After the Great Recession of 2008, many business observers believed the luxury brand to be a figment of retail landscapes past. Many believed it to be a dying art form, particularly in light of once-loftily regarded brands that were now either extinct or on their way to it.
The reality, it appears, is quite different and, in truth, more brand specific. Certainly, there are many brands that have gone by the wayside, but many others have maintained their status (and subsequently their sales). Most interestingly, others have found a way to revive their specific brand, which is a true talent in today’s crowded and competitive luxury landscape.
A Global Market Overview
In 2012, the global luxury products market was estimated to be worth $1.5 trillion. At $0.8 trillion, luxury cars, travel, hotels, and yachting were its largest sub-segments. Other sub-segments include apparel, leather goods and accessories, watches and jewelry, cosmetics, art, home and furniture, technology, and alcohol and food. Between 2013 and 2015, the industry is expected to grow at a 5–6% CAGR on account of the prevailing macroeconomic conditions in Europe and sluggish growth in China. The market is expected to be worth $1.6–1.7 trillion in 2015.
The key factors that are expected to propel growth in this market are the rising number of high net worth individuals globally and the increasing adoption of social media by luxury brands. However, decreased spending by tourists in Europe (particularly from China), due to narrowing price gaps at home, are likely to pull down growth in Europe, a key market for luxury products.
What Constitutes Luxury?
Luxury is anything that is desirable, and beyond the necessary and ordinary.
For instance, a Louis Vuitton handbag is both highly desirable and extravagantly unnecessary – the true hallmark of a luxury product/brand. Luxury as a concept is, like everything else, relative in nature – a Montblanc pen may represent luxury for a student but not for a wealthy Saudi prince. Thus, relativity could be regional, temporal, economic, cultural, and situational, and this often becomes a challenge for luxury brands. Part of the answer lies in how companies define their target group. Observations of relativity aside, it is clear that consumers associate luxury brands with several core attributes, some of which are functional, but many of which are not:
- Quality – The first and most critical notion is of excellent quality, so much so that the relationship between luxury brands and quality is synonymous to a significant extent.
- Price – Similar to quality, even this attribute exhibits a salient association with luxury brands; luxury brands offer products that are extravagantly priced relative to their counterparts in the non-luxury segment.
- Aesthetics – Luxury brands exhibit tremendous visual appeal, exemplified by design, texture, etc.; it is perceived to embody beauty and elegance—de facto pieces of art.
- Rarity – Luxury brands position themselves as selective and exclusive, and their products are not available at all times or places; this attribute of exclusivity is often closely linked to the excellent quality and high prices associated with luxury goods.
- Extraordinariness – Luxury brands create products that appeal beyond the ordinary; their products instill a sense of wonder in owners/users and bystanders alike.
- Symbolism – These brands (and their users) are seen to represent the crème de la crème; its objective is to make the owner proud of being associated with the brand and members of an ‘elite’.
Successfully Maintaining A Luxury Brand
Every luxury brand has a unique identity that acts as its unique selling point, and also a unique set of problems that, if unchecked, could become the reason for its demise. While there is no universal solution to revive a luxury brand, the following pointers can help an ailing brand to walk before it can sprint:
- Focus on strengths—Paddling too many boats at the same time could irreparably damage a brand’s image and fortunes; it is important for a luxury brand to remain focused on its’ core products.
- Conduct an impartial assessment of the market—Market dynamics often change too fast to be fully comprehended; resurrection, at times, involves repositioning the brand to different luxury sub-categories or, in some cases, to a new set of customers.
- Emphasize the emotive aspects of the brand—A brand’s legacy is an important aspect of its appeal and adds intrinsic value; buyers are attracted to brands with which they have an emotional connect, which is easier to create with an established brand than with a newly minted one.
- Maintain exclusivity—A luxury brand that is found everywhere is not considered ‘luxurious’; it is important for a luxury brand to remain limited in order to maintain its status quo.
- Develop a fair brand value assessment—Brand value has less to do with the quality of a product and more with perception—something that is fickle and not easily gauged; as such, it becomes ever more critical for a luxury brand to estimate its true worth and set its targets accordingly.
A Case Study:
Cadillac—the iconic American brand—redesigned itself to appeal to younger consumers
Cadillac, once a revered brand and symbol of American affluence, had been facing waning popularity, especially in the face of stiff competition from brands such as Lincoln and Mercedes. Having been the top-selling automotive brand in the US for decades, it was dethroned by Lincoln in 1998, which sold 186,191 units as compared with Cadillac’s 179,009. It suffered from an image perception of being an archaic brand meant for older people and not able to connect with the younger buyer.
The company rebooted itself, shaking off its old-school image by rolling out the Cadillac CTS. The sedan made its debut in a Super Bowl ad in 2002. Its revival, however, had begun in 1999 with the introduction of the Cadillac Escalade—an SUV aimed at urban youth. Although it took time to catch on, it has gained popularity with rap artists in the past decade. Combined with the introduction of the CTS, Cadillac’s sales once again began to rocket.
Over 2002–2005, its sales rose from 199,748 to 235,002 units. Even after the disastrous market meltdown in 2008, the company has been able to re-establish itself solidly, compared with Lincoln. In June, 2013, General Motors— Cadillac’s parent company—reported: “Cadillac is growing faster than it has in almost 40 years.” At the time of reporting, its sales grew 38%, the biggest such jump since its heyday in 1976.