The concept of luxury is always in a constant state of flux, says luxury brand management expert Eleonora Cattaneo. But the Covid-19 pandemic triggered a massive shift in consumer behavior and values, drastically transforming the luxury brand industry in just a few years. In 11 essays covering topics such as sustainability, digital advances, brand origin and ultra luxury, expert contributors offer authoritative insights to help your brand connect with discerning shoppers. Contributors include both practitioners and scholars, and their essays reference business cases as well as providing deep analysis. Essential reading for executives in the luxury industry.
- Luxury brands capitalize on consumers’ constantly evolving intangible desires.
- The Covid-19 pandemic radically shifted consumers’ priorities, expectations and values.
- Luxury brands that fail to manage supply chains ethically may lose customers and brand value.
- To keep pace with innovation, luxury brand managers should integrate “human touch” elements with digital technologies.
- Brands can thrive in the Metaverse by creating value in five key areas.
- A brand’s geographic origin affects perceptions of the brand – but determining that origin can prove difficult.
- Brands can connect with the wealthiest consumers in the world by carefully winning their trust.
- Emerging collaborative consumption practices are disrupting luxury markets.
Luxury brands capitalize on consumers’ constantly evolving intangible desires.
Consumers become willing to pay extravagant prices for luxury products and experiences when they believe in a brand’s potential to increase hedonistic pleasure or signal high status. Luxury brands connect with people’s desire to find meaning and construct identities. They possess a certain “aura,” appealing to consumers on an emotional or even spiritual level rather than on a rational level.
“Luxury brands are meaning-full to humans – far beyond their utility. But with meaning also comes mystery.” (Ueber-Brands principal J P Kuehlwein)
Modern luxury brands sell the promise of a fantasy or dream, and then they manifest this dream into the world through experiences and products, while daring to stand out from the competition by doing things differently. Societal shifts and trends, occurring on technological and ecological levels, influence consumers’ expectations of luxury experiences. Today, as new ways of signaling consumer identity emerge in an increasingly virtual, Gen Z–driven market, many marketers and consultants are calling for a wholesale reconception of luxury.
The Covid-19 pandemic radically shifted consumers’ priorities, expectations and values.
After the Covid-19 pandemic, consumers began to pay more attention to the brands they viewed as “doing good,” as opposed to those they viewed as untrustworthy. Successful brands changed their approach to meet changing norms. Prada, for example, manufactured 110,000 masks and 80,000 medical overalls for Italy’s health care workers. The pandemic also accelerated the transition to digital luxury experiences, as online experiences, such as social selling, became increasingly prevalent. McKinsey reports that nearly 80% of today’s luxury sales are “digitally influenced,” as consumers increase their engagement with digital channels.
“Although the future is still uncertain, it is an understatement to view the pandemic as merely disrupting the global luxury market.” (Marketing professor Glyn Atwal)
Consumers’ shifting priorities also reflect their growing awareness of issues related to sustainability and self-care. In a BDG global survey conducted in 2020, some 70% of respondents reported feeling more aware of the impact of human activity on the climate and environment than before the pandemic began. Consumers in the UK and Germany plan to buy more durable fashion products than before the pandemic, while Millennial and Gen Z consumers are prioritizing second-hand purchases, indicative of an ideological shift toward supporting a greener, circular economy.
Luxury brands that fail to manage supply chains ethically may lose customers and brand value.
Many consumers have doubts about the compatibility of sustainability and luxury, doubts fueled by increasing awareness of supply chains’ impact on the planet. The public has become increasingly aware of unsustainable, unethical practices in the luxury industry. For example, gold mining damages both the environment and societies, as companies pollute waterways with chemicals and exploit local labor. If luxury brands fail to embrace corporate social and environmental responsibility throughout their supply chains, negative media coverage could lead to a public relations crisis and damage both customer loyalty and brand value.
“Luxury businesses are learning to manage the social and environmental impact and, hopefully, more businesses will actively get involved in sustainable supply chain management.” (Yan Sun and Rachel Wang, Oxford Brookes Business School)
The “dark side” of luxury brands extends beyond environmental concerns. Marketers create false desires and needs among ordinary consumers who can’t afford their products, increasing people’s debt risk; an evidence-backed association exists between wealth and unethical behavior, suggesting brands target a customer segment that displays negative traits such as aggression and intolerance; and the luxury sector contributes to the economic stratification of society. Luxury brands face the challenge of appealing to the emerging values of Gen Z consumers, who tend to prefer socialism to capitalism and demand corporate responsibility, without compromising the pleasure, joy and uniqueness of luxury experiences.
To keep pace with innovation, luxury brand managers should integrate “human touch” elements with digital technologies.
Today, brick-and-mortar stores are becoming obsolete, and “brick and click” shopping experiences are replacing them. Now, the most successful digital luxury experiences integrate physical platforms with digital technologies. Digital advances have created new opportunities for brands to personalize luxury experiences and glean insights into their target consumers. For example, brands can engage shoppers as they walk by brick-and-mortar locations by screening artistic videos or interactive games in their windows. Brands must align their communication strategies with changing consumer expectations, as mobile-centric consumers increasingly expect immediate responses to digital inquiries.
“Luxury retail and the digital world are in constant and fast evolution…Renovations and changes in layout and visual merchandising are necessary and very frequent; it therefore is very difficult to have a fixed ‘state of the art’.” (Giusti head Nicoletta Giusti and professor Tiziana Tini)
AI will play an increasing role in helping consumers make purchasing decisions, given the time scarcity many wealthy shoppers feel. Customers today are turning to AI for support in decision-making for several reasons: AI provides convenience, shoppers trust the brand’s platform and feel a sense of control, and consumers experience positive emotions when conversing with a bot that has a humanized voice, if the interaction yields a desired result. Still, many consumers desire elements of “human touch” integrated into digital experiences at physical touchpoints.
Brands can thrive in the Metaverse by creating value in five key areas.
Luxury brand managers can boost their brands’ value in the Metaverse by strategically leveraging opportunities in the following areas:
- “Genetic engineering” of NFTs and physical products – Many brands have introduced digital products and NFTs associated with physical items.For example, Dolce & Gabbana’s September 2021 Genesis Collection featured physical jewelry and fashion items as well as digital items and experiences. Genetic engineering goes further, allowing buyers to combine existing designs to create a new design in a digital form, which then can be manufactured as a tangible product.
- Emotionally charged “dynamic NFTs” – Dynamic NFTs can change the image they display after the consumer purchases them, and this visual flexibility can engage consumers and drive emotional responses. In gaming, for example, these NFTs can change when players reach milestones, triggering a sense of achievement.
- Social tokens and blockchain-based communities – Creators can work together to achieve common collaborative goals through decentralized autonomous organizations. Creators can share value and ownership among themselves by using social tokens, a type of fungible token.
- Experiential ecosystems – Virtual worlds can replicate physical reality, enabling luxury consumers to purchase goods or enjoy virtual experiences within them. Brand managers can reward consumers in their digital communities with social NFTs – a type of NFT that brands can mint – and consumers can then use their social NFTs to unlock exclusive experiences within the brand’s virtual ecosystem.
- Brand personification – A brand manager can craft a digital personality based on how the brand might behave if it were human, using psychological frameworks such as those psychologist Carl Jung and branding consultant David Aaker developed. In the Metaverse, consumers can develop deep connections with brands, forging a digital “friendship” with Gucci, for example.
A brand’s geographic origin affects perceptions of the brand – but determining that origin can prove difficult.
Establishing a luxury brand’s geographic origin, or country of origin (CoO), can prove quite complex. CoO has several dimensions, including country of manufacture (CoM), country of assembly (CoA), country of design (CoD) and country of parts or raw materials (CoP). Business scholars Klaus Heine and Glyn Atwal call for widening the range of dimensions included in determinations of brand origin, to include attributes such as brand nationality, referring to the nationality of the people behind the products; place of origin, or the brand’s roots in terms of location; brand traditions, meaning its cultural roots; and brand stories, referring to temporal roots.
“Brand origin is of significant relevance for luxury brands as they deliver higher levels of symbolic, experiential and functional value.” (Marketing professors Glyn Atwal and Klaus Heine)
Although brands can leverage positive CoO associations, they must keep in mind the fact that consumers are becoming more critical of cultural stereotypes, and many desire to see more diverse cultural representations. For example, Ralph Lauren has encountered criticism for presenting its brand as a fantastical version of a lifestyle found among certain white Americans. Many luxury brands face the challenge of overcoming negative associations and biases related to their CoO, including brands associated with developing countries or emerging markets. Some strategists recommend such brands embrace more “neutral” geographic positioning to improve consumers’ perceptions of product quality. Yet many brands are capitalizing on complex or hybrid origin stories. For example, Dior positioned its 2020 cruise collection as “a dialogue between the Dior wardrobe and African fashion.”
Brands can connect with the wealthiest consumers in the world by carefully winning their trust.
To win over time-poor, cash-rich, critical and demanding consumers, brand managers must eschew traditional B2B or B2C models in favor of a “human to human” approach. Recent growth in the luxury sector targets ultra-high-net-worth individuals (UHNWI), for whom brands provide “super exclusive” goods and services such as private jets, individualized wellness creams and bespoke items such as champagne, jewelry or automobiles. Marketers who seek to appeal to this unique type of customer should take care to avoid positioning a brand or product as occupying a subservient status in any way, instead projecting confidence in the brand’s or item’s high quality and desirability.
“There is a new space opening at the top of the luxury universe, and the brands that get it right can build resilient businesses to cater to the wealthiest people in the world.” (Vista chief marketing officer Matteo Atti)
The majority of the UHNWI demographic are self-made and are generating their wealth in the technology industry. Consumers under 50 comprise the smallest UHNWI cohort, but also the fastest growing. Subtle, nontraditional forms of influencing and “quiet luxury” are trending, and many brands are forgoing, loud, visible marketing. For example, The Row has eschewed sharing photos of celebrities in the brand’s clothes on social media, yet celebrities such as Zoe Kravitz and Kendall Jenner have tagged the brand. Brand managers should bear in mind that this demographic is knowledgeable and highly educated, and their purchasing decisions hinge on your winning their trust through vetted channels.
Emerging collaborative consumption practices are disrupting luxury markets.
New business models involving the redistribution of goods are emerging in the luxury market. By engaging in practices of renting and resale, luxury consumers are contributing to a more collaborative luxury consumption model. New platforms such as Rent the Runway and Luxury Closet are making collaborative consumption accessible for luxury consumers. Collaborative consumption disrupts product categories, such as casual wear vs. occasion wear; ownership models, such as consumer ownership vs. corporate ownership; and distribution channels. Brand managers must decide how to position their brands within the new circular economy of sharing and second-hand purchasing.
“Consumers and consumption are changing. Luxury is changing too, under the pressure of sustainability, affordability and self-expression.” (Associate professor Roberta Crespi and researcher Alice Guzzetti)
Consumers might view collaborative luxury consumption as a way to enhance their access to signifiers of a higher-status lifestyle or, for those who can afford a luxury lifestyle, as a more sustainable option. Consumers’ desire to wear prominent logos is dwindling as they embrace an aesthetic of thriftiness. Fast fashion is out, and the current social climate of moderate consumption heralds a return to the traditional notion of the slow, artisanal creation of high-quality products and garments.
About the Author
Matteo Atti is the chief marketing officer at Vista, the largest private jet on-demand group in the world. Glyn Atwal is an associate professor of marketing at Burgundy School of Business and co-author of Luxury Brands in China and India. Alessandro Brun, a full professor at the School of Management of Politecnico di Milano, teaches quality management and directs luxury management master’s programs at POLIMI Graduate School of Management. Eleonora Cattaneo is a professor of luxury management and directs master’s programs in luxury brand management at Glion Institute of Higher Education in Switzerland. Roberta Crespi is an associate professor of business management and economics at the Catholic University of the Sacred Heart in Milan and the author of several books on luxury management and supply chain management. Alessandro Donetti is senior adviser for consumer-centric transformation and lecturer at POLIMI Graduate School of Management, with over 30 years’ experience as an adviser to global brands. Nicoletta Giusti has had a long and distinguished academic career in fashion, design and luxury management. She has served as consultant for several fashion and luxury firms, and heads her family business, the luxury menswear store Giusti. Alice Guzzetti studies luxury management, digital transformation, new business models and brand management at the Catholic University of the Sacred Heart in Milan. Klaus Heine is a professor of marketing at EMLyon Business School and directs the school’s master’s program in high-end brand management. His main interest is the creation of brand meaning. Phil Klaus is a professor of customer experience strategy at the International University of Monaco and author of the best-selling Measuring Customer Experience. J P Kuehlwein is principal at Ueber-Brands. He teaches at the Columbia University, NYU Stern and EMLyon schools of business and has co-authored two books on prestige branding. Yan Sun leads specialist modules for PG International Luxury Marketing at Oxford Brookes Business School and serves as lead tutor of the Institute of Direct and Digital Marketing at Oxford Brookes University. Annalisa Tarquini-Poli directs the master’s program in luxury management at the International University of Monaco. She possesses vast managerial and academic experience in human resources, luxury fashion and yachting. Tiziana Tini is a senior lecturer at the leading fashion school Polimoda in Florence, a professor at Glion Institute of Higher Education and a consultant for international luxury companies. Rachel Wang is a senior lecturer at Oxford Brookes Business School, Oxford Brookes University. Her primary research interests lie in business analytics and sustainable luxury hospitality and tourism.
“Managing Luxury Brands: A Complete Guide to Contemporary Luxury Brand Strategies” by Eleonora Cattaneo is a thoughtfully crafted book that offers a wealth of knowledge and insights into the world of luxury brand management. Cattaneo, a renowned expert in the field, provides a comprehensive overview of the luxury industry, covering its history, current trends, and future prospects. This review aims to provide a detailed assessment of the book’s contents, highlighting its strengths, weaknesses, and areas for improvement.
- Thorough understanding of the luxury industry: Cattaneo’s book offers a deep understanding of the luxury industry, its complexities, and the factors that shape its behavior. The author provides historical context, highlighting the evolution of luxury brand management over the years, and offers a nuanced analysis of the current market.
- Practical insights and case studies: The book is rich in practical insights and case studies, which provide readers with a better understanding of how to manage luxury brands in different contexts. The examples range from high-end fashion to luxury cars, jewelry, and hospitality, offering a diverse range of perspectives.
- Actionable strategies and tactics: Cattaneo provides actionable strategies and tactics that can be applied to various aspects of luxury brand management, including marketing, branding, and customer experience. The book offers practical advice on how to create and manage luxury brands in today’s rapidly changing market.
- Well-structured and easy to follow: The book is well-structured, with each chapter building on the previous one to provide a comprehensive overview of luxury brand management. The author’s use of examples, case studies, and visuals makes the content easy to follow and understand.
- Overly theoretical approach: While the book provides a thorough understanding of the luxury industry, some readers may find the theoretical approach to be too academic and detached from practical realities.
- Limited focus on digital transformation: While Cattaneo acknowledges the impact of digital transformation on the luxury industry, there is a lack of in-depth analysis and practical advice on how to navigate the digital landscape.
- Limited coverage of emerging markets: While the book provides valuable insights into the luxury industry in developed markets, there is a lack of coverage of emerging markets, where luxury brand management is increasingly important.
Areas for improvement
- More practical case studies and examples: While the book provides some case studies and examples, more real-world examples of luxury brand management in different contexts could have enriched the content.
- More emphasis on digital transformation: As the luxury industry continues to evolve, there is a growing need for practical advice on how to navigate the digital landscape. Including more examples and insights on this topic could have made the book more relevant to contemporary luxury brand managers.
- Broader coverage of emerging markets: As the luxury industry continues to expand into new markets, there is a need for more insights into the unique challenges and opportunities of these markets. Including more examples and analysis of emerging markets could have made the book more comprehensive and relevant.
“Managing Luxury Brands: A Complete Guide to Contemporary Luxury Brand Strategies” by Eleonora Cattaneo is a valuable resource for anyone interested in the world of luxury brand management. While the book provides a thorough understanding of the luxury industry and practical insights into managing luxury brands, there are some areas where the content could be improved. By incorporating more practical case studies, a greater emphasis on digital transformation, and broader coverage of emerging markets, the book could be even more comprehensive and relevant to contemporary luxury brand managers. Nonetheless, it is an excellent starting point for anyone looking to deepen their understanding of the luxury industry and its complexities.