Luxury On The Inside

The surface of luxury was never truly satisfying. Labels and price tags and big names can only entice people for a moment. When money is no object, those symbols of excess soon feel empty and pointless.

Over the past few weeks we’ve heard people say they’re looking for something more. Whether it be genuine history, passionate craftsmanship, complete personalization, or simply something that money can’t buy… super affluent consumers expect more from their luxury purchases. Being expensive, famous or rare is not enough any more.

When Florence tried to tell us about her first taste of Dom Perignon, she was lost for words. Finally, we learned that the 1985 bottle had been opened with an old military sabre, and her first sip was so wonderful she has never matched it since. The experience spoke to her senses and her heart, not to her ego or her mind.

For Vincent, luxury is intimate, something only he knows that value of. He learned to appreciate true luxury from his grandparents.

“My grandmother’s collection of jewels was so beautiful, I would play and pretend to be a pirate, and she taught me about the stones. Now I’m crazy for old diamonds, with fewer cuts.” Vincent grew up to become a designer with Boucheron and now sells his own jewelry.

“Luxury should not be loud. Luxury is on the inside, not the outside.”

The media is talking about a return to refinement, but we think this is only part of the answer for luxury brands. “Toning it down” is an obvious response to the new mood of financial prudence. But refinement is often about less, we believe that affluent consumers are in fact seeking more. More meaning, relevance and personalization. More care, thought and creativity.

Opportunity: As luxury items and experiences become more refined on the ‘outside’, they must become more rich and full on the ‘inside’.

Thick Fashion Magazines Are So Last Year

September fashion magazines, traditionally the biggest issues of the year, are looking rather skinny this year. About a third skinnier, actually.

Ad pages in Vogue tumbled 36%, to 429. That’s a far cry from 2007, when Vogue issued its record-setting September issue with 727 ad pages--- and weighing in at 4 pounds, nine ounces.

As they spend less on magazines, fashion companies are gingerly testing a range of lower-cost, often more measurable outlets such as Twitter, YouTube, DailyCandy.com, Style.com and more.

Louis Vuitton North America more than doubled its digital ad spending in 2008. Diane Von Furstenberg boosted its web spending from nothing to $43,000 last year. It doesn’t amount to much yet, but it represents one of the few slices of the industry’s marketing budget that are expanding.

Some brands are entering into the social media space as well. Chanel posted a short film to YouTube, starring French actress Audrey Tautou, and promoted the video with search ads and other ads on the site. Other fashion brands are attracting flocks on Twitter, such as Louis Vuitton, which has more than 26,000 followers.

Aiding this move into the digital world is the increasing quality of online experiences. For advertisers concerned primarily with luxury, style and perfection, the aesthetics of the web are finally getting to a place they’re interested in being.

Just as consumers are reevaluating their luxury purchases these days, luxury brands are reevaluating how they spend their own money.

Challenge: Harness the power of the digital space-- not only for financial appeal, but also to bring the luxury world to life

Source: “Thick Fashion Magazines Are So Last Year.” Wall Street Journal. 8/17/09
http://online.wsj.com/article/SB125046605103135399.html

Developing a Palette

Today, Coco, Amit and I met Florence, a design consultant specializing in limited edition contemporary furniture. Her clients spend millions of euro on pieces that are very hard to come by - her job is to find them.

While some of her clients are passionate and knowledgeable about furniture, there are many who start collecting without knowing much more than the most famous designer's name. Their first purchases are simply statements of wealth. But Florence insists that even these people soon become true collectors.

"They need someone to show them the way. I always tell them the story of the item and try to find some way for them to connect with it... something they can relate to. As they learn they become more interested and they develop their own personal tastes."

On the other hand, she also believes that French people are losing their "sense of luxury." For Florence, luxury is about excellent quality and craftsmanship, along with thoughtfulness and refinement. "French people have lost their palette. We no longer know how to appreciate good wine."

She's talking about truly appreciating luxury, rather than simply buying it as a statement. And it seems that the ability to appreciate can be won or lost. An eye for design can be gained with a little guidance and experience. A palette for good wine and food can be developed with thoughtfulness and practice. And the more you appreciate a luxury item, the more you can connect with the brand/designer/vineyard...

 

This is a Lovemarks story. Stories reveal the depth and substance of luxury and build Respect. When we discover that there's more to luxury than a fancy shell and a dazzling price tag, our Lust turns to Love. 

Challenge: Encourage people to develop their palette and go beyond the surface of luxury. Transform expensive purchases into treasured items.

Passion and Purpose

Dean is Managing Director at a major global bank and a father of two. He refers the recession as a ‘dislocation’ because “things didn’t just recede, they came apart.” Dean is interested in the new popularity of middle-men or mediators in the banking process. His bank is doing a lot of this work – mediating large transactions for a ‘small’ fee.

“The arrogance has been stripped out… people are making an effort to do things right... by the book. And also, more importantly, people don’t want to be blamed if things go belly up. They’re allergic to negative press.”

But he wonders if this will last. “I hope it will, but I think that when people forget this pain the arrogance will slowly come back.”

Like many people in similar positions*, Dean is reconsidering what’s important to him. He believes he’s more honest with himself, but admits that this could be a function of his life stage.

“I’m not a big football fan, but I used to make the effort to stay informed so that I could be a part of those conversations (with other senior executives in finance.) Now I realize it’s not worth it. If you’re not passionate about something it soon becomes very obvious.”

Dean’s true passion is music. He’s in the middle of an Opera phase – he’s been listening to Opera almost exclusively for 3 months. “I’ve been wondering if it has something to do with all this (the financial crisis). I feel a total connection to it.”

“I’ve even been speaking to people about God and the afterlife… almost as a social experiment. I think people are searching for a god. Or for a purpose.” Dean sure doesn’t seem like a religious guy, but he is curious and thoughtful and obviously seeking more from life than another step up the ladder.

*An except from a recent article by Manhattan socialite Tatiana Boncompagni titled “The Party’s Over for the Hedge Fund Wives” describes a new candour amongst super affluent consumer;

'Many even seem relieved to finally be able to drop the bombast and get real… seated next to me was a hedge fund manager who, mid-way through his filet mignon, revealed that he was going through a mid life crisis. “I look back on the last five years and think ‘yes I’ve made good money but what do I have to show for it?”

Truth: Beneath the drive for wealth and success lies a very human need to for meaning and purpose. 

Challenge: Ignite their passions. Go beyond their surface desire for status and achievement.

Class Vs Classless

Belinda and I spent the afternoon in luxury car dealerships on Park Lane. We started in BMW where the atmosphere is professional, but reserved. The perfectly parked and posed cars are like caged animals at the zoo, lifeless and a little sad. The dealers are adamant that the recession hasn’t affected business… at least not for new cars.

“This is Park Lane, our customer buys a car and sells it back to us a few months later when they go back home (to Russia or the Middle East). They just want a nice car to drive while they’re here. A BMW is not a big purchase for them.”

There’s a sense of arrogance, or perhaps denial at BMW, but next door at MINI - their sister dealership – things couldn’t be more different. We feel like we’re in a futuristic and funky club, not a car showroom. We’re welcomed with smiles and energy. The models on display are colorful, bold and full of character.

At Mini Ryan tells us how he’s seen people trading up and down into Mini’s over the past 6 months.

“I had a customer sell his Aston Martin to move to a Mini. We have Mini drivers who were in Porsche Cayennes and Mercedes. But we also have people who were drove a Fiat or a Renault. The Mini is a classless vehicle. You can park next to a Porsche at the polo and feel like you belong or you can drive to the pub or the supermarket.”

Sophie (the only female sales person we could find) added, “The only real difference between a BMW and a Mini is space. Mini drivers can still have the leather and luxuries, they still have the speed and power. And in a Mini you make a statement… but it’s not ostentatious. It’s a statement about who you are as a person, not how much money you have.”

Truth: You don’t need to play by the old rules of luxury to appeal to affluent consumers. Mini has performance, character and heritage. They reject the idea that luxury is about wealth or class. And people love them for it.

Challenge: Make luxury classless.

Breaking the Conventions of Luxury

Monocle is a magazine, a perfume, a bag, a notebook, a global following… but more than anything, a group of people passionate about global affairs, business, culture and design. www.monocle.com

Monocle Publisher Pamela Mullinger gave me a tour of their chic but comfy London headquarters where journalists sit next to designers and the walls are lined with custom publications for high end brands.

We talk a lot about the reader, who is hard to pin down.

“Sure they’re wealthy, but they work hard, they travel, they’re quite young, they’re not your typical ‘wealthy target market.'"

By ‘typical’ we mean older – the bulk of high net worth individuals are over 50. Yet while the Monocle reader has a high income, they’re younger and less conventional. And for this creative company, conventions are made to be challenged.

Just take a look at their latest issue, which includes the Monocle Singapore Survey. A magazine within a magazine, funded by Singapore Government but created and edited entirely by Monocle.

“Everything tells a story; whether it is an ad for a watch or an article about a city, these things have a past, they have a story to tell.”

Flicking through the magazine you really notice the difference. The first five pages are still dominated by ubiquitous luxury fashion brand ads, but the grainy paper gives them a more authentic feel and the lifeless mannequins seem to be less prolific. That’s the biggest problem with luxury brand advertising… “mannequin whitewash”… after a few pages it’s hard to determine one uber expensive brand from the next.

Yet with their unique story telling, Monocle helps luxury brands break free of the conventions, giving them a new opportunities to reveal their past, and shape their future.

Opportunity: Shake off the tired conventions of luxury marketing. Tell old stories in new ways.

A Luxury Truth - A Recent Article by Kevin Roberts

This global recession is a moment of truth. Industries once thought bullet proof have been shot to pieces, and some companies have been caught living a bold face lie. Warren Buffet says: "It's only when the tide goes out that you learn who's been swimming naked." A true story; there are plenty of cases of indecent exposure.

Nouriel Roubini, the economist who predicted the recession, says even if we do everything right, things will only get worse. OK, but I prefer my eggs sunny side up. The way to flip them is to start with the answer and work back. The answer, if you want to understand or shift behavior, lies in understanding not what people are doing in these tougher times, but how they are feeling.

I'm a passionate lover of Italy and its luxury fashion houses, so consider what's happening at the top end of town.

Luxury brands are hurting. The spending behaviors of luxury consumers are distinctive, but arctic winds still penetrate the insulation in those fur-lined jackets. As recession deepens, even wallets made by Berluti open less often. There are less luxury consumers with money to spend and they are spending more cautiously.

In the US, luxury hotel bookings are down 24% and sales for luxury auto brands are down to 1996 levels. This is a widespread problem.

Top end to low end, there is a new sensitivity to price, and yet I don't see price as decisive. Every income bracket knows that price and value are not the same thing. Price is what companies put on the tag; value is what consumers feel they get out of the experience, and, people from all walks of life are seizing control of that feeling.

Consumer sentiment is shifting. People are evaluating their habits and familiar ways of choosing and using. They want to experiment with fresh ideas and opportunities as they redefine what value can mean. And they can juggle stuff, indulgence and health; novelty and familiarity; time and money; shopping more and spending less.

And of course we're more connected than ever before. The search for value is no longer about private discipline. It's gone social and viral.

The affluent are a part of all this. A Ferrari driver feels admiration or admonishment as much as a skateboarder. No wonder some luxury customers reportedly have been asking cashiers at pricey boutiques to put their purchases in "plain bags."

How do you build a luxury house in this environment? Reducing prices is not recommended. For one thing, it awakens the commodification monster. For another, the very wealthy may be buying less, but they aren't reducing their standard of living. In a recent survey of the superrich, 82% said they would make fewer purchases, yet 72% said they'd make "more upscale" purchases.

You'll find the answer lies deep in the value equation, in shifting from price to priceless. In logic-laden times, true luxury customers will always pay for what is rare and special. Value is in a purchase that feels personal, unique or original, or gives access to knowledge or wisdom. It's there in a purchase with immediate impact, a "wow". And in purchases that respect or give back time, and have utility.

As recession deepens, value becomes about something more. More than a product, more than a service, more even than a brand. It's something not just irreplaceable, but irresistible. We call it a Lovemark, a brand with loyalty beyond reason. These are the brands where you say: "I'll make sacrifices before I give this up."

The shift in luxury will be from value to meaningful value, where brands make an increased effort to connect with consumers around shared interests. By responding to what people value most in these times with what brands can uniquely or best deliver, you attract. This way, luxury shoppers ask for branded not plain paper bags.

It's about balancing high status with a definite value proposition, about responding to needs and wants. It's about a long term relationship, not a one night stand. I think the next luxury stars will frame indulgence with universal values like experience and wisdom.

And it's about ideas, generated through new and surprising insights to make the connection. True luxury brands gain share through recessions because they innovate. Flexjet reframed its private jets from a luxury item for rich people to a valuable business tool.

In a downturn Apple doesn't purge staff or stop innovating. Instead Apple invests heavily in R&D, because their premium is creativity.

In December 2008 Apple had their first decline ever in year over year sales of computers. But in the third quarter of 08, Apple's sales were up 6%, cracking the 10 billion mark for the first time.

Apple stores haven taken in $4000 of revenue per square foot of retail space. That compares with around $700 at Saks Fifth Avenue. But what Apple delivers to consumers in the store is value at every point, whether shoppers buy or not. This is in Apple people interacting with you - behind the Genius Bar and on the floor. Information, stimulation and entertainment - irresistible!

Lovemarks open a priceless and shared space, and each time you enter, it's more luxurious than the last. I'm with Robert Polet, Chairman of Gucci Group. "You cannot put a price on a dream."

Past, Present and Future

I spent the morning with Jody and Peter at their home in Westchester, CT. These two have an eye for originality and style, their home is filled with amazing art works they've collected over their lifetime, and their cupboards are filled to the brim with vintage Hermes, Chanel and Gucci. Every piece has a story and a history. You won't find 'throw away fashion' in this house. 

"If I'm going to buy, I want something that is excellent quality, I want craftsmanship. Why waste money on crappy stuff?"

This attitude goes beyond the wardrobe and into the kitchen. It even applies to ice cream "Haagen Dazs has the best vanilla, it's the true test of a good ice cream if they do vanilla well. There's no bells and whistles to hide behind."

Their home is laid back - filled with a constant stream of family, friends and dogs - yet you get the feeling that everything in it has been thoughtfully selected and has a special value.

"When I buy for the kids I like to think that they might keep those pieces for a long time.... they might pick up that scarf twenty years from now and remember when I gave it to them. "

Truth: Craftsmanship, quality and originality are sometimes forgotten in today's fast changing, tech loving world. We've been living in a 'throw away' culture, but times are changing again. People are seeking those things that have a past and a future, those things that have the quality to endure.

Opportunity: Craft a future from the past.