Learning from luxury brands: how you can use thier strategies in your startup

Learning from luxury brands: how you can use thier strategies in your startup

For any business to be viable, there has to be a pretty large gap between what it costs to make the product and what customers are willing to pay. In this post I will cover some of the ways that luxury brands increase this gap, as they are arguably the best at it. Many of these methods can easily be used by startups, in particular small ‘maker’ businesses.

First, I will define what luxury actually is. Luxury not just more premium than premium, as many believe. It is a superlative. Think of it this way: you compare features vs price when buying premium items, but just want luxury items because of what they embody. You buy a Lexus because it offers the most features and refinement for the price, but a Range Rover just because it’s a Range Rover.

Luxury works on two levels: as a social marker for others to see and as a hedonistic pleasure for oneself. The smooth, complex flavour of a great Scotch whiskey is an example of the latter, and the Louis Vuitton monogram an example of the former. Luxury items exist because they serve humans’ innate desire for social stratification, which modern democratic societies are otherwise relatively free of.

Notwithstanding luxury’s place as a visible form of social stratification, true luxury must not transgress too far towards vulgarity. It should generally have a degree of subtlety that only those in the know actually recognise and appreciate, for example the detail in the stitching of a fine piece of clothing. Vulgarity will also attract the wrong clientele, thus scaring away more desirable, loyal customers.

Luxury is qualitative not quantitative. Anyone can build a bigger/faster/more expensive/more powerful car, but no-one else can create the immense desire that goes with the Ferrari experience.

One thing that marks all true luxury brands is tradition and a rich history and legend, usually of the charismatic and pioneering founder. Think Ferrari (and it’s racing heritage) or Louis Vuitton (pioneering luggage maker in an era when international travel was the preserve of the wealthy). This makes things a little difficult for the startup! But it can be overcome.

When Mr Ralph Lifshitz, the son of working class Jewish immigrant parents, decided to create a fashion brand targeted at the New York WASP set (from which he couldn’t have been more of an outsider), he changed his name to Ralph Lauren and attached the brand to polo – a pastime of the wealthy. In other words, he created a legend, and it worked because it permeated everything he did and resonated with his target customer.

Reviving old brands is another way to ‘start’ either a luxury business (eg MV Agusta), or one that uses many of its cues (eg Mini). Shinola was once a well-known brand of shoe polish in the US, but the name has recently been revived by a phenomenal group of people in Detroit who make watches, bikes and clothes, amongst other things. Deus Ex Machina are not a luxury brand, but have created a rich looking heritage from scratch.

Luxury takes time. A great Scotch whiskey takes upwards of 20 years to make. A great red wine takes years after purchase to mature. Ferrari have a waiting list, sometimes years long. Mini have taken a leaf out of the luxury playbook and build their cars to order, meaning your car takes months to arrive after ordering it. The investment of time helps build people’s bond with the car.

Luxury is timeless. It doesn’t follow the whim of the latest trend.

Luxury is beautiful art with function. Although not too much function, and is often flawed. A Rolls Royce contains few high tech gadgets. Luxury clothing is often impractical or uncomfortable. While a luxury product may be flawed in some ways, it must use the finest materials and be superbly made, usually by hand.

Luxury appeals to all the senses. A Ferrari looks beautiful, sounds amazing, the interior feels sumptuous and (when new) smells great.

Luxury advertising doesn’t sell: it conveys the brand universe, its legend and builds aspiration. Celebrities are not used prominently either – nothing must out-shine the brand. Luxury advertising doesn’t just communicate to potential customers – it must also show the brand’s universe to non-customers in order to gain cred as a status symbol.

Luxury is tied to a place. Champagne is only from the Champagne region in France, Ferrari’s are built in Marranello, Louis Vuitton is made in France and Swiss watches are a breed of their own. The second a luxury brand gets its wares made anywhere other than the home of the brand, it will lose its lustre.

Luxury is personalised. Haute couture is made specifically to fit the wearer. The great luxury brands own their own shops and provide highly personalised service and then foster ongoing personal relationships with their customers.

Luxury brands do not discount. If they have excess inventory the will burn it, or on occasions have sales events only for their most frequent customers. They do this with caution, and make it very clear that invitation to such an event is a reward for having purchased plenty of (full price) merchandise.

While starting true luxury brand is not the domain of many startups, if you are selling high end products you can benefit immensely by applying luxury cues and techniques to your brand, particularly if you are a ‘maker’ or designer.

Much of the content of this article comes from the book ‘Luxury Strategy’ by Kapferer and Bastien, which I highly recommend.

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