The Luxury Strategy

[ChrisR]

Imagine if you saw a 7 series with a RR emblem.

This is sarcasm right?

 

[ChrisV]

Ok I'll play along, whats the value add for $700k on the car above besides a group of people staring at you?

Dude, the types of people who are buying a Rolls Royce aren’t worries about a meanly 550K... they’re billionaires and decamillionaires and royalty. They don’t need to pinch pennies.

What does it add? A Rolls Royce and a Chrysler 300 are NOT the same things at all. IF you really want an answer to that question, here:

I especially love what he says at 16:05

View: https://www.youtube.com/watch?v=TBIkJSpqcFs

 

[sparechange]

@MJ DeMarco

Curious as to hear your thoughts on the matter, I assume you've splurged on luxury cars and such (afaik you have some old crappy Tacoma)

 

[sparechange]

Articulate points of why a 700k purchase is superior to some 5 digit dinky Japanese car. (No I haven't watched a video from a paid affiliate marketer)

I have been in Ferraris, Lambos & seen Rolls, its not some amazing car atleast to me. Looks nothing special and is totally overpriced. Star roof? Furry carpet? Doors that open the other way!? OMG! Boo hooo.

 

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[sparechange]

Regardless of what anyone says, its a metal box with wheels that takes you from point A to point B with some leather and legroom.

You are **** crazy if you think otherwise.

Back to discussing luxury strategy...

 

[ChrisV]

I used to repossess cars so I’ve literally driven hundreds and hundreds of different cars. The difference is night and day in most cases.

And I’ve owned products on both sides of the spectrum. I owned a Scion at the same time I had my BMW. I didn’t realize it until I parked the scion and got in the BMW how unbelievably shitty the ride in the scion was. It vibrated, there was tons of road noice, it didn’t handle well, the shift pattern was clumsy... it was just cheap. The BMW on the other hand was solid, tight, handled like it was on rails, was exhilarating to drive, was beautiful, the clutch felt nice, the shift pattern was well engineered. To put it simply: Driving the BMW felt good, driving the Scion felt bad. Beauty was only one aspect.

My thread about Uber is a great analogy: The single most important entrepreneurial lesson: People buy emotions.

Low end products are more like Taxis while High end products are more like Uber.

Luxury products are pleasurable to all your senses while normal products are uncomfortable. Sure they both get from Point A to Point B, but in the cheap one you have road noise, a stiff ride, etc etc etc. Something like an Audi BMW or Mercedes is simply a more refined experience. Toyota or Honda are vulgar and rough around the edges.

Your emotional state is much better in high end products in comparison to low end products.

 

[ChrisV]

It terms of timeline and history, do luxury brands come before more affordable products? Do luxury versions inspire cheap copycats, or do normal products inspire designers to create luxury versions? I think the latter, in which case, there is more predictability as to what the next luxury markets may be.

I would say yes. I find that the originator tends to make a luxury product.

Evidence:

First car? Mercedes Benz. Ford made an affordable version.
First Home Computer? Apple 2/Mac. Microsoft made an affordable version.

I think it’s just how it works. The something is new, it’s expensive and only the wealthy can afford it, then the technology trickles down to the working class. Flat screen TVs. DVD Players. Home Computers. Radio. Blu-Ray players.

 

[sparechange]

You’re a snowboarder right? How much is a standard snowboard, boots etc? How much is a premium one? How much is top of the line? What’s the difference between the three considering they’ll all get you down the mountain and are roughly the same size, shape and weight?

A decent snowboard will run you into the 2-400 range, boots go from 1-200,

Now premium like Burton could range from 400+ ?high end I've seen at $700 I think, with the difference being a better flex/camber in the board and bindings not breaking after a few uses. Funny to think its just a piece of wood if you look at it but not exactly true.

Same thing with skateboards, a good one like Santa Cruz can go for $300+ and at Walmart you could get some knockoff for 20 or 30 bucks. Tried one of these and they were so horrible, cheap low quality Chinese crap.

Awesome job of branding, although with the boards its more of a producatory where several people will attest to the quality from experience trying several different brands.

An interesting thing that goes on in sports is celebrity endorsements, if you see professional X using brand Y, its generally accepted that the brand is of premium quality. Just like Nike Jordan's, when you put those shoes on you'll be shooting 3 pointers all day.

I'd even say Nike would not be the brand it is today if it wasn't for endorsements and mass marketing strategies.

 

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[theresgot2bemore]

Good stuff! I always wondered myself what the fine points of luxury would be. This sort of area is a whole 'nother level.

 

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[LittleWolfie]

Good question....that’s the whole point right? What exactly is anything “worth?” There are very few items in this world with a (relatively) universally agreed upon worth. Gold, Silver, copper etc for their melt value maybe?

Silver has more industrial uses than gold and a higher conductivity.

If they were equally abundant with no history as money, silver would probably be more valuable than gold.

 

[Chris25]

 

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[Merging Left]

How does a contemporary luxury brand, especially one whose products do NOT rely on a specific function, can distinguish and promote itself through some kind of history or heritage?

Maybe it just needs time to develop an actual history and heritage. Decades of consistently high quality, low quantity products will lend itself to the type of legacy that other luxury brands have. It's not coincidence that the majority of luxury brands are decades (or even centuries) old.

Briefly reading the history of Cartier, per Wikipedia, the company began in 1847, but it wasn't until the founder's grandsons took over the business did the brand become recognized worldwide. It looks like the company really began to gain some traction in the early 1900s. That's over 50 years after the company was started. By that time, you have 50 years and three generations of family running this business. You now have heritage.

Perhaps that's just one example. Chanel did not take 50 years to grow huge, but it certainly started small, with Chanel making hats for wealthy socialites.

It takes time to gain the recognition necessary to qualify as a luxury brand. It takes years of consistently excellent quality, and it requires independent recognition by qualified critics (i.e. fashion critic reviews).

What are some newer luxury companies started in the last few decades? Screaming Eagle Winery is who comes to mind for me. Their success came from a combination of hiring a world-class winemaker and getting a top score by a world renowned wine critic (who happens to be close friends with said world-class winemaker).

 

[LittleWolfie]

That's a big IF though, don't you think?

At our current level of advancement sure, for ever no. Diamonds are a lot more common than they were 100 years ago.

We can make gold too, it's just too expensive in energy to be worthwhile. Getting off topic though.

 

[smark]

I love it because Joe started the convo knocking it a little if you rewind.

Yeah I saw that! Can't get enough of Joe's wisdom and conversational skills.

I remember thinking some years ago how much knowledge and insights a guy like that must have attained through all the interviews he's done over the years.

You really consider BMW non-luxury?

Partly, but only because of the "accessibility" of their lower models; which btw is how I think of Mercedes too. I did start thinking of BMW way more highly than the other large German car brands since I started looking into luxury though.

IMO and that's how the book makes this distinction too, if a brand does not follow ALL of the "requirements" that make people think of it so highly and thus associate it with luxury, then it is not holistically a luxury brand. Is BMW capable of producing luxury cars? You bet. Most likely even better than Mercedes. But, since they both employ marketing and management methods often found in the luxury sectors (i.e. jewelry, precious antique furniture, Michelin star restaurants etc) it can be said that they follow a "luxury strategy." I know, very confusing but this is how the book breaks it down and I think it's a nice way to think of things.

Honestly though, if we're talking about a car manufacturer who holistically embodies the concept of luxury, then Pagani would probably be the first name to come to mind (besides the likes of Ferrari, Lambo, Bentley etc).

 

[NuclearPuma]

And so the question is: How does a contemporary luxury brand, especially one whose products do NOT rely on a specific function, can distinguish and promote itself through some kind of history or heritage?

You embellish.

Tim Ferris explains the tricks in 4HWW.

 

[Merging Left]

I think that’s what they try to do anyway. that’s why they try to sell you crazy fancy coffins. Unless you were being sarcastic.

Not being sarcastic.

 

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[sparechange]

Stumbled upon this at the mall, $71,000 for a plantnium Rolex. I think pricing factors into what is luxury quite a lot. Sure the Rolex can be of higher quality than timex, but is it really worth $71,000? On the other hand if you charge $20 for the Rolex is it a luxury brand? All price points . I think I’ll start a luxury underwear brand , anyone wanna invest $5m for startup?

 

[smark]

Now going back to the topic at hand, which is why I came back to this thread. I wanted to address the status symbol thing, because actually in a sense, it's true. It true, and it actually works.

In evolutionary psychology we call this a "costly signal" or similiarly "honest signal"

So think about the reason that peacocks have huge amazing tail. There's no reason for this. While other prey camoflauge themselves peacocks have this huge tail that basically signals to predators "here I am bitch, come F*ckin catch me." It's a cocky strut. It's a superbowl dance. The same way that in a horserace the horse with the heaviest handicap weight is actually the fastest horse. It's basically saying to preditors "haha despite the fact that I have this huge heavy-weight GPS tracker on my a$$, YOU STILL CAN'T F*ckIN EAT ME." It signals genetic fitness. And that's WAY attracting to female peacocks because it shows that their children are less likely to be eaten.

Humans do the same thing. In 2019 almost ALL of us have the basic things needed to survive. But the extra stuff it partly a way of signaling to mates "Hey, i'm so genetically fit that I can afford to do things that make it less likely to survive." A normal guy who spends $200K on a Ferrari would be in the poorhouse, just as if you took a peacocks tail and strapped it to a pigeon it would be eaten by predators in a second. And it works. There are plenty of studies on this and women will sleep with a man with a nice car faster than they'll sleep with a man with a Prius (or a neckbeard who posts Lamborginis on his wall.)

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So essentially a Ferrari is a costly signal. is a way of signaling to prospective mates "Hey I can drop 200K on a car without an issue." Does it work? Sure F*cking does.

Just came back to this forum after about 10 months. Not playing to stay though, I have a company to build.

Excellent post!