Brands Create Customers

At the recent International Herald Tribune Conference on Luxury there was renewed attention directed to the creation of “eco-luxury” and “ethical-luxury” brands. These terms might seem like a stretch (or even oxymorons) to some, but luxury brands, which currently base their appeal on exclusivity, status and celebrity, can’t afford to ignore well-informed, well-off customers who demand higher standards of environmental and ethical responsibility. These customers are fast becoming vital markets.

Glitz and glamor isn’t enough

For today’s luxury brands, it will take some real work to fit “luxury” onto the same value platform as “ecology” and “ethical.” That’s because ecology and ethics are radically different avenues of value creation than glitz and glamor. Thus, the industry needs a revised brand approach to take this next step. The good news is that iconic luxury brands themselves hold the key to a successful transition.

The risk: luxury brands disrupted from below

What’s clear to me is that the luxury industry must take this transition seriously. If it can’t forge a deeper connection with the values that underpin environmental and social responsibility, luxury brands face a real threat of being disrupted from below—by a new form of luxury that uses ethics and ecology to make “traditional” luxury brands irrelevant.

The luxury industry has been totally transformed once, from small, family-owned workshops into a global marketing machine. There’s no law that says it can’t be transformed again.

Luxury brands don’t have the luxury of time

One thing is certain: luxury brands are on the clock. They don’t have the luxury of time to slowly and opaquely evolve their commitments to ethics and ecology. They are now being held accountable for their actions, just like the Gap’s, Nike’s and Levis’ of the world have been for decades. The world is waiting to see how passionate and creative luxury brands can be when the human condition and the environment are at stake.

A luxury scorecard

Shortly before the IHT conference a unit of the World Wildlife Fund published an in-depth social responsibility scorecard on the top ten publicly traded luxury firms, ranking them on 50 criteria in four categories: environment, human rights, corporate governance and stakeholder relations. The results were not pretty. The highest corporate grade was a C+ (received by three firms), while two firms received F’s.

The full survey is worth reading. For a summary, see the Financial Times account.
The bottom line is that luxury firms, paragons of product quality and taste, must now become paragons of social responsibility. From brands of world-class excellence, one would expect no less.

Not a masquerade

Granted, it will take definite brand innovation for brands traditionally associated with self-indulgent elites to become brands of ecology and ethics. For luxury brands to gain credibility in these areas, their commitments (and actions) must be the real deal, not a masquerade. This would rule out commitments richer in words than deeds. If luxury brands appear to be faking their new commitments, they may be viewed as counterfeit, potentially falling to the same level as the shameless replicas that haunt their own business.

Let’s now see what the IHT conference produced.

“We need to replace hollow with deep”

From the IHT report:

The luxury industry, a booming business for the last 20 years, is positioned well for continuing spectacular growth - Bernard Arnault, chairman of LVMH, predicted a doubling in the next five years to €300 billion - but needs to heed the growing ethical concerns, particularly of younger consumers in Western markets, industry leaders said Wednesday.

Arnault and the next speaker, the designer Tom Ford, also gave strong emphasis to what is being called “ethical luxury” - the products that define their owners or wearers as people with human and ecological consciences.

Arnault said the trend was increasingly noticeable among the younger customers in the more saturated markets of the West, who, he said, seek discretion, while consumers in emerging economies still favor the pursuit of the ostentatious.

I especially liked this quote from Tom Ford:

Ford summed it up starkly: “Luxury is not going out of style. It needs to change its style.” He added, “We need to replace hollow with deep.”

A model for “going deep”

A brand that intends to demonstrate deeper commitments to social and environmental issues will be expected to adopt specific program measures to define and achieve its goals. These would answer the question: As a brand, how can we lead in the effort to advance ecological and social responsibility?

At a minimum, typical measures would include:

1. A statement of principles, or a charter,
2. Goals and objectives
3. Codes of conduct for the brand and its suppliers
4. Executive responsibility
5. A means to work with customers, partners and suppliers to achieve the new aims.

These can’t be produced overnight, of course, but they’re needed to make ecological and ethical commitments a core component of the brand—so the brand can make a (legitimate) stand.

For now, a shallow start

The quotations cited above indicate that the luxury industry—as represented by those quoted—may initially intend to “go deep” by a succession of fairly shallow steps. The emphasis seems to be more on appearance than substance.

For example, it appears that “ecology” and “ethics” are being framed as style attributes to the brands themselves, rather than practices deserving real commitments for the companies behind the brands. It’s as if the products would be tweaked to represent ecology and ethics—using design, naming, creative promotions and associated campaigns—while the industry itself carries on with business as usual.

(more…)

The Wall Street Journal and other sources report that Ford is exploring the sale of its Jaguar and Land Rover units as a way to trim money-losing operations. Ford spent billions of dollars to acquire the two car makers in 1989 and 2000 respectively, spent hundreds of millions more to upgrade and market them, but never figured out how to create new customers for the famed marques.

Why didn’t these expensive and highly visible acquisitions pan out for Ford? Here are some thoughts from a brand value perspective.

Brands are married, not “bought”

Brands flourish as shared passions between maker and buyer. Customers marry a cherished brand more than they “buy” it. It’s an emotional plunge. If a new corporate owner doesn’t have a deep and abiding passion for what makes the product and its customers tick—the living connections that infuse every aspect of the brand relationship—the new corporate brand marriage may be dysfunctional, or even sterile. Brands are a joining, from top to bottom. So, perhaps Ford’s biggest mistake was its approach to “buy” the brands in the first place, when a more physical relationship was called for. It arrived with spreadsheets instead of silk sheets.

Intensify the brand, or lose the brand

Great brands like Jaguar and Land Rover live by their own logic and passion. They create customers in their own image. This is a process of brand intensity, a reduction to pristine elements of heightened existence. If a new corporate owner makes a brand more of what it is, unleashing potential locked within, then the brand can thrive anew, as in BMW’s glorious resurrection of the Mini. But if a new corporate owner believes that buying a famed brand is nothing more than buying a selling point, the brand can lose its vision—for itself and its customers. Customers—always the brand canaries—will sense this in a heartbeat.

The interior feels low rent and, insignificant as it might sound, the electric aerial is a joke on a car costing in excess of £60,000. Jaguar needs to look forward and to change its focus. I know many point the finger of blame firmly at Jaguar’s Ford parent company, but the Blue Oval has poured money into the firm but the excuses always seem to be the same – ‘wait until you see what’s coming next’. Jaguar has tantalised us frequently in recent years with concepts promising new directions, svelte styling and innovation like the R-D6 concept . . . a big diesel GT four-door coupé. Did they build it? Nope.

Brand dilution dilutes customers

When you marry into aristocracy, as Ford did with Jaguar and Land Rover, you join the world of dukes and duchesses. You leave Dearborn far behind. This means producing marques that are extravagant in what they do, at a price to match, rather than diluted, entry-level lines churned out for sorties to Wal-Mart. Even though Ford made tremendous improvements in Jaguar quality and reliability, one of its lasting legacies will be its platform sharing strategies that put drivetrain and suspension components from mass-market Fords into the Jaguar brand. While this was highly cost-effective, it was hardly brand-effective.

Maybe “luxury brand” was the wrong category

Ford bought Jaguar and Land Rover to gain share in the automotive “luxury brand” market, but I’m wondering if categorizing these two marques as “luxury brands” may have been one of Ford’s strategic mistakes. It landed Ford in a nest of “Red Ocean” conundrums, from which they never really escaped. In their glory days these marques were high performance brands that originally appealed to high performance customers—unmistakable individuals who were going places with verve and energy (on-road and off-road). They were expansive brands. Dragging in the feather bed “luxury” label led Ford to aim the vehicles at the early adopter Geritol set. No wonder movers and shakers stayed away.

These are brands that under a different charter might have reinvented a high performance context, with a new breed of high-performance customers to match.

Not enough Dylan Thomas

Brands are the poetry of products, and poets can give us insight into the workings of brands. Dylan Thomas’s line, “the force that through the green fuse drives the flower” is a wonderful metaphor for a brand at work, with the customer as the flower. Ford might have read up on Thomas, and worked on a new force and fuse for Jaguar and Land Rover, to create a new customer flowering. Instead they seem to have spent their money on bouquets at the florist.

Photo: Jaguar XK 150 by evercool — Flickr

A visual feature of the new Rolex website is so stunning in its elegance and simplicity that it sets a standard for brands on the web—and especially for widgets that wish to convey brand meaning with a single graphic device.

Brand quality expressed as graphic quality

Go to the Rolex website, let it load (Flash) and then admire the gorgeous oblique view of the Rolex GMT II as it adjusts itself to your time—and then keeps time as if it were on your own wrist. It appears uncannily real. Everything you experience is of the utmost authenticity, right down to the minute hand passing beneath the trademark Rolex magnifying lens.

Without a single word, this tour de force visual defines the Rolex brand for what it is: uncompromising quality. Rolex could have settled for less, but didn’t. It’s Rolex. It’s not just “different,” but in a class by itself.

I’ve never seen anything like this before on the web. Have you?

Widgets must rise to the level of brands

If you’re creating widgets with brand aspirations, Rolex has set the standard. Your job is to do no less, and preferably to take it to the next level. The last thing you want to do is to reduce a brand to the level of a widget. It has to be the other way around.

Thanks to: Scott Weisbrod

A traditional rule in luxury brands is that you have to exercise strict control of both production and distribution. Quality and exclusivity are the name of the game. In fact, managing the channel is increasingly the key to success. The more you control where and how customers buy your products, the more you can control pricing, and profit.

Within limits, of course. From the Telegraph:

Glamour firms fined £32m for price-fixing on perfumes
(Filed: 15/03/2006)

Manufacturers of some of the world’s most glamorous perfume and cosmetics brands were fined by French competition authorities yesterday after it was ruled that the companies had colluded to keep prices high at the expense of the consumer.

Thirteen iconic brands, including Chanel, Yves Saint Laurent, Christian Dior and Guerlain, and three leading French retailers were fined almost £32 million between them for inflating prices between 1997 and 2000.

The French competition council said that under the price-fixing arrangement, a “price police” was set up between them to artificially inflate prices, put pressure on individual vendors and threaten reprisals against those that refused to apply the prices set by the perfume and cosmetic brands.

Philippe Nasse, the council’s vice-president, said that of 4,300 prices investigated by the authorities, 80 per cent were subject to price-fixing.

The inquiry was limited to France but investigators “found elements that showed the probability of price contagion,” Mr Nasse added, noting that French prices can affect those elsewhere in Europe.

A council statement said the brands in question “claimed the standardisation of prices was designed to defend the ‘luxury image’ of products”. Several planned to appeal.

Strategy issues affecting luxury brands

Irrespective of how these specific charges are settled, they raise interesting brand strategy questions for luxury brands themselves:

1. Are luxury brands inherently closed and defensive, with elaborate sets of barriers, restrictions, and gateways? If so, does this make them a Maginot Line of marketing, susceptible to flanking attacks? (Not by a conventional luxury brand, of course, but by higher forms of relevance.)
2. Is a “free” luxury brand feasible?
3. Do luxury brands ever compete on brand innovation? If not, are they painting them into a corner?
4. Can a well-managed luxury brand be “disruption-proof”?