Kapferer Luxury

THE LUXURY STRATEGY
Break the rules of marketing to build luxury brands

Prof Jean Jean-Nol KAPFERER HEC P Paris i
April p 19 , 2010
Jean-Nol Kapferer HEC Paris
Copyright JN Kapferer
Plan
The luxury business growth A growing market confusion The question of luxury definition Understanding U d t di the th specific ifi rules l of luxury management
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Luxury market is growing
Its highest perspective is in the BRIC countries
Why does this market grow ?

There are more very rich people
-Oct. 2009 : 130 Chinese billionaires $ -Forbes Feb 2010 : 1000 billionnaires -The CLEWI index g goes up p , much more than the regular price index
The gap grows between extraordinary and ordinary people
The democratization of luxury

- economic growth : middle class feels p , is richer and wants to trade up p optimistic - women work and marry later - you are what you wear -access pleasure through shopping malls
Luxury is correlated to GDP growth
Because the mass wants to own a bit of what symbolizes the better life of the happy few
- economic growth makes you go beyond your aspirations p needs and liberates y - Luxury is consumption at its best : it delivers rare intense emotions ( love , power, p , pleasure, p , pride, p , reward, , social sign) g )

Because people like luxury
People like luxury

1t to 10 ; source IPSOS WLT
China Mexico India UK USA K Korea
8.2 8.0 80 7.3 73 7 7.3 3 6 6.8 8 6 6.4 4
HK Russia Italy Germ F France J Japan
6.3 6.1 61 6 6.1 1 6 6.1 1 5 5.7 7 5 5.6 6
Why people like luxury

-It elevates them -It gives them pleasure, beauty ,style in life -It gives them products with meaning , with high quality quality, out of the ordinary , -With prestigious brands, known as visas of social distinction. -Saving the face , becoming a person
Luxury is in danger
The middle class growth in many countries is a business opportunity for luxury and also a great danger
To capture this huge demand , mass brands imitate luxury , mimick its codes How will luxury show its difference ,and avoid running too after volume ?
Confusion in the market
Main Street brands imitate High Street brands , creating confusion between luxury and non luxury
Today , many mainstream brands use the codes of luxury (small series , top models ) : frontiers seem porous
Unclear frontiers
Unclear frontiers
Chanels Chanel s worldly known designer Karl Lagerfeld partners with H&M
Unclear frontiers
Unclear frontiers
Unclear frontiers
ZARA is a low cost producer but its stores do not look low cost
Confusion in the market
A lot of new terms come out every day adding to the confusion
-new luxury -mass prestige -mass luxury -trading up -premiumization
New terms add confusion
Confusion:luxury or premium?
Key y source of confusion

Luxury Premium Brand Mass Qualities
Price
Luxury L is i not t more of f premium i

Luxury Price Premium Brand Mass Qualities
L Luxury is i specific ifi

Luxury is not more of premium , or y p premium or more expensive p beyond than premium : it is elsewhere , Luxury is Janus: two indissociable faces
A sociological face : it represents ,and publicly bli l i incarnates t social i l stratification t tifi ti A psychological face : giving oneself a pleasure l and dd dream of f exception ti
A turning point
Today, all these porous frontiers recreate a need of clear social markers of the latent vertical social hierarchy hierarchy especially in soso-called open or classless societies
A turning point
Stripes and stars are back
Status for everyday life
What is luxury after all ?
This is surely not luxury
This is not luxury either
Is this luxury ?
Are they all luxury brands ?
No commonly agreed definition that clearly separates it from super premium or even mass prestige
What definition for luxury?

What is luxury ? Traditionally the word luxury applies to tangible goods , suggesting superior materials and designs sold in an upscale retail environment Bain & co .
What definition for luxury?

What is luxury ?
Exclusivity, Exclusivity premium prices , image g and status which combine to make them more desirable for reasons other th than th function f ti TJ k T.Jackson
What is luxury ?
Another definition Expensive p rare objects j with an image of good taste
Need to distinguish
Luxury ( absolute meaning ) from the happy few to the man in the street A Luxury ( relative meaning ) for a specific group trading up for more quality and prestige ,not the happy few My Luxury ( purely individual )

Absolute Ab l t luxury l : a consensus
Categories and famous brands held in the world as symbols of luxury
A Luxury is a relative statement
F some consumers , Coach For C h is i a luxury y , , it gives g them a feeling g of extra quality , of prestige, above that of ordinary bags . Same for Lancel , But the happy few disagree disagree.
A Luxury is relative
In India a luxury is drinkable water for a majority of people but golden taps for a minority
My Luxury is very private

My luxury is not your luxury What is rare and p priceless for me may y not be the same for you. My luxury does not imply social comparison : it is intimate and does not create a market
Understanding luxury
HOW ECONOMISTS DEFINE LUXURY

PRICE
FUNCTIONAL BENEFITS

PRICE
Premium
FUNCTIONAL BENEFITS

PRICE
Luxury y Premium
FUNCTIONAL BENEFITS

PRICE
Art Luxury y Premium
Fashion
FUNCTIONAL BENEFITS
Go beyond function
art for art ?
Luxury is close to art
Luxury cultivates the arts
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What does Etymology say about the essence of luxury ?
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What does Etymology say about the essence of luxury ?
LUXUS
L ti word Latin d luxatio l ti , result lt of f going i apart p , making g a leap p , a big g gap g p
What chinese etymology says
Big people / Lot of people

What indian etymology says
sanskrit : vitasar To dazzle , to impress

What History says
The business of luxury goods has been created by y the collapse p of the aristocratic societies where strict rules l prohibited hibit d the th diffusion diff i of f luxury signs and goods (etiquette)
What History says
By making it accessible, accessible luxury business has g grown on the basis of the drive for social imitation and d the th democratic d ti right i ht to t happiness and hedonism
What is new today ?
Thi evolution This l ti has h stimulated ti l t d the th consumption of luxury products but the central sociological function (signaling the social stratification ) has been lost
Why luxury ?
Today Meritocracy y Reward by signing ones success and accessing elit pleasures
A clear marker of a social gap

Yesterday Aristocracy y An obligation demonstrate your inherited rank y Noblesse oblige Etiquette
RECREATING THE GAP
P i i l of Principles f luxury l management t
Luxury : rere-create the gap
Luxury , fashion, fashion premium

Luxury
Social elevation Timeless S lf di Self distinction ti ti Priceless Hedonism Superlative Dream Gift
Tribal differentiation Imitation Seduction Ephemeral
Realism
Performances / Price Rational Investment Comparative
F hi Fashion
Frivolous
Seriousness
P Premium i

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THE LUXURY STRATEGY

Break the rules of marketing to build luxury brands

Jean-Nol Kapferer HEC Paris

COPY RIGHT J.N. KAPFERER

Luxury market is growing

Its highest perspective is in the BRIC countries

Jean-Nol Kapferer HEC Paris

Why does this market grow ?

The gap grows between extraordinary and ordinary people

Jean-Nol Kapferer HEC Paris

Why does this market grow ?

The democratization of luxury

Luxury is correlated to GDP growth

Jean-Nol Kapferer HEC Paris

Why does this market grow ?

Why does this market grow ?

Jean-Nol Kapferer HEC Paris

People like luxury

China Mexico India UK USA K Korea

8.2 8.0 80 7.3 73 7 7.3 3 6 6.8 8 6 6.4 4

HK Russia Italy Germ F France J Japan

6.3 6.1 61 6 6.1 1 6 6.1 1 5 5.7 7 5 5.6 6

Jean-Nol Kapferer HEC Paris

Why does this market grow ?

Why people like luxury

COPY RIGHT J.N. KAPFERER

COPY RIGHT J.N. KAPFERER

Confusion in the market

Jean-Nol Kapferer HEC Paris

COPY RIGHT J.N. KAPFERER

Jean-Nol Kapferer HEC Paris

Jean-Nol Kapferer HEC Paris

Jean-Nol Kapferer HEC Paris

COPY RIGHT J.N. KAPFERER

Jean-Nol Kapferer HEC Paris

COPY RIGHT J.N. KAPFERER

Confusion in the market

New terms add confusion

Jean-Nol Kapferer HEC Paris

Jean-Nol Kapferer HEC Paris

Key y source of confusion

Jean-Nol Kapferer HEC Paris

Luxury L is i not t more of f premium i

Jean-Nol Kapferer HEC Paris

L Luxury is i specific ifi

COPY RIGHT J.N. KAPFERER

Jean-Nol Kapferer HEC Paris

COPY RIGHT J.N. KAPFERER

Stripes and stars are back

Jean-Nol Kapferer HEC Paris

Status for everyday life

Jean-Nol Kapferer HEC Paris

COPY RIGHT J.N. KAPFERER

What is luxury after all ?

Jean-Nol Kapferer HEC Paris

This is surely not luxury

Jean-Nol Kapferer HEC Paris

This is not luxury either

Jean-Nol Kapferer HEC Paris

Jean-Nol Kapferer HEC Paris

Are they all luxury brands ?

Jean-Nol Kapferer HEC Paris

COPY RIGHT J.N. KAPFERER

What is luxury after all ?