning of women emancipation until the late 20th Century gave it a social justification.

Issues in The 21st Century Overcome fierce competition from industrial products and their ultra sophisticated marketing, and adapt to the 4 major boosting drivers of modern society: 1.  Democratization (everyone has access to it and

hereditary social stratification is gradually dying) 2.  Globalization (a brand that cannot go global finishes

up disappearing) 3.  The rise in spending power through wage increase

(and falling prices for products and services) 4.  Communications: we can now come up with our own

social stratification through social media networks

Branding Issues in The 21st Century When a Luxury brand becomes the be-all-and-end-all for some individuals, guiding them in their social choices, they behave sometimes as if they belong to a religious group: 1.  Apple and the annual Steve Jobs’ shows 2.  The use of Chief Evangelist Officer terminology for marketing

roles in several corporations with a strong brand focus 3.  The non-return effect: once you taste Luxury, it is hard to turn

away from it Many fashion brands adopt the behavior of luxury brands. Sharing some aspects of luxury and a certain element of showing off, Fashion would like to think it belongs to the world of Luxury in order to improve its status. The semantic confusion is greater than ever in the 21st Century.

Luxury branding is not about getting you to chose a brand over the competition. It’s about getting you to see the brand as the only solution to your desire.

The DNA of Luxury (1/2) •  Its production centre is always rooted in its country of

origin •  A luxury product, who carries a whole universe with it,

is produced and only distributed in places that are consistent with its universe

•  Small volumes, high margins by all means (quality vs quantity)

•  Distribution of products is made in small nuclueus in key countries, with impeccable service

If not, the brand (even if global) ceases to be a luxury brand and is relegated to the consumer goods category, where it is unsuited and cannot survive.

Quality is not an accident. It is the result of high intention, high craftsmanship and aesthetics, sincere effort and skillful execution.

The DNA of Luxury (2/2) •  Luxury is a social marker •  Luxury is the symbolic desire to belong to a unique

class, which everyone would have chosen according to their dreams

•  Anything that becomes a social signifier can become a luxury

•  Anything that ceases to be a social signifier loses its luxury status

•  A Brand is cultural with a profound truth that brings us into resonance with it

•  Luxury = Pleasure with strong hedonistic component, over functionality. It has to be a multisensory compression (UX or User Experience).

Rich tradition wraps the brand with deep mystique. Mystique is a framework of beliefs built around the founder, endowing the person and the product with enhanced value and profound meaning.

The Role of Luxury Recreate The Stratification of Society

•  Luxury is both modern to the society, with a stamp of

timelessness •  Luxury is opposed to the consumer society: it is loaded with

meaning, to which ones becomes attached. •  It is hand-made and sold by one individual to another

individual. It is a personal experience and decision. •  It corresponds to a deep aspiration, whereas the consumer

product is the object of a spontaneous desire created and manipulated by traditional marketing, making consumers switch compulsively from one fashionable product to the other .

•  The keyword is a multisensory DREAM, not Envy…

Movie stars, musicians, sports personalities, royal families, fashion models, and designer themselves garner attention and impact, replacing aristocracy in our societies.

The Role of Fashion Respond to urbanization and massification

•  Human psyche is suited to live in small family units,

closely bound with nature •  In our large housing developments, fashion has

artificially given back a rhythm to time by marking the seasons, that done away with by urbanization

•  Modernity simultaneoulsly sets in motion a linear time (technical progress and history) and a cyclical time, which is that of Fashion – Baudrillard

•  Fashion creates an horizontal differentiation, as opposed to the vertical differentiation created by Luxury

Original Company

Distribution System

LicensingDistribution

for Licensees

HOME OVERSEAS

CORE

LICENSED

Differences Between Money & Luxury

Impact on The Stratification of Society

•  Money is the collective and unidimensional abstraction of value. It is not a product of social stratification, but rather a raw material for it.

•  Money fuels the luxury engine, but is not the engine. The engine is the recreation of vertical hierarchy, social stratification.

•  Luxury converts money into a culturally sophisticated product that is social stratification.

« Luxury is a necessity that begins where necessity ends. » - V. Kapferer

The Financial Duality of Luxury •  Luxury as a Social Statement in relation to other

people, products and services •  Luxury as a Personal Statement (individual pleasure,

cocooning, UX)

Money is Society’s Language, Luxury is its Grammar The Luxury Institute (USA), produces 2 barometers in this respect: 1.  The LCEI (Luxury Customer Experience Index) 2.  The LBSI (Luxury Brand Status Index)

«Just as grammar does for vocabulary, it is Luxury that brings monetary signs to create a language.» - V. Kapferer

Finding Your Train Ticket « Alice: Would you tell me please, which way I ought to go? The Cat: That depends on where you want to go to Alice: I don’t much care where The Cat: Then it does not matter which way you go. »  Alice’s Adventures in Wonderland – Lewis Carroll

Like in the discussion summary with Einstein’s anecdote, a Brand should find out where she is going and how to get there: •  French Luxury is the most studied topic in the world

(several additions to Unesco’s World Intangible Heritage List)

•  Paris is the most visited place in the world •  French Brands are experts in the taste, selection and

creation of luxury products. •  Starting point: Strong rooting in France (Paris) •  Ending point: Giving pleasure profitably across the

globe

Preparing The Journey « The best brands never start out with the intent of building a great brand. They focus on building a great – and profitable – product or service and an organization that can sustain it. » - Scott Bedbury

A Luxury Brand needs to eliminate anything that does not contribute to its identity, which in turn will bring the business back to profitability: •  Focus on the country of origin to (re) establish the identity •  Reduce the number of non-core outlets •  Reduce or even stop licenses and franchises •  Reduce debt •  Recruit Evangelists to create and foster a community

Applying the classic Ps of marketing (Product, Place, Price and Promotion), but replacing Promotion by Proselytization, which is the process of converting others to the Brand’s passion.

Shape The Client The model for effective brand evangelism is the relationship between a good parent and child, with respect and utmost care: •  Advise, Socialize, Educate •  Luxury is the domain of culture and taste •  Many well-off buyers do not have the gastronomy

codes themselves, but would love to have them •  Clients have to know how to appreciate the products

and consume them •  Videos and articles to be posted through social media

networks on the Brand’s view of Luxury, Art & Culture

« Why is it that those who have something to say can’t say it, while those who have nothing to say keep saying it?» - Anonymous

Talk The Walk The starting point of a profitable business is evangelism inside and outside the Brand’s world: •  Re-establish it locally in Paris or it birth place in

France, before venturing forth •  Get all employees understand the value that the

brand delivers and communicate about it internally •  Do not sell (people see videos or read blogs

because they want valuable information first) •  Communicate to those whom you are not targeting •  Cultivate closeliness to the initiates of art & culture

which is not yet popular. The new wealthy buyers are younger and eager for powerful impressions.

Evangelists should not be stars or celebrities. They should have valuable information they value and want to share. The test for good information should be: « is it good for our audience? » and not: « is it good for our organization? »

Walk The Walk: 5 Steps •  Step 1: from « me-too products in multiple segments/

categories » to « unique products in a few segments/categories of expertise

•  Step 2: from « customers adapt to business processes » to « business processes adapt to customers »

•  Step 3: from « price premium is imposed » to « price premium is earned »

•  Step 4: from « key assets are brick and mortar » to « key assets are people and relationships »

•  Step 5: from « brand validates customers » to «…and customers validate brand »

Taste is what money can’t buy: it is the qualification of the clients themselves that makes a luxury object. The popular saying is « Vox Populi Vox Dei ». In Luxury business, it is the reverse: Getting the recognition of a clientele whose choices shape the public opinion that follows them, will generate buzz. Then the press will write about it and customers will flow.

Thank you for your attention !

Questions? Comments? Usually, a business can get back to solvency in 6 months or less, without additional capital investment. Rebuilding a Brand should not take more than 12 months.