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The Luxury Strategy

Discussion in 'Business Models, Niches, Industries' started by smark, Aug 8, 2018.

  1. ChrisR
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    ChrisR Diamond Contributor Read Millionaire Fastlane I've Read UNSCRIPTED FASTLANE INSIDER Speedway Pass

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    I don't care what "they" say. If you actually believe that statement, I was right when I said you know little about cars.

    Furthermore, if you think a car that practically drives itself is a drivers car, you should probably just stop commenting on the subject. You CLEARLY have no clue what you're talking about.
     
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  2. LittleWolfie
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    LittleWolfie Bronze Contributor Read Millionaire Fastlane FASTLANE INSIDER Speedway Pass

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    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.
     
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  3. Chris25
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    Chris25 Contributor Read Millionaire Fastlane I've Read UNSCRIPTED

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    [​IMG]
     
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  4. smark
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    smark Bronze Contributor Speedway Pass

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    That's a big IF though, don't you think? One on hand you have a metal that is more functional yet (more) abundant and on the other, one that is not only more scarce (scarcity aka rarity is a big part of ANY luxury product/brand) but also looks awesome!

    Just from its appearance it becomes evident as to why ancient Egyptian kings would use it to adorn themselves and thus differentiate themselves through such ostentatious displays. Funny enough, this is actually in the first chapter of the book, which covers the background history of “luxury” and how it came to be.
    -
    I'm going to admit @MTEE1985 this is a tough one and the part of luxury brand "construction" that I've had the most trouble with so far.

    As @rpeck90 was kind enough to point out in an earlier post on this thread, pedigree/heritage are KEY if one wants to properly promote and sell a luxury good/service. For example, if I were to steer the conversation away from goods/services and talk about something more abstract such as culinary culture, why is it that Southern European countries which have a long history of contribution in both the arts and sciences such as Italy, France and Greece come to mind? Not that the food(s) associated with each one of these cultures is necessarily better than any other, but I think we can all agree that having brunch in a small cafe in Milan or the Swiss Alps for example, carries a certain degree of sophistication and respect not present when referring to other culinary cultures; especially those countries with minimal contributions to the modern world. The same applies to (luxury) brands.

    For example, Cartier, a model luxury brand IMO can boast of making the first leather strap wrist watch (if I'm not mistaken). A sports car manufacturer like Porsche, can boast of its race-track achievements. And Audemars Piguet, one of the most respected Swiss watch makers contributed heavily on the evolution of mechanical watches; similarly to how Mercedes did with cars, on top of actually inventing the damn thing!

    Notice a trend here though? All of the above 'creations' relate to primarily functional (yet still, beautiful and hedonistic) products. Why? Because technology wasn't the same back then as it is now, and so most of the big luxury brands started with function first and then moved on to 'beauty.' 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?
     
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  5. Merging Left
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    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).
     
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  6. MTEE1985
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    Awesome post and great question, especially in the age of purchasing perceived luxury a la Frye Festival which we all know was the opposite.

    I found the chart below to interesting, specifically as it relates to the points of sale each product is available at. I find scarcity to be a good metric in the luxury market. I agree with @Merging Left regarding time as being #1 though.


    upload_2018-9-13_10-13-14.jpeg
     
    Last edited: Sep 13, 2018
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  7. LittleWolfie
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    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.
     
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  8. smark
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    I am actually familiar with this pyramid chart and find it to be a good starting point when it comes to evaluating the price points of various luxury (and non-luxury) brands. However, as you get deeper into luxury and even branding in general, you come to realize that price is only a tiny piece of the puzzle and which exists as a result of everything else (promoting rarity, beautiful hedonistic products made to last, tied to a specific culture, heritage, etc).

    Interesting thought. Just goes to show how highly some goods/materials are valued despite their functions (or lack thereof) as well as humankind's attraction to not only luxury goods, but also the concepts of luxury, comfort and pleasure in general.

    This is true. But, considering the vast amount of resources we have in our disposal as creators/entrepreneurs, is there a way to speed this up and create a heritage 'out of nothing?'

    Let me try to answer my own question. The book (whose co-author used to be the CEO of LV in the late 80s) distinguishes between three types of history:

    1. True History. This is quite self-explanatory. However, saying that you've been in business for 100 years for example won't do much for you; in the words of the authors, "it just makes you old." Thus, what is needed here is a "founding legend" or story which eventually shows what you actually accomplished throughout that time. A great example would be how Louis Roederer's Cristal champagne used to be specially made for the Russian czars. This approach though is obviously time-consuming and not suitable for allowing a contemporary luxury brand to flourish relatively quickly.

    2. The reappropriation of true historical elements in the service of a recent brand. For this, the authors offer the example of Dom Perignon champagne (made in the 50s) which borrows from the true myth of Monk Dom Pierre Perignon who was alive in the 1600s and made important contributions to the development of winery. This obviously, is a lot easier to do as it gives the brand a semi-true backstory/founding legend on which the brand's achievements can then be added on, possibly resulting in the same degree of heritage offered by "true history" but in just a few decades. However, this is not easy to do, as this myth must be closely related to the brand's identity and the culture to which it is tied (e.g. Ferrari is Italian, Dom Perignon is French, etc).

    3. The creation of a new, contemporary legend. Of the three, this is obviously the most vague one and definitely the most difficult to pull off effectively. Thus, it is highly individualized and copying here - or even modeling to a certain extent - are not viable options. An example of this would be how Ralph Lauren (though not luxury) represents the modern reincarnation of The Great Gatsby and the American dream, as seen from the perspective of English aristocrats who migrated to the US East Coast many generations ago - even though Ralph Lauren himself (real last name Lifshitz) was a US born Ashkenazi Jew and not an English aristocrat, he did a great job at embodying that aspect of the wealthy US East Coast aristocracy, which is highly evident in each one of his stores. Thus, according to the authors: "the history does not...need to be that of the brand itself; it may be the history of its universe of expression." In essence, the KEY here (as @rpeck90 has previously pointed out before) is to identify who YOU are and what YOU have to offer.

    As a recent example of a luxury brand, Bell&Ross, a watch maker started by two French businessmen in 1992 managed to amass a devoted and passionate clientele by focusing on the abstract concept of aviation and especially military aviation, as a symbol of technological advancement, accomplishment (which is heavily in line with male-driven motivation; as @rpeck90 had said, something is either done to "get paid" or "get laid") and product excellence as defined by being able to survive in the harshest conditions. How do they back this up with accomplishments? Well, their watches have been worn in space before, which shows that they are perfectly capable of living up their promise(s).

    What do you guys think of these?
     
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  9. ChrisV
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    ChrisV Gold Contributor Read Millionaire Fastlane I've Read UNSCRIPTED Speedway Pass

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    Well one thing to note is also that Mercedes... their luxury reputation? That’s mostly an American phenomenon. They’re not really thought of as Luxury cars in Europe as much. For instance you can get most Mercedes with cloth interiors, which you can’t in the US.

    329df1ac-5511-4fcb-a9e4-7b591449e72e.jpeg

    In Germany they’re really just the German motor company.

    https---blueprint-api-production.s3.amazonaws.com-uploads-story-thumbnail-4814-merc_trucks.png

    They make trucks, vans, airplane engines, boat engines, etc

    I mean there is "Volks wagon" which translates in English to “the people’s car”.. which h is more geared toward being the everyday joe car, but still Mercedes isn’t what is is in the US.
     
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  10. ChrisV
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  11. rpeck90
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    I think that pedigree / heritage are symptomatic of luxury (not its causation). They're social proof.

    The real difference between all the big luxury brands - regardless of when they were founded - is their creators were (generally) pioneers in some sector.

    In every brand I've personally looked at, there's someone (or maybe a few) who lay it the core of it all, committed to a completely different (new? better?) way of doing things and was eventually adopted. The adoption by members of the higher social class added the required credence to justify their ideas to everybody else. Prussian king Frederick the Great (Der Kartoffelkönig) and the potato are good examples.

    We see the whole "heritage" thing coming up even in areas where premium/luxury isn't an issue...

    [​IMG]

    The real "secret" of most of these brands is that this founder/creator had ONE overarching "goal" they put at the forefront of everything else; their products embodying this ideal to the core. Steve Jobs wanted to give "geniuses" a "bicycle for the mind"; Lamborghini hated his Ferrari so decided to make a car stripped of ALL the non-essentials in the pursuit of pure power.

    The social proof was the justification of that particular way of doing things. A VERY apt example of this is Henry Ford. We all know Ford, and his eponymous company, but back in the day - he struggled to gain traction after going BK 3 times (I think?)... it wasn't until he beat Alexander Winston in 1901 that investors began to realize that he knew what he was doing.

    The "luxury" nature of a brand is typically adopted after the initial innovation. The job of marketeers is to take the heritage prevalent in most "great" brands and make it a major contributor to the perceived value of the company, its products, values and - ultimately - results.

    If you think about it logically, what difference does LV being founded in the 1850's have on its present day products? We went to the moon since it was created; if they don't employ some sort of advancement in their processes, I'd be shocked. What its pedigree tells me is that since it's such a RARE and UNIQUE thing to have (you can't exactly go back in time to found a business), LV must have some inherent value simply by virtue of trading for so long. *HOW* this value is transmuted in the modern world is then up to the product design, development and manufacturing process.

    In other words, there are plenty of "luxury" brands (Tom Ford) which were founded within the last 20 years, and are still as potent as many of the longest-lasting. The difference lies not in the fact a company was created earlier than another, but their processes, ideas & underlying value are encrusted in the gems they built over their time.

    The part where heritage *really* adds value is in what that product/company/founder was responsible for introducing into the world. This is generally where we start to see the "real" winners emerge. The pedigree / heritage play is mostly a result of the "impact" the company/founding team had at the time - with that value being echoed through the ages in the companies they left in their wake.

    --

    In the end, all this is arbitrary -- the real deal is trying to determine how we could imbue this sort of process into our own brands / companies. As mentioned previously, luxury is subjective. I am looking at buying some Tom Ford clothing. Why? It's not because he's a recent designer... it's because his stuff gives me a social precedent I'm eager to aspire to.

    In this light, it's my opinion that the best thing that can be done is to focus on the "service" you provide as a person/company, amplify that over time with poignant products and then if you find something which sticks, you're able to use the likes of pedigree etc to enhance the message/offer.

    Here's a good example - my dad was showing me an electronics magazine he kept from 1983 the other day. This thing is ancient in terms of its age BUT could be considered a part of "my" company's brand heritage (I'm involved with software development):

    [​IMG] [​IMG] [​IMG]

    On its own, it means nothing. But as part of my company's "story" (that I've been using computers since I was 3 years old and programming since I was 13) allows me to do stuff like this:

    [​IMG]

    Looking someone in the eye, I can confidently tell them that my Dad got me into PC's since I was super young. This heritage is backed up by the fact he was "in the game" when it was still a hobbyist bastion.

    The implication is that I know what I'm talking about with it. I may not know... but compare this "home grown" talent to some guy who basically learned to code from a book in university, and you'll start to see the difference between a "me too" company, and one with the potential to become a timeless brand.

    --

    Here's another good example... Girls Girls Girls.

    In that song, they mention the Crazy Horse in Paris. Ever wonder why I looked up the CH in a previous post? The social credence from going there would far outweigh any practical value; adding to our social standing as a company.
     
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  12. rpeck90
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    GREAT insights!

    The big thing I would add is to say that it's relatively simple to observe what others have done; difference lies in what you're doing. If you invented a contemporary legend, how would that look for a modern prem/lux brand?
     
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    You're absolutely right Chris. As someone who wasn't born in the US but has been here for the past 2 years I've noticed that the brand is glorified much more outside Europe. However, I was meaning that more towards how Mercedes approaches its management and marketing and not purely in terms of its products (some of which are quite affordable) or how the brand is perceived.

    MINI and BMW are other examples of non-luxury car brands but which for the most part follow - or have primarily followed in the past - a luxury strategy, as I had defined it in page 1 of this thread. Same goes for Tesla or Apple. But again, these companies primarily follow a luxury strategy, in the sense that they are not "true" luxury brands (at least not when compared to Audemars Piguet, Pagani, Hermes, etc) but rather, 'borrowed' some management & marketing principles from the luxury sector and applied them to their respective industries with great success.

    So Joe and Elon get luxury. F*** now I like them even more!! Hahahahaha

    It is. I've always thought that action is what truly separates those who can from those who can't. The high number of hopeless - yet often intelligent - underachievers on Earth perfectly illustrates this.

    As far as creating a contemporary luxury legend goes, I honestly don't know how that would look. BUT, like you said, it often comes down to who YOU are and what YOU believe in; with your brand/company becoming a manifestation of those. All big brands (luxury or otherwise) have a "brand legend" that catches people's attention (i.e. Amazon was founded in a garage) BUT, what truly separates one from everyone else is the reason WHY they chose to do what they did, as in their underlying reason for existence.



    I was first introduced to this way of thinking by the above video. Although the speaker focuses more on the aspect of 'Why' in the context of marketing/advertising it can be applied to any area of business where one seeks to stand out and offer something truly new to the world.

    As someone had posted earlier in this thread "Luxury brands don't even need advertising." And the reason for this lies on the fact that what they did and the way they did it, as well as WHY they chose to do it made them so unique that people were bound to be drawn to them over time. Why is Apple the biggest company in the world and why has it been since 2012? I would argue that without Steve Jobs' ideas and way of thinking (on top of his understanding of business transactions and good design) Apple would just be like every other boring computer company out there.

    For example, what helps me stand out as an individual and what has attracted people to me since a very young age is just that, that I stand out. I don't know how exactly YET, but apparently the way I present myself, act and think draws people to me. And what I'm planning to do is embody (as well as promote) that with my business. Of course, the way I think of this will change over time WHILE I'm taking action, but so far I have a solid framework on which to build on. Those actions are then what will infuse me and my company/brand with a sense of heritage which will act as social proof as a means of attracting the social elites of our societies with the eventual goal of becoming known by pretty much anyone, anywhere.
     
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  14. ChrisV
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    ChrisV Gold Contributor Read Millionaire Fastlane I've Read UNSCRIPTED Speedway Pass

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    Wanna know something funny about a similar phenomenon? One brand that’s held in the same regard in China/Japan? You won’t believe it. Buick. I sh*t you not, but Buick is the ultimate symbol of class and sophistication in Asian cultures.

    Edit: well, you might believe/know that, but other people usually can’t believe that.

    Buick is a lot more than a dad wagon in China

    Why Chinese Buyers Are Obsessed With Buick

    Not just your grandma’s car, Buicks shine in Chinese luxury market

    I love it because Joe started the convo knocking it a little if you rewind.
     
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  15. ChrisV
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    ChrisV Gold Contributor Read Millionaire Fastlane I've Read UNSCRIPTED Speedway Pass

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    Leviev.... I literally drool at those diamonds. And I don’t even particularly like diamonds.

    You throw your chick a piece from Leviev I guarantee it will be worth your investment in how she puts it down alone.

    You really consider BMW non-luxury? I had one before my Mercedes and I find that it’s luxury features are almost equal, though not on par. I mean they’re more of a sports car than a luxury car, but I still think they keep the lux elements in tact. Loved some of the in-dash computerized features or the fact that the battery for the key fob would recharge whenever you put it in the slot, so you never had to change batteries.
     
    Last edited: Sep 15, 2018
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  16. smark
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    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.

    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).
     
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  17. ChrisV
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    I would love that job. Tim Ferris too. He just wrote a book Tools of the Titans distilling down all the most important things he’s learned from guests.
     
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