Opinion: Why luxury brands need a blueprint for success

As luxury brands prepare to publish their latest financial results, the picture will be mixed. While I expect the best managed and most successful brands to post significant growth, there will also be others experiencing negative performance. Though it’s tempting to blame a decline on a cooling down of demand, in my career, I’ve found that the root cause of underperformance often lies elsewhere. Between 2020 and 2022, luxury experienced unprecedented growth rates, exceeding 20 percent year on year. Now, we are observing a normalization of market growth, in line with the historic compound annual growth rate (CAGR) of the luxury market. I anticipate this growth rate to range between 4 and 7 percent annually from now until 2030. Based on my observations and numerous interviews with luxury consumers and ultra-high-net-worth individuals, it’s evident that brands are facing much stronger scrutiny from clients than ever before. Client expectations toward luxury brands and the experiences they offer are at an all-time high, and many brands are simply failing to meet these demands. Despite sales personnel excelling in certain dimensions they were trained for — such as smiling, approaching clients, using their names, and maintaining a well-groomed and polite demeanor — I've seen several client experience studies where customer satisfaction remained unacceptably low. This indicates that luxury brands must significantly step up their game to stay relevant. We are in an era where luxury consumers are faced with an unprecedented number of brands promising high quality, exquisite craftsmanship, and excellent service. However, these attributes alone no longer define what it means to be a luxury brand from a client perspective. Luxury is the ability to create extreme value, and exceptional tangible factors are simply expected by luxury clients; when they are expected, then they are nothing special. Therefore, for a luxury brand to evoke desire, it must apply a much broader and more deliberate philosophy. In my experience, the best-managed luxury brands distinguish themselves by adhering to a strict long-term vision, excelling in brand storytelling, investing effort and intention in the creation, design, and execution of each new product, maintaining a pricing strategy that enhances brand equity, and prioritizing education. Let’s delve deeper into these factors: A vision for the future plus a ‘wow’ execution The cornerstone of any leading luxury brand is a long-term vision and the highest level of precision in executing against that vision. This includes a deep commitment to the brand’s core values. Luxury is fundamentally about exceeding expectations in ways that resonate on a personal and emotional level with the consumer. The brands that succeed are those that never compromise on their core values, ensuring that every decision aligns with their brand identity and respect for their heritage. This does not mean that brands have to stand still. In fact, the most successful brands managed to expand into new categories and adapt to what is relevant for each generation while staying true to who they are. Hermès and Rolex are great examples of a long-term commitment to building brand equity while keeping the brand fresh and surprising. Intentionality and effort in design Exceptional luxury brands understand that every element of their products must be intentional. This goes beyond the vision of the creative director or brand aesthetics. It fundamentally needs to include every aspect of the product development process. Clients need to feel the effort that goes into crafting products and experiences that are exceptional. From the initial concept to the final product, every stage must reflect deliberate choices that enhance utility and allure. It’s about crafting with soul. This meticulous attention to detail ensures that the final product is not only functionally superior but also emotionally compelling. And luxury is pure emotion. Many brands forget that. The art of storytelling The value of a luxury brand is in its ability to own and tell a unique story that resonates with clients. Storytelling is an art that only the most successful luxury brands master. Gucci mastered the art of storytelling under both Tom Ford and Alessandro Michele, leading the brand to outperform its peers in both periods. However, recent disappointing results reflect a decline in brand storytelling. Like many other brands, Gucci has lost its uniqueness and is becoming increasingly predictable, undifferentiated, and boring, relying too heavily on celebrity endorsements. When brands resort to desperate measures to connect with celebrities, it suggests a lack of confidence in their own storytelling abilities. The brand story creates an emotional connection with clients. It’s the number one factor to unlock Added Luxury Value (ALV), a value component exclusive to luxury brands that reflects a client’s anticipation of an emotional and perceptual shift. After years of research on ALV creation, it’s evident that many brands are not fully harnessing its potential, resulting in a strategic disadvantage rather than cultivating desirability. Ultimately, it’s the emotional connection fostered through storytelling that serves as the most crucial driver of extreme value creation. When brands resort to desperate measures to connect with celebrities, it suggests a lack of confidence in their own storytelling abilities. Strategic luxury pricing Luxury pricing strategy is a critical aspect of successful luxury brands. The best luxury brands never discount their products. Discounting not only undermines the perceived value of the brand but also erodes brand equity faster than anything else. This is why I like to call pricing the nuclear option for a brand: once you discount, brand equity is often irreparably damaged. Pricing is the nuclear option for a brand: once you discount, brand equity is irreparably damaged. Education over salesmanship Luxury is love. “I fell in love with the brand” is a sentiment I hear all the time from clients. This perspective shifts the focus from selling products to nurturing genuine client relationships. However, clients often break up with brands when they sense that salespeople prioritize transactions over empathy and care. It’s crazy how much brands alienate clients through their own behavior. By investing significantly in training their staff on emotional intelligence, the best luxury brands ensure that their representatives are adept at showing empathy to their clients. Luxury training is therefore one of the most critical success factors. The blueprint for success Well-managed brands experience growth as they continuously enhance desirability. Conversely, brands that become complacent and don’t address their gaps risk losing ground, especially as client expectations grow significantly. This requires an approach that creates an ecosystem of extreme value creation, including a visionary long-term approach, meticulous design efforts, differentiated and emotionally resonant brand storytelling, a disciplined pricing strategy, and a steadfast commitment to education and customer relationships. It’s a call to action. Are you ready? This is an opinion piece by Daniel Langer, CEO of Équité, recognized as one of the “Global Top Five Luxury Key Opinion Leaders to Watch.” He serves as an executive professor of luxury strategy and pricing at Pepperdine University in Malibu and as a professor of luxury at NYU, New York. Daniel has authored best-selling books on luxury management in English and Chinese, and is a respected global keynote speaker. Daniel conducts masterclasses on various luxury topics across the world. As a luxury expert featured on Bloomberg TV, Forbes, The Economist, and others; Daniel holds an MBA and a Ph.D. in luxury management, and has received education from Harvard Business School. Follow him: LinkedIn and Instagram. All opinions expressed in the column are his own and do not reflect the official position of Jing Daily.

Opinion: Why luxury brands need a blueprint for success

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Published April 15, 2024

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Opinion: Why luxury brands need a blueprint for success