INSEAD Library

Includes bibliographical references and index

Digitized

Let Them Eat Cake Marketing Luxury to the Masses As Well As the Classes Contents Introduction xi Why Luxury Now? xi Everyone Everywhere Wants More Luxury xii Metaphysics of Luxury: Luxury Is Ultimately the Unattainable xiv Branding Connects Corporate Strategy with Consumer Psychology xv Finding a New Direction to Luxury: From Mass to Class and Class to Mass xvi Previewing What's to Come xviii PART ONE What Is Luxury? Where It Came From and Where It's Going I. TODAY'S LUXURY MARKET I The Year 1984 Marks the Official Birth of "New" Luxury 1 Personal Perspective on Luxury: American Express's Sylvia Bass--Luxury Is a Higher Level of Service for Those with Discriminating Taste 3 The 1990s Were Go-Go Years for Luxury Marketers 5 Baby Boomers Are the New Luxury Generation 7 Personal Perspective on Luxury: House and Garden 's Dominique Browning--Luxury Is Creative Expression 8 Demographics Are Destiny in 1984 and 2004 11 Future Vision of Luxury--Consumer Market Will Increasingly Polarize with Growth at Luxury and Budget Extremes 13 2. NEW LUXURY--OLD LUXURY IS ABOUT THE "THING," NEW LUXURY IS DEFINED BY THE EXPERIENCE 17 Definition of Luxury Depends on Whom You Ask 17 New Luxury Describes the Experience 18 Four Dimensions of Luxury Put New and Old Luxury into Perspective 21 Luxury Is a Verb 26 Personal Perspective on Luxury: KitchenAid's Brian Maynard-- Luxury Is Personal Transformation 28 Luxury Must Transcend the Ordinary to Become Extraordinary 30 v vi Contents PART TWO The Five Ps of Luxury Marketing 3. WHO IS A MEMBER OF THE LUXURY "CLASS"? 31 The Missing "P" of Marketing: People 31 Luxury Consumer Demographics: Consumers' Greatest Satisfaction Comes from Experiences 33 Why Do Experiences Provide the Greatest Luxury Satisfaction? 34 Who Qualifies for the Luxury Market? 37 The Affluents Are a Lot Alike Demographically 40 Future Vision of Luxury--Rising Tide of Affluence: Boomers Key to Growth through 2010 42 Affluents Make More, Spend More, and Save More 44 Luxury Consumers Feel Far Better Off Financially Now Than They Did Last Year, but Their Spending Lags Their Confidence 45 4. LUXURY CONSUMERS--THE LUXURIES THEY BUY, HOW MUCH THEY SPEND, AND WHY THEY BUY 49 Shifts and Turns in Luxury Consumer Purchase Behavior 49 Lifestyle Changes Trigger Luxury Spending 50 The Product Perspective of Luxury 52 Luxury Electronics and Experiential Luxuries Show Biggest Purchase Growth 53 Less Emphasis on Luxury Home Decor in 2003 55 Future Vision of Luxury--Connecting Is Replacing Cocooning as Prime Consumer Trend 56 Personal Perspective on Luxury: Real Simple Magazine's Robin Domeniconi--Luxury Is Simplicity: The New Mantra for Luxury Living 61 Luxury Consumers Still Improving Their Dining and Cooking Experiences 64 Personal Perspective on Luxury: Martin's Herend Imports' Lisa BeheLuxury Is Handcrafted Perfection 64 Experiential Luxuries Get a Boost in 2003 67 Personal Perspective on Luxury: Starwood's Douglas McKenzie--Luxury Is Delivering an Experience That Transcends Ordinary Luxury Hotel Services 68 Purchase Incidence Increases with Income 70 Luxury Spending Increased in 2003 72 Super-Affluents Spend Almost Five Times More on Luxury Than Do Near-Affluents 72 Why People Buy Luxury: The Emotional Underpinnings of Luxury Consumers 74 Contents vii 5. THE INNER LIFE OF LUXURY CONSUMERS--FIELD GUIDE TO THE NEW LUXURY CONSUMERS 79 The Drives and Motivations Propelling the Luxury Consumer in the Marketplace 79 Butterflies Have Emerged from Their Luxurious Cocoons 85 Luxury Cocooners Are Still Enveloped in Their Luxury Cocoons 87 Luxury Aspirers Have Not Yet Reached the Level of Luxury to Which They Aspire 88 X Fluents Live the Lifestyle of the Rich and Famous 89 Future Vision of Luxury--Luxury Consumers Are Seeking Equilibrium to Reduce Stress 90 6. LUXURY HOME PRODUCTS--THE PRODUCTS THAT DELIVER TO PEOPLE'S PASSION 95 Overview 95 Products Must Deliver Luxury Performance 95 Personal Perspective on Luxury: Sub-Zero's Paul Leuthe--Delivering Luxury Kitchen Performance 97 Home Luxuries--Not All Home Spending Is Created Equal; Some Is an Investment, the Rest Is an Expense 99 Personal Perspective on Luxury: Best Buy's Barry Judge--Luxury Is a Sanctuary within Chaos 100 Personal Perspective on Luxury: SFERRA Fine Linens's Paul Hooker-- Luxury Is the European Tradition of Fine Linen 103 Luxury Consumers Spent Slightly Less on Home Products in 2003 105 Luxury Home Market Potential Is $126 Billion 107 Department Stores: First Choice for Luxury Home Shoppers 109 Brand's Role in Home Luxury Purchases Is Most Important in Electronics 109 Future Vision of Luxury--Home Luxury Prospects Are Mixed 111 Personal Perspective on Luxury: Hunter Douglas's Kim Kiner- Luxury Combines Style and Function 113 7. PERSONAL LUXURY PRODUCTS--PERSONAL LUXURY PERFORMANCE PARAMETERS 117 Personal Perspective on Luxury: Cargo 's Ariel Foxman--Luxury Is Knowledge That Money Is Well Spent 118 Indulgence in Personal Luxuries Apparently Declined Somewhat in 2003 120 Personal Perspective on Luxury: Aerosoles's Kimberley Grayson-- The Ultimate Luxury in Shoes Is Comfortable Style 121 Total Personal Luxury Spending Reached $2,500 123 Personal Luxuries Market Potential 125 viii Contents Personal Perspective on Luxury: Guthy-Renker's Michelle Taylor--Luxury Is Skin Science Combined with Beauty Know-How 126 Top Choices for Personal Luxury Shoppers: Department Stores, Specialty Luxury Retailers and Boutiques, and Internet/Mail-Order/ TV Shopping 128 Brand's Role in Purchase Most Important in Automobiles and Beauty Products 129 Future Vision of Luxury Personal Luxuries Will Become More Important 130 8. LUXURY EXPERIENCES AND SERVICES--IT ALL COMES DOWN TO THE EXPERIENCES 133 Personal Perspective on Luxury: Matterhorn Nursery's Matt Horn--Luxury Is an Escape into Nature 134 Self-Actualization Is the Ultimate Goal for Luxury Consumers 137 When Things Are Not Enough, Luxury Consumers Express Desire for Experiences 138 Future Vision of Luxury--Next Luxury Boom Will Be in Experiential Luxuries 139 Purchase Incidence of Experiential Luxuries Boom 141 Personal Perspective on Luxury: Cosmetic Surgeon Dr. Paul Glat--Luxury Is Looking Good 142 Luxury Consumers Spent More Than $9,000 on Experiential Luxuries 145 Experiential Luxury Market Potential 146 Travel Is Priority for Luxury Consumers 148 Personal Perspective on Luxury: Crystal Cruises's Gregg Michel--Luxury Is Spaciousness Combined with Choices 149 Travelers Want to Create Memorable Experiences 152 9. PRICING LUXURIES--IT HAS VERY LITTLE TO DO WITH MONEY 153 The Frugal Affluent Shoppers 155 Personal Perspective on Luxury: Volkswagen's Karen Marderosian--Luxury Is Adapting the People's Brand for Today's Affluent Marketplace 158 Getting a Bargain Is How Luxury Consumers Measure Their Winnings in the Shopping Game 161 The Luxury-Pricing Equation: How Much Does a Feeling Cost? 164 Luxury Consumers Have a Good Idea What the Right Price Is 166 Luxury Pricing Challenge--Triple the Value but Only Double the Price 169 Personal Perspective on Luxury: Riedel Crystal's Maximillian Riedel--Luxury Is Delivering a True Wine-Tasting Experience for Different Wines 170 Money Is Largely Symbollic 172 Contents ix 10. PROMOTING LUXURIES--THE MYTHS AND MYSTERIES OF LUXURY BRANDING 175 Influencers in Luxury Buying 176 Luxury Marketing Myth #1: Advertising Is Key to Promoting and Selling Luxuries 177 Personal Perspective on Luxury: Polo Ralph Lauren's Jeffrey Morgan-- Luxury Is Telling a Story through Different Retail Worlds 179 Luxury Marketing Catch-22: How Do You Build a Luxury Brand If Advertising Doesn't Work Anymore? 181 Personal Perspective on Luxury: MandC Saatchi's Kate Bristow and Adam Leavitt--Luxury Is Advertising That Spins a Feeling of Specialness through a Story 186 Luxury Marketing Myth #2: Luxury Consumers Buy Because of the Brand 189 Luxury Marketing Myth #3: Exclusivity Is Critical to Maintaining the Allure of Luxury Brands 193 Luxury Marketing Myth #4: Luxury Brands Are Something You Own and Have 195 Luxury Marketing Myth #5: Luxury Brand Awareness Means Marketing Success 196 Personal Perspective on Luxury: Brand Keys's Robert Passikoff--Luxury Brands Are Like Other Brands, Only More So 198 Luxury Marketing Myth #6: Luxury Brand Is about the Product 201 Personal Perspective on Luxury: Ten Thousand Villages's Doug Dirks-- Luxury Is Doing Good 203 New Luxury Branding Paradigm 207 II. RETAILING AND SELLING LUXURIES--EVERYTHING ABOUT SHOPPING HAS CHANGED AND IT'S NEVER GOING BACK TO THE WAY IT WAS 209 Personal Perspective on Luxury: The Taubman Company's William Taubman--Luxury Is Thinking Globally but Acting Locally 211 In Retailing: As Below at Mass, So Above with Class 214 Personal Perspective on Luxury: Saks Fifth Avenue's Kimberly Grabel- Luxury Loses Its Meaning When Everything Is Luxury 216 Shopping Is No Longer about the Product but about the Shopping Experience 218 Personal Perspective on Luxury: JGA's Ken Nisch--Luxury Is Turning More Implicit, Less Explicit; More Intelligent, Less Obvious 219 Where the Affluents Shop for Their Luxuries 221 Future Vision of Luxury--Luxury Must Extend throughout the Entire Buying Cycle 224 The Internet Is Right at the Top of Places Where Luxury Consumers Shop 228 X Contents Personal Perspective on Luxury: Cooking.com's Tracy Randall--Luxury Delivers Enhanced Cooking Experience 229 Television Shopping Is Breaking the Mass-to-Class Barriers 231 Personal Perspective on Luxury: QVC's Doug Rose--Luxury Is Pleasure Shopping 234 PART THREE Putting the Insights to Work in Luxury Marketing 12. LESSONS FOR MARKETING LUXURY TO THE MASSES AND THE CLASSES AND EVERYONE IN BETWEEN--IT ALL STARTS AND ENDS WITH CONSUMERS' EXPERIENCE 237 Key Research Findings 238 Lesson #1--Luxury Marketers Need to Add a New Marketing "P"Performance--to Gauge the Success of Their Marketing Efforts 242 Lesson #2--Luxury Is an Experience Everyone Wants and Believes They Deserve, So Give It to Them 244 Lesson #3--The Affluent Market Is Sweet, but the Mass Market Is Sweeter, So Look Beyond Your Traditional Market Segments 247 Lesson #4--Give Your Luxury Consumers an Exit Ramp off the Mass Track 252 Lesson #5--No Matter Where You Market along the Masses-to-Classes Continuum, You Can Always Add More Luxury Value 255 Lesson #6--Luxury Marketers Need to Strategize for "Luxflation" to Counteract the Downward Gravitational Pull of Luxury from the Classes to the Masses 257 Lesson #7--Luxury Marketers Must Embrace a Luxury-Branding Paradigm That Combines Product Features and Benefits with Consumercentric Luxury Values 259 Lesson #8--Nurture Brand Evangelists to Spread the Word about the Luxury Values Your Brand Delivers 263 Lesson #9--The Price Communicates on Many Different Levels; Know and Understand the Experiential Dimensions of Luxury Pricing 266 Lesson #10--Brand Awareness Is Not Enough Anymore; We Need to Connect More Personally with Consumers 268 Lesson #11--Luxury Is All about the Fantasy; Help Your Consumers Create and Live Their Personal Fantasy 272 Acknowledgments 275 Appendix: Research Objectives and Methodology 277 Bibliography 287 Index 289