white paper The Nature of Luxury: Dispelling the Myths
Why “luxury” as a commodity is so confusing
Six myths of luxury — what it is and what it’s not
How understandin g the nature of luxury will help build margins and differentiate products and services Five really useful tips on how to use the concept of luxury for fun and profit
Marketers today are increasingly focusing on the “luxury” market, as if it were an identifiable, affluent orgasm that spews money on high design and extravagance. While this may be the behavior of some affluent consumers, it is a very limited view of what luxury is and where it belongs. Luxury is, as this paper discusses, an excess that is not necessary, and therefore can be the lynch pin of marketing strategies across all economic segments. What is luxury and why does the answer matter?
The second part of the question is easy to answer: it matters because luxury adds value to any proposition, and hence an important component of just about any business. But what it is, is somewhat more complicated. I Googled "definition of luxury", which returned 330,000 entries. After reading the top 175,230 entries, I realized that the subject needed to be revisited in a more useful way. Having spent twenty years understanding consumers and how they relate to the world around them, especially the stuff they buy, use and experience, I have developed a universal definition of "luxury" and hence a way of applying the idea of luxury at almost every level of experience of almost any product in almost any category. To understand this a little better, let's examine some of the myths of luxury. But first, the underlying fallacy of the modern approach to luxury marketing. Underlying fallacy
Most discussions about luxury end up being discussions about luxury things ‐‐ when Isadore Sharp of Four Seasons defines luxury he is defining "luxury experiences," and generally from the perspective of hotels (more
on this later). It is important to understand that the word "luxury" derives from the Latin "luxus", which means "excess". The adjective, which is what we generally define (very often in narrow contexts), simply describes the object as "in excess" ‐‐ a luxury brand, then, would be a brand that (to give the marketers their due) promises excess. Fifteen years ago, I introduced the notion of luxury as "waste." Again, simply put, luxury is anything that is not necessary, and anything that is necessary is not luxury. This helps explain why a hot bath to relax in the evening after a tiring day is a luxury, while a hot bath to get clean in the morning is not a luxury. Similarly, time is seen as the greatest luxury when we have extra time available to do something that is not essential, but it is certainly not a luxury when we have extra time because we are kept waiting at the dentist. The most significant point, of course, is that in this definition of luxury we see that the object is not, in most cases, luxury or luxurious, but the way it is experienced may (or may not) be luxurious. As we know, one man's stale coffee is another man's added value in a no‐frills hotel. One of the most important implications of this is that the customer has to know that what he
or she is experiencing is "luxury", which is by no means always the case. This is where design, merchandising and service cues play a vital role.
Did Rolls Royce cease being “luxury” when the Maybach came on to the market?
Now for the myths. Myth #1: Luxury is expensive
The case of the hot bath makes this point as well as can be made. Time, too, is not expensive, it's free, except when it's priceless. Besides which, what is expensive? A night in the Ty Warner Penthouse suite at the Four Seasons in New York runs around $35,000; however, it is little more than half the cost of The Royal Penthouse Suite, President Wilson Hotel, Geneva ($65,000). Does this mean that the bargain basement suite at the Four Seasons is only half the luxury of the President Wilson Hotel? You get my point! Myth #2: Luxury is the best of whatever
Luis Mogollon*, Director of Develop‐ ment, Quivira Los Cabos, defines luxury as "…the best that life has to offer…" For sure this rules out the Four Seasons New York. On that subject, Isadore Sharp is quoted as defining luxury as "Luxury, by definition, means something that appears to be the best of whatever it represents."* This is of course unfortunate for a luxury hotel chain unless their hotels can always be the most every‐ thing, everywhere. Which they can’t. Did Rolls Royce cease being “luxury” when the May‐ bach came on to the market? On a more prosaic note, does a 320 thread sheet lose its “luxury” because there are 380 thread count sheets available? Myth #3: Luxury is style and comfort
Tod Hevers*, publisher of Home and Design Magazine, perhaps not surprisingly, uses this definition (although he adds a neat, pithy, catchy twist: “Luxury is style and comfort, priced accordingly. Extravagance is style and comfort, cost be damned.” ). A comfortable style may be luxury
(excessive), but the same attribute can be
applied to a style that is anything but comfort‐ able (whatever you say about a Lamborghini, comfort is not part of it). Myth #4: Luxury is exclusive, not available to everybody
No. Hot water is available to most people in North America and time is available to everybody in, as it turns out, on a day‐by‐day‐ basis, equal quantities. Sometimes time is a luxury for some people; for most people most of the time this is actually not the case. Myth #5: Luxury is making your dreams come true, with which we will lump, luxury is making memories
In a weird way, this is not a myth (after all, it's hard to make the case that making your dreams come true is necessary, so in a sense it fits the definition of waste = luxury). But it is only one of many luxuries, so making your dreams come true, like staying in a really expensive hotel is a luxury for some people. The two may be interlinked for some and not for others (if my dream is to stay at a luxury hotel, then yes; if I want the wasteful comfort and high end service of a luxury hotel to make my business trip more fun, then they are not). Myth #6: Luxury is prestige
No, it's not. Some luxury things have an element of prestige, but this does not mean that luxury is prestige. Prestige is prestige, and it is not always a luxury (email me at bern‐ firstname.lastname@example.org and I'll explain this to you ‐‐ it's too long to get into here) There are many other myths, but we'll skip them to get to the point: how can this progressive understanding of luxury help your business? And finally, the helpful tips Helpful tip #1:
There is in all probabilities a way of viewing whatever it is you are marketing, as having some luxury component. This does not mean you must view it this way (some products sell better because they are entirely functional without any frills). However, if you're are
...determine a price-value relationship that returns the value of the luxury in the offering...
trying to increase margin, or preemptively differentiate your product or service, this idea may be the insight you have been looking for.
should add a complimentary breakfast rather than drop their rates, and position this as an added value (luxury) item.
Helpful tip #2
Helpful tip #3
By understanding what your customers (guests, whatever) consider necessary and what they consider waste (excess) will enable you to: frame your advertising to appeal to the value‐added emotional mindset (or not, depending on your strategy); determine what you can eliminate to cut costs in tough times and, most importantly, determine a price‐ value relationship that returns the value of the luxury in the offering.
If you are already selling luxury goods, an understanding of what is necessary and what is waste, and how this fits into the lives of the customers, will inform go‐to‐market strategies.
As a simple example: somebody staying at a three star hotel may have to pay $20 for breakfast in addition to their room. Based on their budget, this may be too much of a luxury (waste of money), and they will buy coffee and a muffin on their way to their first appointment. But, the hotel next door, the two star hotel, serves free breakfast. To this traveler, the two star hotel provides a luxury! The two star can entice away the guest by talking about luxury that costs less. So, the three star hotel aggressively competes by dropping their rates, but, no matter how far they drop their rates, they will also have to give away the free breakfast or be considered too expensive. In fact, the three star hotel
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In some cases the "waste" is the extrinsic prestige which the branded product bestows on the owner (Luis Vuitton luggage); in other cases it is the intrinsic sense of accomplish‐ ment (Kiton suits which have no external badge). The "luxury" of each of these is entirely different, and in many cases will appeal to very different people (the Kiton purchaser would consider LV luggage to be an extravagant, showy, waste of money and the LV buyer would never see the point of a $7,000 blazer that nobody knows costs $7,000). Helpful tip #4
Read the original paper by clicking on this link or going to http://tinyurl.com/proteanluxury1 http://tinyurl.com/proteanluxury * Some references to individual quotes from: http:// luxuryletter.wordpress.com/2008/05/14/what-is-your-
Laurence Bernstein is the founder and managing partner of Protean Strategies/The Bay Charles Consulting Group Limited. He has been a leading proponent of the “new order of differentiation” and has written and lectured on the subject of experiential branding and intrinsic/ extrinsic research methodologies in Canada, the US and China. In addition to a highly successful 20 year career in advertising and marketing he held senior positions at Westin Hotels and The Canadian Restaurant Association. Laurence attended the University of the Witwatersrand in Johannesburg and Cornell University in Ithaca , New York This white-paper is based on the original paper on the subject written by Laurence Bernstein and published in the Cornell Quarterly in April, 1999.