Luxury Brand Extensions: Wise Decision or Risky Strategy?

luxury brand extensions

I am a fan of classic watches. The product itself is a marvel of craftsmanship, precision engineering, and design. Add heritage to the mix and you have the perfect ingredients of a luxury brand.

Professionally, the watch industry offers valuable lessons in premium and luxury brand management.

As a casual industry observer, the launch of the new Baume watch brand by Swiss luxury conglomerate Richemont Group offered the opportunity to address an increasingly popular strategy: luxury brand extensions.

Has the Luxury Industry Lost Its Luster?

The strategy behind the new brand (almost) make sense. Penetrating a new segment in such a conservative category, requires bold moves, and Baume seems committed to tackle many of the challenges the luxury watchmaking industry is facing.

The primary product function (indicating time) has become irrelevant in the decision to buy a watch rather than using the smartphones and smart watches. According to Julien Tornare, CEO of Swiss luxury watchmaker Zenith, “Mechanical watches are not there anymore to have the primary function of indicating the time. Their role is to present part of our personality.

Luxury brands have long been criticised for their business practices, expanding from the materials used in their products, to supply chain management issues. Luxury brands such as Burberry came under intense consumer scrutiny for their practice of burning excess inventory to protect the brand from counterfeits, and the materials used in their products.

Luxury brands often lack transparency, and have become very profit oriented. The segment is dominated by 3 conglomerates that are publicly-traded companies, in a continuous pursuit to acquire independent luxury brands. Many feel these luxury brands have lost their luxury DNA, and have abandoned their artisan, family oriented roots.

Supporting the point above, production of many luxury products has been moved to low-cost manufacturing countries with questionable labour practices. Few luxury brands are openly admitting this practice, however consumers are starting to take notice. This practice goes against their brand’s DNA and certainly provides no justification for high prices.

The Brand Extension Temptation

Brand extensions are a very tempting growth strategy. Leveraging a name consumers are already familiar with lends instant credibility.

This Baume brand poses a strategic dilemma; while the brand name is an obvious offshoot of Baume & Mercier, its positioning and go-to-market strategy is the complete opposite of the traditional luxury model.

According to the company management, Baume aims to become relevant to an audience traditional luxury brands fail to capture: the environmentally –conscious, sustainable consumption consumer.

Baume watches are made using responsible-sourced, natural, recycled and upcycled material, without the use of any precious metals and stones, or animal materials.

The brand uses a direct-to-consumer distribution model via its own website, rather than the traditional brick and mortar, or company-owned stores.

There Is Only One Problem

The sustainable consumption trend is very popular, especially with the younger audience Baume is targeting, so the brand’s positioning makes perfect sense. With one exception: its name.

The Baume name creates an instant connection to the established Baume & Mercier and signals to consumers the watchmaking expertise.

However, the Baume name poses a great risk, of the luxury brand losing its cache. Why should luxury shoppers continue to buy into the Baume & Mercier story, when they can have almost the same name on their wrist, at a lesser cost?

Luxury brands, just like ordinary and premium brands, go through a period of transformation, adaptation and soul searching. Protecting the brand cache, and selling the dream, require carefully-planned and prudent strategic decisions.

Moreover, the eco-friendly, sustainable brand positioning, while great in theory, often fail to produce sales results. Since the Baume name comes with an existing “baggage”, and management should really question the brand’s ability to extend from the “luxury” to the “sustainable” space.

Nike “Considered”

Nike tried a similar strategy with the “Considered” line of products, in 2005. Despite the glowing press reviews and positive PR the brand received, the products fail to sell. It turns out the sustainability positioning was too drastic of a departure from the brand’s “performance” image.

Less Risky Strategic Alternatives to Luxury Brand Extensions

While the need for growth is understandable, there are a few less risky strategies a luxury brand can employ, to avoid alienating existing customers.

One strategy is to reposition a brand you currently own rather than launching a new one. This strategy works best for companies with a large brand portfolio, such us the Richemont Group, and its many watch brands: Vacheron Constantin, A. Lange & Söhne, Jaeger-LeCoultre, Roger Dubuis, Piaget, IWC Schaffhausen, Officine Panerai, Ralph Lauren, Baume & Mercier, Cartier, Van Cleef & Arpels, Montblanc, Dunhill.  Why not reposition one of these brands as a “sustainable” alternative, rather than creating an offshoot of a reputable, heritage brand?

Secondly, the company can make the parent brand slightly more accessible to new consumer groups. One option, commonly used by premium car manufacturers, is to offer entry-level models with fewer features but featuring the prestige badge in front. These lost leaders are meant to attract a younger audience who aspire to drive a premium vehicle. Going back to our case study, the price gap between Baume and the parent brand’s entry level models is a few hundred dollars. Why not launch a “sustainable” entry-level model under the parent brand, even if less profitable, and allow the customer to take pride in wearing a Baume & Mercier?

A third strategy is to focus on capturing market share with the existing brand. The luxury market is constantly evolving both geographically and demographically. Rather than investing in launching a new brand from scratch, companies might find it easier to adapt, extend and reinvent themselves for organic growth.

As the luxury industry becomes more polarised, we will witness more attempts to leverage established names into new territories, be it demographic, geographic, or simply a new mindset.

Baume has a lot of things going for it; however “borrowing” the name of established luxury brand comes with inherent risks. Only time will tell if the strategic bet will pay dividends and Baume will become the independent, self-sustaining brand it wants to be.

In the next article I will continue the journey into the watch industry. The focus will be on another brand introduction, in the same category, with the same positioning, and brilliant strategy and execution.

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Indian Luxury Education: An Eye Opener

This is a guest post by Love Ranga, Chief Strategy Officer and Author, The Ghost of Luxury

September 2008

“So, what do you know about Luxury Retail?” asked the interviewer.
“Sir, in Luxury Retail we sell expensive products,” replied the candidate.
“And?” the interviewer persisted.
“Here the customer is the ‘rich’ king,” the candidate answered with a big smile.
The interviewer laughed and continued,” Can you name a few luxury brands?”
“Sure, sir. Versaake, Louiss Vuittan, Zeghna-”
“Interesting way of putting them across. How are the three different from each other?” the interviewer scratched his head.
“They are all the same. They sell high quality luxury fashion,” pat came the reply.

The Background

Such was the status of ‘so called’ potential work force when India had just opened up to structured luxury retail. To meet the high standards, the brands in the business of conspicuousness had no alternative but to poach manpower from hospitality and aviation industry.

Gradually, as has been the case elsewhere, was felt the need of absolute professionals with deeper understanding of luxury brand management. Hospitality professionals no doubt displayed sophistication, but lay flat in application of luxury strategy. For apparent reasons, most of them were restricted to front-end, selling goods at the boutique.

Indians who travelled to European institutes, specifically to become skilled at the art of luxury, gained immense favour back then in India. Seeing the gap, institutes like IIM and SDA Bocconi introduced specialised short-term executive courses in India.

It was not until 2014, the country could see its first full time post-graduate course. Pearl Academy runs a postgraduate and even an undergraduate program in luxury management.

Today, the competition grows immense with new names like Fad Academy, Instituto Marangoni, SP Jain, MBA ESG and more finding their feet in Indian Luxury Education segment.

Content Management

Courtesy legendary maharajas who revelled in brands like Rolls Royce, Chaumet, Jaeger-leCoultre, Boucheron, Vacheron Constantin, India has since long been acquainted to luxury consumption.

However, there never existed any firm connection with the contemporary concept of luxury, something Europe is famously known to practice. As a result, the first courses struggled with content generation and management.

The state of affairs in fact, has not improved much. Indian academicians approach the subject of luxury, taking cues from generic business management, marketing and retailing. The Indian Luxury professionals, on the other hand, for obvious reasons fall short on academic rigour required to deliver such niche courses.

A more serious issue is the lack of content. Either the faculty could not comprehend the available textbooks on luxury, or they could not build upon them to accommodate long-term courses. Most did not aim to do research to create relevant content of their own.

The students pursuing these courses, quite often complain of redundancy and generalisation, widely triggered by basic brand study and rigidity of teaching modality.

The Foreign Association

It was unambiguous from early stages that any luxury course in India would need a foreign association. How else can Indian students witness the true luxury destinations like Paris, Milan and Switzerland?

Every such course therefore, is either validated or run in collaboration with a foreign counterpart. This, understandably, leads to division in revenue and equity between the two institutes.

In this regard, Roberto Riccio, CEO of Instituto Marangoni has been smart enough to open a new campus in Mumbai. If it offers a full time course on luxury in future, its students will get to remain with the same school throughout their modules in India and Europe.

The other schools must learn if they have to remain competitive. Of course, their Mumbai campus is not only about Luxury courses.

A foreign tie-up also addresses the crunch of meaningful and exciting content. The experience imparted by the foreign counterpart, paired with cultural excitement becomes so overwhelming that students find the inputs of Indian institute vague and insignificant upon comparison.

The Treatment

For a moment imagine a luxury product, in concern of which its creator focused only on positioning it at a high price, but did not pay attention to detailing and artisanship. Most luxury courses in India are the result of similar ideology.

Needless to mention, they are more expensive than regular design and management programs. If not for the heavy revenue they bring in, the basic expectation of quality inputs deserves attention of the same strength.

To achieve success in terms of numbers and content quality, the treatment of luxury courses must change. Right from marketing collaterals, to counselling sessions, from assessment strategy to grooming sense of faculties, pretty much everything should undergo an overhaul to meet the standards of luxury.

Teaching Talent

The ideal faculty is the one in possession of both luxury trade experience and academic understanding.

We have briefly touched upon how the two cadres of academicians and Indian professionals fail to provide real value to luxury courses. The solution lies in hiring either, and further training them to inculcate the other missing half. Training the teachers therefore is of utmost significance.

This also means that one kind of training plan cannot suit everyone. It must be individually tailored, depending upon the kind of experience one has gathered in past.

Another, crucial aspect here is knowledge sharing between entire course team. The business of Luxury relies on strict strategic coherence. Hermès is probably the example of highest order.

The students need to learn the art of creation and maintenance of coherence before they head out in the industry. A faculty cannot preach it, without first infusing coherence within the course. The entire team must come together to align individual course deliverables towards a specific end.

A course on luxury must exhibit a character of its own, for it is in no way less than a luxury product. This goes beyond the traditional approach of Constructive Alignment.

Teaching Methodology

‘Value for money’ is an ideology deeply rooted in the Indian culture. No matter how rich, one will not buy a luxury automobile without bothering about the mileage, something that technically becomes illogical at that end of the spectrum globally.

It is not very different with Indian students when they indulge in the expensive service of luxury education. They expect wow factors in return, in addition to decent internship and placement at the end.

Which is why, one teaching medium fails to command attention. PowerPoint presentations cannot do the trick every time. Teaching modality, assessment tool, teaching strategy, all must change regularly to maintain interest.

The Showmanship

The term ‘faculty’ may have been used in this article until now for ease of understanding, otherwise faculties must assume the standard and mentality of a ‘trainer’ while dealing with Indian Luxury Education aspirants.

Showmanship, is what is the need of the hour, something mostly, the trainers are identified with. A surprising action, a shocking revelation, an unusual teaching style, a bit of entertainment is the right way of delivering such expensive courses.

The modern concept of luxury may belong to Europe, but it is only a matter time when Indian clientele and brands decipher the absolute codes of luxury. Many global luxury brands are already here, and more are eyeing entry in this market of burgeoning high net worth individuals.

The demand for learned professionals is surely going to rise in the coming years. The Indian Luxury Education segment is not even a decade old, the misses and hits are part of the learning. What matters, is the evolution. Is it not evolving at a healthy pace?

Love Ranga is a luxury business leader, educator and an avid learner. He is the originator of ‘Brand Extremity’, hailed as the most aggressive tool ever devised to facilitate indefinite coherence and extreme differentiation for luxury brands. His most recent book, ‘The Ghost of Luxury’ is widely acclaimed as an exceptional content on strategic luxury brand management.

Post his experience with brands like Versace, Corneliani and John Smedley in India, in the capacity of Chief Strategy Officer; he strategized India’s first short-term Executive Luxury Brand Management course in association with SDA Bocconi, Milan. Later, he joined a Laureate Network Institute to lead India’s first full-time programs on Management of Luxury, validated by Italian design institute, Domus Academy.

Backed by a decade of intense experience, he consults for various luxury brands and luxury education institutes across the globe. Often invited as speaker and trainer, he is described as the facilitator of innovation and creativity.

Luxury Marketing: The Difference Between Fashion and Luxury Brands

Apple Watch


The launch of Apple’s 18-Karat Rose Gold edition of the Watch, with the price tag of $USD 12,000, and supported by a stylish 12-page spread in Vogue magazine has signaled to many the company’s expansion into the luxury segment.

The hiring of Angela Ahrendts from the British luxury brand Burberry was considered the first move in the same direction.

But can the Apple Watch be positioned a luxury product? Are the high price tag, beautiful design, quality materials, and an emphasis on personal style enough to position Apple as a luxury brand?

The Fashion Brand: A Definition

In one of my previous articles on luxury marketing, I summarized the difference between premium and luxury brands. Is is time to highlight, for those involved in luxury marketing, the difference between fashion and luxury brands.

A clarification is needed before we continue.

The word “fashion” in the context of this analysis does not refer to brands in the fashion industry (clothing and accessories, jewelry, makeup, etc). Those brands can belong to any category, including luxury (Burberry, Prada, and Hermès for example).

A fashion brand offers products, in any category, that follow a popular trend or style. Most mobile phones are fashion objects that become obsolete once a new design/technology gains traction (usually in less than a year).

Luxury Versus Fashion Brands: Key Differences

It is very important for any marketer managing a brand at the borderline between fashion and luxury to properly answer the question: “Should I follow a luxury or a fashion brand strategy?”

Luxury brands should be managed fundamentally different than ordinary, premium and fashion ones, due to differences in product characteristics and target audience.

The chart below summarizes the key differences between a fashion and a luxury brand.




Product Design

Changes frequently and drastically depending on the current popular trend. Iconic design that changes very rarely as an evolution, not drastic departure from the initial concept.


Broad price range, depending on the brand positioning within its category. Inaccessible to most, price acts as a selection tool that limits the access to the brand.

Price Discounts

A very common strategy, in particular at the end of the season, when the product is no longer in fashion.  Not advisable, the high price increases product desirability.

Celebrity Endorsement

Seeking endorsement from current trend setters in entertainment and sports is a very common strategy. Not advisable, as luxury brands transcend the current trends and celebrities.

Product Line

Can be broad-one product for each segment targeted. Very narrow-a flagship product and only few variations.

Country of Manufacture

Usually manufactured in low-cost countries, to allow for price flexibility at the end of the season. Manufacturing country is not important in purchase decision. Country of manufacture is part of the brand myth. Brand should not relocate manufacturing facilities to lower cost countries. Country of manufacture is very important in the purchase decision.


Immediate. The goods have to be delivered in time to capture the latest trend. Not urgent. The wait for the product to be built/created/fully matured contributes to the overall luxury experience.


As seen above there are many differences between fashion and luxury products. High quality materials, state of the art manufacturing, and high prices are not enough credentials to justify the “luxury” label.

Can a Technology Company Offer a Luxury Product?

Technology companies, such as Apple, will face an impossible task in their quest to break the luxury barrier. Technology is probably the fashionable, ever changing category, where products become obsolete not long after purchase.

The Apple Watch is no exception. Luxury watches a passed on from generation to generation and increase in value, whereas the Watch will become irrelevant once a thinner, bigger, more performing model will be released next year.

Book Review: “The Management of Luxury”

The Management of Luxury

Luxury branding is the favorite topic among the readers of this blog. My previous articles on how to manage luxury brands received the most number of shares and some passionate comments and opinions.

Luxury brand management doesn’t receive the coverage it deserves, given the positive dynamics within the segment. According to Bain & Company, the number of consumers who shop for luxury products has tripled since 1995, reaching 330 million in 2013.

Given the limited amount of information on the topic I am very happy to introduce you to another book dedicated to those in charge of managing brands in the luxury segment: “The Management of Luxury-A Practitioner’s Handbook”, published Kogan Page USA in 2014.

Receiving this book was another confirmation of why I enjoy reading the printed editions: its covers have a nice velvety feel, and the choice of font and layout makes for a pleasant read. But, as I would soon discover, not an easy one.

The book is a comprehensive and multi-national collection of perspectives into the management of luxury brands. 50 contributors from 11 countries contributed to probably the most detailed and multifaceted coverage of luxury marketing I have come across.

The topics are grouped into 4 parts: the luxury market, luxury brand strategy, luxury business strategy and luxury responsibility.

Overall the book is very academic in nature and addresses the many questions any firm targeting the luxury consumer should answer: “how to enter a vast and foreign market and how to make an impact while not diluting the brand; how to optimize the retail experience and not sink millions in the process; how not only to sell online but also to be successful in doing so; and how to diversify without overstretching the scope of the firm”.

The level of detail the authors go into to illustrate the various concepts is impressive, and nothing is left to chance. The cases studies used to reinforce the key concepts cover well-known luxury brands such as Dior, Coach, Gucci, Escada and Ferrari, which reinforces the book’s practicality.

And if that wasn’t enough, the long list of notes at the end of each chapter invites the curious reader to further exploration and investigation.

One topic I particularly enjoyed was the one covered in Chapter 3, that explains the motivation behind luxury purchases.

According to the authors, there are five extrinsic (public reasons, called effects) for which people shop for luxury goods:

The Veblen Effect (showing off)-people in this category see luxury as a way to display and seek external validation of their wealth and status.

The Snob Effect-consumers in this category purchasing a luxury item makes them feel good psychologically.

The bandwagon effect- these category of luxury consumers associate luxury goods with belonging to a desired social group, like their wealthy friends, neighbors and other people they want to be associated with.

The hedonic effect—these consumers find personal pleasure in owning luxury goods.

The perfectionism effect-these consumers perceive luxury goods as a reflection of supreme quality, versus ordinary, mass-produced goods.

As I mentioned in the introduction this book is a complex read. Making the most of it requires important time commitment and taking many notes.

“The Management of Luxury” is probably the only book the specialist working in luxury brand management would need to read to feel more prepared to tackle the challenges the luxury market poses, and be able to make more informed decisions.

Luxury Marketing: Should Luxury Brands Sell Online?

Luxury Marketing

The number of luxury consumers reached 330 million in 2013, up from 95 million in 1995, according to a study released by Bain and Company earlier this year. That’s a healthy 300% increase over almost 20 years.

The same study predicts that 10 million customers will be joining the segment every year, bringing the total to 400 million luxury consumers by 2020.

Luxury marketing’s goal is to adapt and capture the “new entrants” before they become loyal to a competitive brand.

Luxury Brands’ Reluctance to Sell Online

A decision luxury brands have struggled with is the adoption of eCommerce as an alternative to the traditional distribution channels: company-owned and department stores.

According to Elora Consulting, in 2015 only 20% of luxury brand sales will be generated by the online channel. The relatively small percentage shows luxury brands’ reluctance to adopt eCommerce.

The question “Should luxury brands sell online?” generated a lot of discussion, with both sides offering some very solid arguments to support their opinion.

Arguments Against Selling Online

One of the biggest supporters of the idea that luxury brands should stick to their traditional offline retail strategy is Jean-Noël Kapferer. Jean-Noël is an expert in luxury branding and the co-author of “The Luxury Strategy”, a comprehensive guide on how to build luxury brands.

In his opinion a luxury brand that is sold online ceases to be luxury, for a few reasons:

  • Online channel damages a brand’s elite and exclusive status. Ordinary brands use the online channel to provide customers with instant availability and convenience. Luxury brands on the other hand need to be selective and exclusive, so  internet selling is rather a disadvantage.
  • Online is often associated with lower prices. Luxury brands that sell online are automatically affected by this consumer perception, thus loosing their prestige and the ability to command a high price.
  • Retail experience is part of the luxury brand story. The internet is a very impersonal shopping environment that not able to replicate the true luxury brand experience.

Arguments For Selling Online

The proponents of the online strategy see the luxury brands’ reluctance to embrace eCommerce as a missed opportunity to reach the new, modern luxury shoppers who are very comfortable with online shopping. Some of their arguments include:

  • Wealthy individuals spend more time and money online than the average consumer. They feel very comfortable in the online environment and spend large amounts of money shopping for goods from the comfort of their home.
  • Inability to target the next generation luxury shopper. The future generations of luxury shoppers grew up and are very comfortable in the online environment.
  • Physical luxury retail store can be intimidating. Remember the Oprah incident in the Swiss luxury store, where the sales assistant refused to show her a luxury bag? Just like art galleries, some shoppers are reluctant to enter a luxury store, fearing they might be judged and even refused service.

My Personal Opinion

All statistics show the eCommerce channel is growing in double digits year after year. The nature of the product doesn’t seem to be a barrier, since these days you can buy almost anything online, from shoes to sunglasses, to even automobiles.

From a brand owner’s perspective, online sales means a broader distribution and instant access to a broad geographical market. Luxury brands should consider taking advantage of this opportunity, given the exponential segment growth.

That being said I don’t think the online strategy is suitable for ALL luxury brands. Below are some questions that should help luxury brand managers in their decision:

  • Does the purchase decision depend on the client’s ability to touch, feel and try the product?
  • Is exclusivity related to limited geographical availability?
  • Is the place of purchase (such as specific city, or geographical area) the key driver in the purchase decision?
  • Are counterfeit products a big issues in your product category?
  • Is the luxury experience provided by the brand’s retail presence impossible to reproduce online?
  • Will the online store make the product available to a category of consumers you don’t want associated with your luxury brand?
  • Will the online channel cannibalize existing store sales?

If the answer to most questions is “Yes”, the online strategy is not appropriate for your brand. But before you answer, remember to explore all options to go around different obstacles.

For example, the concern that clients need to see and try the product in person might only mean that online availability is relevant to repeat customers, who already had know the brand and feel comfortable buying it online.

Exclusivity might be addressed by a membership store with restricted access based on very selective criteria.

As always, I am interested in your opinion on this topic. Do you think eCommerce is a viable channel for luxury brands?

Book Review: “The Luxury Strategy” by Jean-Noël Kapferer and Vincent Bastien

The Luxury Strategy

During the month of March I decided to focus on luxury brand management. As the final chapter of my “luxurious” journey, today I am reviewing “The Luxury Strategy: Break the Rules of Marketing to Build Luxury Brands” by Jean-Noël Kapferer and Vincent Bastien.

The second edition of this book was published by Kogan Page USA in 2012.

Even since I read his book “The New Strategic Brand Management“, Jean-Noël Kapferer has become one of my favorite marketing authors. His books are insightful, well-documented, and filled with real life examples. The book I am reviewing today makes no exception.

Vincent Bastien teaches marketing at HEC School of Management Paris. Between 1988 and 1995 he was the CEO of Louis Vuitton, part of the French luxury conglomerate LVMH.

“Luxury” is a word that’s overused and often misunderstood. This books has two clear objectives: to define the true luxury brand, and provide a comprehensive luxury brand management guide.

Because, as the book illustrates, successful luxury brands shouldn’t be managed using classic brand management principles. Actually, as the title suggest, luxury brand management often requires going in the opposite direction and breaking the marketing rules as they apply to ordinary and even premium brands.

The luxury brand definition is comprehensive and consists of 6 criteria:

  • a very qualitative hedonistic experience or product made to last
  • offered at a price that far exceeds what their mere functional value would command

  • tied to a heritage, unique know-how and culture attached to the brand
  • available in purposefully restricted and controlled distribution

  • offered with personalized accompanying services
  • representing a social marker, making the owner or beneficiary feel special, with a sense of privilege.

Another important distinction the book makes is between premium and luxury brands. This separation is important in today’s overcrowded marketplace, where the two terms are often used interchangeably.

The chapter I found most interesting was “The Anti-Laws of Marketing”. Here we come to understand that luxury brands have to be managed fundamentally different. The 24 anti-laws of classic marketing listed here are sure to generate a lot of debate among marketing professionals.

Let’s take brand positioning, a fundamental brand management concept. According to the book brand positioning is not applicable to luxury brands:

Luxury is “superlative” and not “comparative”. It prefers to be faithful to an identity rather than always worrying about where it stands in relation to a competitor.

I personally disagree, as I believe positioning is applicable to all brands, luxury or otherwise. Brand positioning is relevant to all segments where consumer has to make a choice between brands, and I believe the luxury shopper makes choices as well (Ferrari vs Lamborghini, BMW vs Mercedes-Benz, etc.).

Another point of debate is the recommendation that luxury brands should avoid selling on the internet. Many will perceive this advice as simply outdated, and irrelevant given today’s fast growing digital channel.

I actually believe that, given the specificity of the luxury brand, this strategy makes a lot of sense. Luxury is characterized by very selective distribution, and a long sales cycle (the need to sell the “dream” before you sell the product). Internet provides instant availability and easy purchase, not to mention lower prices, which works against the luxury strategy.

“The Luxury Strategy” is a very intriguing book that can generate passionate discussions, depending on one’s perception of luxury.

If you are in charge of managing luxury brands, or an entrepreneur looking to add a luxury brand to your portfolio this books is worth a look. Will it change your perceptions of luxury? Probably not, but it will definitely present an original and competent point of view on luxury marketing.

If you are interested in luxury brand management, make sure to check my other related articles:

Marketing A Luxury Brand: Part 1

Marketing A Luxury Brand: Part 2

Luxury Branding: The Difference Between Premium And Luxury

Luxury Branding: The Difference Between Premium and Luxury

An article on the NBC News website announces the new 2014 Hyundai Equus, with a price tag of over $70,000:

“At next week’s New York Auto Show, Hyundai will spotlight the 2014 Equus, the mid-cycle update of its premium-luxury sedan. The sedan will compete with high-end makes, such as the Mercedes-Benz S-Class and BMW 7-Series.”

Did you notice the dash between the words “premium” and “luxury”? Has the distinction between “premium” and “luxury” become so insignificant  that it’s almost impossible to quantify?

Can a brand such as Hyundai, that many would equate to “affordability”, suddenly become a player in the premium, or even luxury segment?

I have to admit the line that separates the “luxury” from “premium” has become blurry. Is Volvo a premium, or a luxury vehicle? What about BMW?

Many luxury brands launched “teaser” products, at much more affordable prices,  in order to attract the new, younger clientele.

In Canada for example, the lease offers for the entry level BMW 3 Series are very aggressive: the difference between driving a Toyota and a BMW can be as little as $100/monthly.

Luxury branding requires proper distinction between the terms. Because, as shown in a previous article, luxury brands have to be managed differently then ordinary, and even premium ones.

The chart below summarises the differences between the true luxury and premium brands.




Target Audience

Broad-whoever can justify rationally and financially the added benefits has access to the brand. Narrow-only a small percentage of the general population can afford the brand.


The higher price is justifiable by the extra features versus a regular brand. Greatly exceeds the functional value of the product. Acts as a selection tool that limits the access to the brand.


Broad, a variety of channels can be used simultaneously: corporate stores, independent retailers, online, catalog. Highly selective, and almost exclusively through a corporate-owned channel.


Mass communication. The goal is to inform and create brand preference. Appeals to both ration and emotion. A blend of imagery and sometimes (extensive) copy. Selective communication. The goal is to educate rather than inform.

Product Line

Can be broad-one product for each segment targeted. Very narrow-a flagship product and only few variations.


Mass production. The goal is to produce as profitably as possible. Manufacturing country is not important in purchase decision. Handmade. Method of production is part of the brand myth. Brand should not relocate manufacturing facilities to lower cost countries. Country of manufacture very important in the purchase decision.


Immediate. Customers are not willing to wait. Not urgent. The wait for the product to be built/create/fully matured contributes to the overall luxury experience.

One last note on luxury branding: stretching the brand upwards into the premium segment is common practice (see the Hyundai example above).

Stretching a luxury brand downwards in order to broaden its appeal should be avoided at all costs. The risk of losing its core and profitable customer base greatly offset the short term (financial) benefits.

In the last article in the luxury branding series I will review a brand management book that provides detailed guidelines on how to manage a luxury brand.

Marketing a Luxury Brand-Part 2

The first article in this series listed the unique ingredients of the true luxury brand: selective ownership, timeless design, a unique brand story and of course, a high price tag.

It’s now time to address a fundamental brand management question: can traditional marketing principles be transferred to the luxury market? Can a luxury brand be managed using the same set of strategies and tactics as an ordinary, or even premium one?

Most of us responsible for brand management in the consumer goods industry are familiar with the classic marketing strategy: a unique and differentiated brand positioning, and a strategy that aims to steal market share from competition.

Do the same principles apply to luxury brands? The simple answer is no. Actually, managing a luxury brand requires taking brand management into the opposite direction.

Let’s take a look at some classic brand management concepts and how they apply to the luxury brand.


Building a strong brand is important in any category, including premium products. In the luxury world, a strong brand is more than important, it is vital.

A consumer who shops for a car starts with identifying the functional and emotional needs: fuel efficiency, seating capacity (2, 5, 7 seaters), design (SUV, sedan, wagon), fun to drive (Subaru vs Hyundai). Once these criteria are established, the options are narrowed down to a few brands: Toyota, Honda, Ford…etc. Needs first, brand second.

In the luxury market the brand always comes first. The luxury shopper wants a Ferrari, not a 2 seat vehicle that makes a lot of noise. The luxury brand translates the essence of the product, the heritage, the history, into one’s desire to own it.


Brand positioning is a fundamental concept in consumer brand management. A brand should choose a relevant way to be identified and differentiated in the consumer mind, vis-a-vis its competitors. Consumers use comparative methods  to select a product, based on functional and emotional perceptions the brand managed to create in their minds.

The concept of brand positioning in not applicable to the luxury market. As I mentioned earlier, the purchase decision is “superlative”, not “comparative”. Luxury shoppers choose the brand that best reflects who they are, and how they want to be perceived by society. Each luxury brand brings a unique character, an identity that cannot be replicated or compared.

Comparing two luxury brand is like comparing the work of two musicians. Who is a better composer, Mozart or Beethoven? The comparison doesn’t make sense-both artists offered the world great masterpieces.


Classic marketing books teach us that mass production helps companies achieve economies of scale. Brand managers are responsible for identifying relevant consumer needs and trends. Once these needs are identified the company designs and markets a product with those features that could be standardized and mass produced.

In the luxury world, product development is an inside-out process. The product is the unique reflection of the creator’s skills, his/her personality and not the result of consumer feedback. Consumers then will be educated on its characteristics, unique history and merits.

Luxury brands are never mass produced. Rather, many associate luxury to handmade, uniquely personalised to individual taste.


In the consumer goods industry, the goal of the distribution strategy is to get the product into the hands of as many people as possible. Availability is key as consumers are not willing to go out of their way to purchase it.

Purchasing luxury is part of the journey, the experience, the initiation into its cult. A brand that can be seen, touch, experienced (even if only for a limited time, inside the store) loses its luxury status. A brand that is available at every pillar and post is not a luxury brand.

Luxury brands enjoy very selective distribution, usually through the company-owned stores. This channels allows for the brand message to be controlled and communicated properly. The role of distributors is.

The preferred method of distribution is company-owned stores, where the message can be properly controlled. This allow the sales person to focus on only one thing: to educate the potential buyers on the privileges that come with owning the brand, and turn them into members of the selective brand club.


The classic pricing strategy in consumer brand management is launching a product at the high enough price to take advantage of its novelty. Once the segment becomes more competitive brand managers often use price incentives to maintain or increase the demand.

Price acts only as a selection tool in the luxury world.

According to Kapferer“A luxury brand must always be seen to be restoring the gap, re-stratifying, and as such it is acting as a visible agent of meritocracy”.

The higher the price, the better the perceived value. This is very much true in the emerging countries. In China for example, rich clientele see the high prices and a protective barrier from the rest of the society.


Ordinary brands are advertised using a mix of rational and emotional messages that entice clients to consider it. The rational/emotional ratio changes as the brand becomes stronger, in favor of the latter. However, there is always a rational reason to justify a purchase, even with the premium brands: people buy emotionally and justify rationally.

Product functionality is rarely advertised in the world of luxury. Exceptional product quality is a given, even if this is not always true. Many luxury products have flaws. Luxury watches are known to be less accurate at keeping time than ordinary ones. A Ferrari has its fair share of reliability issues.

Graphically, a luxury brand ad makes almost exclusive use of suggestive imagery. The copy is kept to one or two words, if present at all.

Luxury brand management requires going against the classical marketing principles. Many companies that have acquired luxury brands failed to market them successively for this only reason: failing to adapt their strategy to the luxury market.

Ford’s management of the Jaguar and land Rover brands are good examples of applying classic principles to the luxury brand. Both brands ended up being sold at a loss to Tata Motor of India.

Marketing a Luxury Brand: Part 1

Marketing a Luxury Brand

Today I am starting a series of articles on marketing a luxury brand.

It’s sometimes hard to believe there are brands for which the words “Sale” or “Limited Time Offer” are not part of the vocabulary. In fact, the higher price tag only adds to the myths these brand managed to create over time.

I am referring of course to luxury brands.

The word “luxury” is used very loosely these days. We have all seen ads promoting a product as “an affordable luxury”, “your everyday luxury”, and so on.

This article will try to define the true luxury brand. What are the characteristics that make it “luxury”? Are expensive products automatically “luxury” products?

Marketing a luxury brand is not (only) about setting a price that makes it beyond the reach of most people. Here are some key ingredients, common to brands in the luxury market:

Desired by Many, Owned by Very Few

Luxury products are valued possessions of the selected few.

The CEO of Porsche once said “When I see two Porsche on the same street I begin to worry.”

Being exclusive does not mean targeting only the narrow customer base that can afford to own the brand. Marketing a luxury brand requires attracting brand enthusiasts that will never afford it, but are very passionate about it.

Exclusivity requires instant recognition.

Luxury brands have to make their story widely known. Their logos act as badges that establish social hierarchies and speak to the owner’s taste in the eyes of ordinary people.

In order to create the social distinction, the brand has to be known and appreciated by everybody, and owned only by few.

Timeless Masterpieces

Luxury brands evolve with the modern times, rather that drastically change. The “secret recipe”, distinctive design, and all symbolism associated with luxury brands transcend time, rather than follow the modern day trends.

Every BMW model, no matter the production year, has a specific, distinctive and consistent look. Not the same can be said about Lexus, a brand that chances the design of its vehicles every few years. This is one reason why Lexus is a premium, not a luxury brand.

The timeless character is what brings value to the luxury brand, and assures the owner that his possession will always be relevant. That also explains the high resale value of luxury products.

It’s All About Emotions

According to Jean-Noel Kapferer, the author of the excellent book “The Luxury Strategy”, brand positioning concept does not apply to luxury brands:

“When it comes to luxury, being unique is what counts, not any comparison with a competitor. Luxury is the expression of a taste, of a creative identity, of the intrinsic passion of the creator; luxury makes the bold statement “this is what I am” not “that depends”-which is what positioning implies.”

There is nothing rational in the desire to own a luxury brand. In the rational, consumer goods market, immediate availability is key. When it comes to luxury, having to wait two years to have your Ferrari built only adds to the excitement of owning one.

A brand that uses rational arguments to build loyalty is not competing in the luxury segment. That’s what separates luxury from ordinary: high price tags, scarce availability, acknowledged design flaws and other things that are red flags in any rational purchase decision.

In the world of luxury, these are ingredients that contribute the creation of exclusivity.

A Unique, Almost Mythical Brand Story

Luxury brands were built on a compelling story that cannot be reproduced or replicate. Often, it all started with the owner’s distinctive personality and skills.

Brands such as Porsche, Ferrari or Mercedes-Benz were built on the mechanical ingenuity of their founders. Rolls-Royce is a brand strongly associated with the royals.

This is the story of the famous Dom Pérignon champagne, as presented on their website:

“Dom Pérignon is a vibrant, living, perpetually renewed homage that evokes Dom Pierre Pérignon, the spiritual father of champagne”.

Price Greatly Exceeds the Functional Value of the Product

What functional attributes can justify the $400,000 USD price tag on the Richard Mille watch?

Price in the luxury market acts as a selection tool, that separate brand enthusiasts from the small group of owners. Its role is not to justify the functional features of the brands-another distinction between luxury and premium brands.

Premium brands provide the extra features that explains the price premium to be paid for it. In the luxury world, the higher the price tag, the more exclusive and valued the brand becomes.

Most of us know the Ferrari brand from the Formula 1 races that these cars are involved in. We love the brand for its unique, distinctive design, heritage, achievements, and technical performance. We all have the desire to own one in the future. There is only one obstacle that stands in our way: the high price tag.

The word “sale” is not part of the communication vocabulary of a luxury brand. Lowering the price will cheapen the luxury brand, bringing it from the stratosphere down to earth.

Highly Personalized Accompanying Services

In the luxury world, each member of the selective owners club benefits from royal services. A highly personalized product and service is a key ingredient that makes the client feel special and contributes to the hedonistic pleasure owning a luxury item generates.

Kapferer introduces the concept of community recognition management, the equivalent of customer relationship management in the luxury world: recognising and honouring the community of believers, the followers.

“…at Ferrari the community of 38,000 owners of old Ferraris are honoured and cajoled. They are encouraged to send their jewel for an in-depth maintenance check, at the holy of holies, at Maranello.”

Next article in this series will address why the luxury brand strategy does not follow the traditional brand management model.