Part 1. How to Understand Consumerism
Part 2. How to Understand Media/Content/Communication/Consciousness Centralization?
Part 3. How to Understand Brands (Using Luxury Goods as an Example)?
The core idea of "Luxury Brand Management" is: Most books on brands on the market only approach it from two angles: marketing (using traditional positioning theory and contemporary sophisticated/precision marketing as the axis) and micro-psychology (many psychological tricks that look good but have little practical value, with sensational value greater than analytical value). This book focuses on luxury brand strategy and management, and the author embodies a strong old-school luxury brand sentiment (if you are not a luxury brand enthusiast yourself, this book's perspective will provide a good understanding of the perceptions of heavy luxury brand users), and puts forth many "anti-traditional marketing theory" perspectives.
The Sociology Significance of Luxury Goods
Firstly, it's necessary to understand that luxury goods are not just a problem in the field of consumption, nor can we simply imagine their "spiritual needs" based on Maslow's hierarchy of needs (otherwise, we cannot distinguish valuable luxury brands from a batch of poorly made imitations). The author agrees with the book's assertion that the existence of luxury goods is essentially a problem in sociology and human history.
"Remember that luxury is and always has been the main sociological issue in any society, as it is linked to the following issues:
Social stratification
Utility and waste
Wealth distribution
In other words, luxury is not a neutral concept at the societal level; on the contrary, society defines luxury in a way."
The author defines the four driving forces of the modern luxury goods industry as follows:
Democratization
Increased consumer purchasing power
Globalization
Communication industry
To understand this set of ideas, we first need to understand a premise: human society naturally needs a hierarchical system."
Based on this premise, we can look at the iterations of human history, from primitive society to feudal society, to capitalist democracy. Symbols used to identify hierarchy have always existed, such as shells in primitive society, jewelry/silk in feudal society, and "consumer landscape" in capitalist society. The change in social form is only the mechanism of hierarchy differentiation that is changing.
Returning to the modern era of the birth of luxury goods, "Democratization means that historical social stratification is gradually disappearing." "In a class society, luxury goods are the product of social stratification. But in a democratic society, luxury goods have become the promoter of democracy." If we fully understand the meaning of "consumer society" in the previous article, we will understand that "luxury goods" are a means of social system tools based on commodities and consumption for forming higher-level differentiation.
This leads to another deep-seated problem: Where does the legitimacy of luxury goods as a high-level distinguishing object come from (it is recommended to understand together with the later "brand value of luxury goods")?
The answer is: history and culture.
Luxury goods have two important characteristics: temporality and cultural relevance. This is why we see luxury goods concentrated in Europe rather than the US, and why many luxury brands have originated from royalty and nobility. Essentially, the brief history of the US is not conducive to the deep-rooted heritage of luxury goods. According to the definition in this book, many brands claiming to be luxury goods are actually just high-end products (see the next section for clarification), but this does not mean that young brands lacking temporality cannot succeed (see the section on luxury brand value models later in the book).
Additionally, due to historical and cultural characteristics, a third characteristic of luxury goods arises: locality. Globalization of luxury brands can actually affect brand value. The author believes that brands must be firmly tied to the cultural origins of their locality because luxury goods are not in the business of "adding cost," and they do not need to pursue cost-efficiency in economics. Rather, "waste" that serves their essence is necessary. However, it is worth noting that locality does not necessarily mean localization. In fact, the place of origin must be fixed, but the market must be globalized. Globalization is not only a reflection of the strength of luxury brands, but from another perspective, if luxury goods themselves are the carrier of cultural output, then they must necessarily be globalized (local output to local customers is not enough to become luxury goods).
Luxury Goods Concept Analysis
The author provides several concept analyses of luxury goods to help us better understand the essence of luxury:
Luxury vs. Fashion: The first difference is in terms of time. Fashion does not require a time-specific feature (the so-called "fashion": what is popular at that time), while luxury goods have a strong time element. The second difference is in the principle of achieving "differentiation". Fashion is horizontal, while luxury goods are vertical (the former distinguishes "we are a certain type of people", while the latter distinguishes "we are in the same class"). For some people, fashion is a way to reject social stratification (social differentiation vs. social stratification).
Luxury vs. High-end: Luxury goods are by no means "the highest level of high-end goods." Raising prices does not make high-end goods luxurious. High price is a result, not a reason.
Luxury vs. Art: Refer to "Luxury vs. Fashion". Luxury goods must contain elements of art (aesthetics, transcendence), but the timing of the two is different.
Luxury vs Religion: Luxury and religion have inherent similarities.This quote is from the original book:
"The similarities between religion, art, and luxury goods are startling: all are concerned with eternity, or at least with transcending the limits of time. We call something that lasts a long time "art"; religion promises eternal happiness after death; luxury goods emphasize eternal qualities of difference and beauty. This comparison can be extended to the development of a luxury brand: the brand starts out small, with just a few clients, like a sect of believers. Then the brand hopes to grow that sect, building a truly loyal community. Structurally, luxury brands resemble religions in the following ways:
They have a creator.
They have a founding myth and legends.
The story will remain shrouded in mystery.
There is a sacred place, or sacred places, from which everything began.
There are some symbols (marks, numbers, logos, etc.) whose meaning is known only to the initiated.
Luxury brands will have a logo (the product is endowed with a kind of holy history).
The flagship stores will be seen as new cathedrals in our cities.
There will be regular ceremonies of communication (known as "community management").
Sacrifice will be part of it. Most important, there will be a price."
Luxury brand value
We can summarize the brand value of luxury goods as follows:
Functional value: It exists as a means of distinguishing social class.
Practical value: "Luxury goods should contain strong personal and hedonistic elements, otherwise it cannot be called a luxury good, at best it is just a symbol of conformism, and we will soon fall into the trap of other people's words" (understand in the context of the "cultural" characteristics of luxury goods); Another point to understand is that the principle behind luxury goods becoming a differentiating factor is through self-elevation, not the denigration of others.
Values and cultural concepts: "Any luxury brand should rely on a group of loyal customers as much as possible. They are obsessed with the brand's culture, appreciate the world view and characteristics presented by the brand, and identify with the brand's philosophical concepts"; "Luxury goods gather currency symbols together and create a language. The more sophisticated and organized the grammar is, the more refined the social structure is."
Aesthetic value: "Personal luxury goods contain a strong aesthetic factor, which is different from its hedonistic element (we believe that things that are beautiful do not necessarily bring pleasure to people)."
Human service: "Because luxury goods are a social phenomenon, and society is made up of people, whether it is luxury goods or luxury services, they should be realized by people, originating from people: luxury goods must be handcrafted, and luxury services must be provided by people."
The relationship between luxury goods and consumers
In plain language, the essence of luxury brands lies in their "dominant-submissive" relationship with consumers (with the brand in a dominant position). "Brand rationality comes not only from expertise, but also from power, class, and creativity."
There should be a certain distance between the brand and the customer, neither arrogant nor distant, while maintaining a mysterious quality. "True luxury brands are those that can set prices freely." In terms of emotional relationships between customers and brands (similar to parent-child relationships), one person dominating the other does not mean disrespecting the other. The "hedgehog effect" means that once people have tasted the sweetness of luxury goods, it is difficult to resist their temptation, and it becomes increasingly difficult to return to their original level of consumption. As such, the value construction of luxury goods must involve both target consumers and target audiences who are aware of the brand. "Dreams are defined by brand awareness and ownership. Here, we once again find that the ultimate definition of luxury goods is to divide society into different classes (including social class, quality, product excellence, and price). The dream of luxury goods is defined by people who know and can afford them."
Types of consumers of luxury goods:
Luxury brand value model
This book has constructed several models that outline the different paths through which luxury brands create their value:
European vs. American:
By studying luxury brand management, it becomes clear that there are two models for building a brand. The first model pursues the ultimate product quality and values the product itself and its real historical tradition, believing that the brand is the modern embodiment of history. The second model is American-style: without a long history of their own, these "new world" brands dare to create history. These brands also value the role of physical stores, using the store atmosphere to create a pure and authoritative brand image, making the brand value accessible. The US has created Disney and Hollywood, which are the creators of fantasy worlds.
The "prism" model of luxury brands:
Example:
From this, we can see that successful luxury brands must have highly personalized features while avoiding being too individualized.
Means of creating differentiation in luxury goods：
Luxury brand management involves balancing four aspects across all products and services: a sense of history, a pursuit of status and prestige, modern features that bring vitality, emotion and creativity to the brand, and accessibility.
Luxury brands often have an entry-level product in their product matrix, such as Chanel No. 5, as well as products that generate the most profit. However, unlike the idea of "traffic thinking," the entry-level product is not just a means of attracting customers, but is also a part of the entire luxury brand marketing campaign. The entry-level product must be flawless in its value proposition and attractive to consumers.
Luxury brands' "anti-marketing rule"
The book presents some practical rules for luxury brand operations. Here are some excerpts that help us understand the principles of luxury:
Anti-"positioning," luxury goods are not comparable (nor should they be).
Anti-"cost-performance ratio" and "high-end product" thinking: the flaws/defects of a product may be where the value of luxury lies.
Anti-market research: Do not cater to consumers, do not respond to market demands, do not test in advance, do not seek consensus. Luxury goods are not collected, understood, and satisfied from consumers' demands (typical fast-moving consumer goods practices, e.g., P&G, L'Oreal); but rather built from top to bottom, with extreme talent and self-attraction of the founders, and should 【dominate customers】, similar to leadership and management in organizational management.
Anti-supply-demand model: On the supply side, one way luxury goods maintain their scarcity is by artificially limiting supply, and "do not let customers easily purchase" (e.g., buying Hermes bags requires "matching"); do not profit by lowering costs. Consideration: the religious nature of luxury goods and the location of luxury goods. On the demand side (price increases): raise prices over time to increase demand, constantly increase the average price within the product range, and promotions are taboo.
Anti-4P model: The role of advertising is not promotion but communication; luxury goods pricing is usually inconsistent, especially the product prices should not be mentioned in public advertising unless it is the well-known entry-level product.
Anti-segmentation: Traditional marketing emphasizes population segmentation (geography, age, gender, etc.), but the difference in target customers for luxury goods is not based on demographic characteristics. The simple principle is to stay away from those who lack passion, to separate customers from non-customers, and to distinguish between large and small customers. At the same time, because the dream of luxury goods is built jointly by those who can afford and those who cannot, luxury goods cannot exclude non-target customers but must communicate with them in an appropriate manner.
Anti-bandwagon effect: Do not use celebrities in advertising.
Luxury Brand Extension
For luxury brands that have already established a good style, this book provides the following strategies for business extension:
Globalization: "For luxury brands, it is better to have a small customer base in every country than a large one in one country, because the former is likely to expand while the latter can disappear overnight."
Horizontal expansion: Expand into different product categories with the brand as the core asset. For example, Chanel expanded from perfumes to beauty products.
Vertical expansion: Usually expanding into different price ranges. The risk is that it may shake the foundation of the brand's image, and a compromise is to create different sub-brands.
One thing to note here is that "luxury brand has no lifecycle". Whether it is extension or maintaining an independent market segment, the life and death of a luxury brand cannot be analyzed using traditional macroeconomic cycle models or the product lifecycle models used for general consumer goods.
During an economic downturn, the sales of luxury brands do not significantly decrease;
Non-linear lifecycle: Luxury brands do go extinct, but their evolution does not follow macroeconomic ability or population size like general consumer goods lifecycle models.
Key Takeaways:
Luxury brands are the epitome of branding. Although most investment targets in the market are not as extreme and strict, but rather in a hybrid state of "branding-efficiency," understanding this concept has great inspiration and reference value for us to understand brand power.
Based on the knowledge system of this book, we can see that brand power is not achieved through "face-brushing," but is essentially a set of value systems carried by "products," and requires suitable organizational structure and operational activities to complement it. The reason why time is a dimension to test a brand is that it tests the value system (conformity to humanity/time or contrary to it) rather than the product. A brand is not a single intangible asset in the balance sheet, but an inherent value and operational system within the organization.
Part 4. Summarize
As you have read up to this point, we try to summarize all the above content and re-examine the investment in consumer goods led by the premium logic:
Consumption is a social relationship, and understanding the surface of consumer goods is based on economic logic (supply-demand model), while the underlying is a representation of the evolution of social systems and human nature under current environmental conditions.
Consumption is naturally inseparable from channels. Channels include communication channels, sales channels, and cognitive channels. The explosion of consumer goods may not be linear, which is also the difficulty of consumer investment. One possible solution is to remain sensitive to micro-changes.
Product strength is not the essence of a brand. A brand is actually a whole value system.
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