For luxury brands, the current crisis is different and more threatening than previous ones. And different strategies are called for this time. The prize, as always, is to come out stronger at the end of the tunnel. The threat, however, is to lose your business forever!
In every economic dip, there are always winners as well as losers. Those winners used to be eager to demostrate their success. Along with a second group of ‘old elite’ in need to show they’re still doing fine, the new climbers represented the source of business for luxury brands to sustain in the depression. This time, however, it’s not considered appropriate even for those unaffected by the downturn to demonstrate wealth. Luxury brands that are only image without substance are in trouble. Now it is necessary to ‘humble down’ your act and return to the roots.
Here are some strategic To-Do’s to navigate luxury brands through this crisis:
1. Strengthen the core
All luxury brands have started from a specific area of competence, be it women’s apparel like Chanel, luggage like Louis Vuitton, or leather bags like Prada. No matter what proportion of the overall business they represent today, they are essential to give credence to your brand’s claims of excellence and superiority. They should never be entirely forgotten, no matter how broad your portfolio and how contemporary your demeanor. If you lose the basement, the entire building is destined to tumble.
Should your core have collected some dust, now is the time to brush it off. Your customers will thank you because it helps to justify their purchase. And in the end, your core may well turn out to be the most crisis-proof part of your business.
2. Emphasize quality and craftsmanship
Luxury brands are rooted in uncompromising quality and superior craftsmanship. If this has been forgotten in the pursuit of ROI, efficiencies and new customer segments, you better reinstate it now. Unfounded evocations of prestige and image have lost their luster. Luxury products are now bought to treat yourself more than others. The senses must tell the difference. Mere o.k. quality is a must even for low-price entrants today; anything less than superior quality and finish doesn’t qualify for the premium league anmore.
I just stumbled upon the most recent Louis Vuitton ad and I think it’s a brilliant example of our point here. It doesn’t just demonstrate how a luxury brand strengthens its core. It also proves that a brand doesn’t lose its magic by talking about quality and craftsmanship. I love this ad for its subtle borrowing from Vermeer – and its even more subtle sex.
Here is the headline: “The sewer with the linen thread and the bee wax.”
3. Don’t rely on your license business to save the day
When your brand is silently losing air, your license business may well implode with a bang. Both consumers and licensee are very sensitive about the strength of a luxury badge and fast to re-negotiate once they smell signs of weakness.
4. Price healthily, don’t try to be clever
Beware of pricing schemes that look clever on paper. Entry-level low prices and top-end mark-ups can only distort customers’ value perception. Every product in your portfolio should contribute to the bottom-line with every sale. Don’t postpone profit into an uncertain future. What you want is a customer with a good judgement and high esteem for the difference in value between other products and yours. Your pricing should be as transparent and plausible as possible because you charge a high premium. Help your customer understand how it is justified. Opacity of your pricing suggests you’re a rip-off.