The Return Of Luxury

At the Burberry fashion show this spring, there were only hints of the company’s black and caramel-colored plaid in its runway line Prorsum, an exclusive brand in the Burberry stable. Limiting the accessibility of its signature pattern has been a key part of Burberry’s strategy to shake off the damage done to its high-end image after the pattern was adopted by a British working-class group called “chavs” that once plastered the pattern across its Web site and took to decking themselves out from head to toe in a similar-looking fabric.

We’ve all heard the horror stories about swank brands whose image or sales suffered when the masses adopted them—from the preppy Tommy Hilfiger look to the Japanese consumer who wouldn’t be caught dead shopping next to a middle-class Tiffany customer intent on the all-too-accessible $70 key ring.

Now the experts say the movement in luxury marketing is headed back to a return to glamour. Traditional upscale marketers like Burberry, Jaguar and Godiva are focusing on making their products more exclusive for the elite consumer through elegant ad campaigns or, in some cases, by introducing new items targeted at a luxe audience.

So much for the democratization of luxury—a noted trend only two years ago. It’s not that such extravagant brands are giving up their wayward stepchildren. They’re just not talking about them in their quest for the wealthy consumer who jets to Dubai and Shanghai for shopping sprees and who places a premium on value and experience.

“Marketing needs to change regarding luxury goods,” says Marian Salzman, chief marketing officer at JWT. “The blue box at Tiffany is no longer enough to do it. There has to be something extra caught up in that premium. To be truly special, it has to be one step better than what you get at another jewelry store.”

As Andrew Benett, chief strategy officer at Euro RSCG, whose clients include Jaguar, puts it, “Many luxury brands are trying to return exclusivity to luxury.”

So Grand Marnier offers a $225 bottle of Cuvée du Cent Cinquantenaire that’s marketed with the headline “Hard to find, impossible to pronounce and prohibitively expensive.” Only people who bring “a unique wealth of experience”—and a $55,000 membership fee—can join the Core Club in New York City, the urban spin on the old country club. And for a $150,000 membership deposit, you can have your name on The Napa Valley Reserve, which saves its best grapes to create private-label wines not sold anywhere else.

“What great luxury brands do is have a sense of conversational currency,” Benett says. “It’s not just about the actual product and experience, it is about being in the know and being able to talk about it. When someone says, ‘Where is the wine from?’ it is your own personal vintage. The talk value that surrounds it is even greater.”

Benett says the very wealthy want more products and services that make them feel “above the crowd,” and he calls this trend “the push-back against ‘masstige.'”

There are now an estimated 8.3 million people in the world with $1 million or more in financial assets, according to Merrill Lynch and Capgemini’s 2005 World Wealth Report. This means upper-middle-class consumers have been willing to spend significantly on a few luxury items because they can. Michael Silverstein, svp of the Boston Consulting Group and author of Treasure Hunt: Inside the Mind of the New Consumer, calls this trend “trading up.” This mass luxury market, which Silverstein says has more than doubled to “$600 billion-plus in the U.S. in the last five years,” has in turn forced a growing segmentation toward more exclusive products or services.

“It has put pressure on luxury brands to deliver a heightened sense of style, quality and elegance, and to create things that other people don’t necessarily have,” says Richard Kirshenbaum, co-chair of Kirshenbaum Bond + Partners, whose clients include Moët & Chandon champagne and NetJets. “Maybe it’s a rare pink diamond, or it’s a Roman chariot race at the hippodrome in Jerash, Jordan. “

NEW MONEY SET WANTS VALUE TOO

But there is one twist with today’s high-end consumer that no marketer can afford to ignore. The luxury consumer has changed in a way where it becomes important to add value—a word hardly associated with luxury—back into the marketing equation, says Jim Taylor, vice chairman of The Harrison Group, a market research firm in Waterbury, Conn. A January 2006 Harrison study, done with Worth magazine, found that 92 percent of wealthy Americans—defined by families with $5 million to $11 billion in liquid assets—earned their money in the last 20 years.

That means old money, the kind people inherited, has become a smaller part of the equation. If self-made entrepreneurs—think people like Steve Jobs—dominate the wealth, then Taylor says that middle-class roots prompt these wealthy consumers to demand value with their glamour. “The only money is new,” Taylor says. “These people bring a value equation to this process that is not in the hands of the marketers. If you grasp the emotional connection and the value in the advertising, then you will reach the luxury consumer.”

Whole Foods, a successful upscale marketer of organic food, has put the word “value” in its recent advertising. Peninsula Hotels chooses to showcase service in its “Portraits of Peninsula” campaign done by Agency Sacks, New York, which uses pictures of hotel employees taken by photographer Annie Leibowitz.

Agency president Andrew Sacks says the campaign works because it understands the middle-class mentality of the wealthy consumer, where service is something that matters. “You have to be very respectful of how you market to this audience,” Sacks says. “You really can’t BS them. That is why even language like using the word ‘luxury’ can be a code [to the consumer] that ‘you don’t get me.'”

Jodi Sweetbaum-Carse, president of Lloyd + Co., a New York agency specializing in fashion and beauty, credits outgoing Burberry chief executive Rose Marie Bravo with altering a management culture that said, “Let’s put the plaid on everything,” through numerous licensing agreements from vodka to cigarettes, she says.

“She pulled the plaid back and let it rest hidden away so they could relaunch it in its iconic state,” Sweetbaum-Carse says. “Now, it feels fresh and new but instantly recognizable.”

Burberry has also infused a sense of sophistication and style into the ad campaign for its new London fragrance, which shows black-and-white images of such attractions like Big Ben and the London Eye. Actress Rachel Weisz appears with Welsh actor Ioan Gruffudd.

In April, when Burberry announced a 16 percent increase in retail sales over the previous four months, Bravo pointed to the spring collection and the new ad campaign as significant factors in that growth.

The jury is still out on how well Jaguar will recover. Jaguar first got into trouble when it slapped its classy-looking body on a European Ford chassis in the $29,000 X-Type sedan in 2001 and has been trying to improve its image ever since. Even though the car company still offers the X-Type, Jaguar has been working to return prestige to its overall brand by pumping ad dollars in to its high-end products. For the traditional luxury consumer, “How do you make yourself special and unique?” asks Heather Harkovich, Jaguar’s marketing communications manager. “They are not driving the same car everyone else has, and you are seeing companies broaden what they are offering customers in response to that.”

As a result, Jaguar introduced its top-of-the-line Super V8 Portfolio last September, which included 150 new $115,000 cars that came with a phone and concierge service that made restaurant reservations available at the touch of a button. All the cars sold.

But the automaker still needed to shake that “old guy with money” image by positioning the brand to appeal to a younger audience and making it feel more modern. Its latest ad campaign, “Gorgeous,” which launched in September, pushes the XJ, the XK and the S-Type by featuring people engaged in conversations or experiences with the car in the background. “This is not luxury automotive brand advertising, where you are talking about the sleekness, the precision and the power of the car,” says Benett of Euro RSCG, which took over the account in May 2005. “This campaign tells a story that invites you in. You still get a sense of the beauty and performance of the vehicle, but we are doing it in a way that is more subtle. We are communicating a sense of discovery.”

Jaguar has also ratcheted up the buzz marketing, narrowed the focus of its event marketing and shifted more dollars to Internet ads. It recently picked up author Jay McInerney in an XJ8L—a luxury sedan with a $50,000-plus price tag—and brought him to dinner at a New York restaurant with a dozen other notables. And it created advertorials connected to the “Gorgeous” campaign that appear on Concierge.com and Epicurious.com.

Despite increasing its ad spending from $18 million in 2004 to 40 million last year, per Nielsen Monitor-Plus, sales were down 34 percent last year. But Jaguar has sold 1,737 XKs this year, a 62 percent increase over last year.

One danger would be to let the quality slip, says The Harrison Group’s Taylor. The company has tried to address this issue with its XJ model by using aluminum to lower the car’s body weight so it has more horsepower and gets better gas mileage, two factors considered a plus among the value-conscious luxury consumer.

“Jaguar better build one helluva car, because they are going up against Audi, Mercedes, BMW and Cadillac,” Taylor says. “Jaguar diminished their reputation by defining themselves as a product where price overwhelmed the good judgment of the engineers. They eroded the value equation.”

For Michael Kantrow, CEO of Margeotes Fertitta Powell, New York, who handles the chocolate company Godiva, the marketing challenge was to find a way to make the luxury brand something consumers would still aspire to when it could be found in nearly every shopping mall. The agency found that advertising alone was not the solution. “There is an inherent conflict between a true luxury brand, which is about a scarce product or brand of very fine quality and can only be produced in a certain amount, and the very nature of traditional advertising, which is by nature mass-produced communication,” he says.

Godiva, traditionally known among consumers as more expensive chocolates you give as a gift, needed to reposition itself when sales slowed in 2001, says Sharon Rothstein, Godiva’s vp of global marketing and merchandising. Extending its product offerings beyond the classic collection in the gold box became a necessary step.

Since then, Godiva has introduced a handmade G Collection, which is only available in select stores, and a Platinum Collection made with more cocoa for the less sweet palate, Rothstein says. The makeover continued inside its stores, where Godiva established a “theatre” experience of dipping different ingredients like fresh strawberries into chocolate.

In September 2004, Godiva launched the “Diva” campaign, which positioned the chocolate as a fashionable indulgence featuring models like Sophie Dahl.

Godiva has also tailored its product promotions to a more upscale audience. This past Mother’s Day, Godiva paired a $65 box of its G Collection with a $2,006 baby shoe charm by the jeweler Aaron Basha, done in 18-carat white gold with green and brown, based on the colors of the G Collection. Overall, Rothstein says Godiva is now enjoying a renaissance that the company feels satisfied with.

MASS MARKETERS GO LUXE

Even some mass marketers are looking to tap into the luxury set.

Delta Faucet Company’s fine line of fixtures, under the name Brizo, uses a mythological goddess of the same name in its marketing efforts and connects her to the fashion world. The faucet maker knew it had a problem two years ago when it watched its premium brand—called Delta Select—sit on storeroom shelves despite a booming remodeling market where sales of premium products were swelling. Enter Brizo, with a price point starting at $300 for a faucet and ranging up to $5,000 for a custom shower system, which launched in 2004 on a catwalk in Chicago. The key was not connecting the name Delta—a product one could find in every Lowe’s and Home Depot across the country—with the new luxury brand.

“With Delta, there is no reason to pay a premium for that exclusivity,” said Amy Hillsman, Delta Faucet’s senior brand manager. “The story behind Brizo can’t be found at a Home Depot. Brizo is a bragging right when they have their friends over.”

The next step was to position Brizo as a fashionable brand by having designers like Nicole Miller and Michael Kors create clothing for a charitable cause based on the Brizo design. “When we started the brand, the ultimate goal was to become a fashion label for Brizo, and that comes out of the ongoing connection between fashion and the home,” says Carolyn Hadlock, partner and creative director at Young & Laramore in Indianapolis, which handles creative for Brizo.

Delta thinks Brizo is paying off. After limiting the distribution points from the 1,500 its Delta Select premium brand had to 650 for Brizo, Hillsman says the company has more than doubled its sales in two years.

The return to exclusivity and glamour with a twist on value doesn’t surprise people like Joan DeJean, a French professor at the University of Pennsylvania and author of The Essence of Style: How the French Invented High Fashion, Fine Food, Chic Cafés, Style, Sophistication and Glamour. DeJean, who recently gave a talk on luxury at Kantrow’s shop, says more luxury marketers should study the history of commerce under Louis XIV, the 17th-century Sun King.

“Value was not primarily about price and performance, but was determined by intangible factors. It was a matter of aesthetics and elegance,” DeJean writes.

And this combination of value and aesthetics exists in today’s luxury market, she writes. “It’s not enough to offer customers a good product; you have to make them feel special by providing a hefty dose of emotion and drama along with the merchandise.”

When reached at her Paris home, DeJean said today’s luxury marketers ponder the same dilemma 17th-century merchants grappled with, but on a bigger scale. How do you make people aware of your luxury brand but still keep it exclusive?

“You wouldn’t want to be the only person wearing the dress, because you want to be copied,” she says. “How else can you make people know who the trendsetters are?”