It’s official: The luxury industry is back after a short rest. According to an article in Forbes referring to the global consulting firm, Bain & Company’s 2012 Luxury Market Update, the luxury goods industry is poised for full recovery in 2011. The report is authored by Claudia D’Arpizio, a partner based in the firm’s Milan office.
The study covered some 220 luxury brands, which includes leather goods, fashion, jewelry, alcohol and cosmetics companies that serve high net worth customers, or those with assets of US$1 million or above and concluded that spending on luxury is expected to pick up to around $230 billion per annum by 2012. New millionaire from countries like China, India etc. will be leading the charge.
Rules of the game: While some golden rules of marketing remain, there are a few new ones that need to be recognized. The new rich seem to believe in the maxim – “If you’ve got it, you’ve got to be able to show it…or else you ain’t really got it”
There are those who think that, because of the current poor economy, the wealthy now want to be understated and subtle about their wealth. Well, as far as the new rich are concerned this idea is completely wrong.
Why Luxury Brands?: The rich patronize luxury brands for a variety of reasons. Although most would just prefer to say they buy for the quality of the product, the real reasons are more at the subconscious level – like peer recognition and approval, status, the admiration (envy) of the not so rich i.e. the aspiring rich etc.
Luxury Brands Marketing: Luxury goods brands deploy a wide variety of techniques to keep their brands within the mindset of their customers… both current and in particular future customers. While public relations and advertising in selected media has been the mainstay, savvy marketers have also used event sponsorship for decades… but mostly in name only.
However, in the last few years, a down economy has forced many luxury goods marketers to become more creative in reaching their target audiences.
Historically, marketers of luxury brands such as liquor, fragrances, timepieces, fashion and cosmetics have consistently pursued a luxury pricing strategy in order to maintain an impression of exclusivity. That strategy meant limiting the availability of products, price mar-ups etc. The thinking was, that their brands had to be guarded against brand devaluation.
But with luxury brands facing stiffer competition from new entrants and in an economy that’s presenting additional challenges, the risk of becoming irrelevant or God forbid! Being considered ordinary is very real, Luxury brands are now reinventing themselves to a whole new generation of potential customers. They are moving above advertising, that’s available to all with a budget, to considering unique, limited availability sponsorship of events and activities that are easily identified with the rich and famous, for differentiating their products.
Building Brand Image through Sponsorship: It takes a lot to build and a lot more to maintain a brand’s upscale image active in the minds of customers. And this is vital to the success of any luxury brand. There is no better and more cost effective way to build and secure that image than by regularly aligning with luxury events organized by equally luxury oriented organizations.
Take for example Richman’s International Millionaire Clubs. Its Charter Corporate Platinum Memberships is limited to just 100 globally, and is reportedly the world’s most expensive private club memberships. This particular class of exclusive membership offers much more that just one club membership with worldwide benefits not offered by any other club in the world. These memberships offer its holders exclusive rights to thirty years of corporate sponsorship rights to horse racing and other international millionaire events, at no additional cost – a value probably far in excess of the cost of membership. Of course the club probably has other classes of members who don’t necessarily enjoy these free sponsorship rights.
Luxury brands could sponsor both international and country specific events like the Richman’s Inter-World Horse Racing, Polo, Motor Racing, Golf etc. Challenges. In addition to on site attendance, these events indirectly reach a huge world wide audience of both the rich and rich wannbes through extensive television and Internet coverage of the event – thus providing sponsors with media coverage at no extra cost. It would cost a substantial fortune to purchase this amount of media coverage through advertisements.
The point is that apart from just media coverage, sponsorship is a unique platform that has exclusive, specific and strong traits and personalities in identifying with and influencing both directly and subliminally with the wealthy and the rich wannabes. Selecting events with qualities most similar to a brand provides a very powerful vehicle for drawing attention to, and sustaining the image of the brand. Additionally, the lifestyles of these events’ patrons – i.e. expensive, exclusive with limited access etc. will greatly reinforce related qualities of the luxury brand over time.
Innovative Brand Building Relationships: Luxury brands must seek to stand out among their competitors. Therefore, the atmosphere in which luxury brands engage their most committed customers must match the exclusivity of the brand and the lifestyle it seeks to represent. Properly planned and activated hospitality programs leave a more lasting impact on the biggest customers than image-laden ads in high-gloss limited-distribution lifestyle magazines – a medium that lifestyle brands have traditionally leaned on for years. In using lifestyle magazines, it’s probably more cost effective to pitch them on co-sponsoring events or subsidizing hospitality programs rather than straight advertising in them.
The New Rich. Are they different?: Old money is just that – it’s OLD. It has it’s established habits and favored brands. It’s entrenched and less concerned with peer pressure or living up to the Joneses. Sad but true…Old money is a dieing breed and worst of all it’s buying less and less. “To survive and grow, luxury brands need to market to the new rich.”
Unfortunately the very people who are responsible for marketing and maintaining the image of many established luxury brands have grown old with their brands. Old – but not necessarily in biological age terms… but in philosophical and mind set terms. What worked well before may not work as well anymore…and the lean and hungry competition is just around the corner
In general, luxury brand purchasers are accustomed to being pampered, but they are also used to having access to the hottest parties, entertainment events and sports venues. Their experience threshold is much higher than the average fan. The new rich want all of this and more…and on more terms relevant to them.
For instance, a great view from a luxury hotel suite would be a truly memorable experience for most. For many consumers of luxury brands, it’s an average experience. But for the new rich it’s more. They want the whole world to know that they can afford to stay at the luxury suite. The view is an added bonus.
Event Sponsorship provides a unique, non competitive, really exclusive platform for bringing truly memorable experiences to the new luxury consumer… and in a way he or she wants it. Perhaps the experience needs to be a bit over-the-top and maybe the average investment per invitee is going to be higher than the usual customer entertainment event but when you’re selling luxury to the new rich, coddling the customer just that much more is well worth the investment.