Game of Brands
How Premium Brands Can Learn from Luxury Titans
In a world rife with economic uncertainty and ever-changing consumer preferences, brands find themselves walking a delicate tightrope — the line between luxury and premium. Within this precarious landscape, the unique strengths and challenges of these brands, and their inherent distinctiveness, come to light.
In one corner, luxury brands like LVMH and Hermes are defined by their exclusivity, superior materials, and focus on craftsmanship. These titans maintain their swagger and allure despite economic ebbs and flows, as their loyal clientele continues to regard them as symbols of high status and opulence. Their success lies in the depth of customer relationships, exclusive experiences such as LVMH’s splendid soirées, and alignment with intrinsic values. Under Alexandre Arnault’s leadership, LVMH is reinventing Tiffany & Co. by focusing on approachable luxury that appeals to a new generation while maintaining luxury. This involves innovative marketing strategies, unique collaborations, and an emphasis on inclusivity — all while preserving the American identity of the brand. Reacting to ideas and engaging in cultural conversation is a crucial aspect of Arnault’s strategy, helping elevate the brand’s prestige and cultural relevance among younger consumers.
However, a recurring issue for aspiring luxury brands is their overemphasis on extravaganza. They often dilute their brand identity, overshadow their core values, and distance themselves from the luxury positioning they desire. These aspiring luxury brands, or “pretenders,” often emphasize extravagant events to gain brand recognition, which can overshadow their core values. Let’s call the pretenders; premium brands, such as Tesla, All Birds, and Lululemon. These brands cannot have the exclusivity, craftsmanship, and superior materials luxury brands have, so instead, they wield a blend of quality, design, and innovation as their weapons of choice. These players, however, face a perilous journey — their survival hinging upon their ability to remain competitive in the face of shifting consumer tastes.
Premium brands like Tesla, All Birds, and Lululemon bravely face the storms by constantly molding their strategies to fit the demands of the environment rather than knowing their consumer. They’ll oftentimes stray from their core values to achieve growth or the perception of it. Their growth often forces the hard question of whether their efforts contribute to the growth of their brand’s strategy and value proposition or are merely superficial marketing moves designed to create buzz. The Coachella 2023 festival is a prime example, as its brimming with branded events, such as Neon Carnival (sponsored by Levis and Don Julio), Revolve Festival (featuring high-end and exclusive daytime parties), and a slew of daytime events hosted by Marc Jacobs, Kourtney Kardashian Barker, and Rachel Zoe. While these satellite events and parties are not inherently bad, assessing whether they align with the company’s overarching brand strategy is crucial. For premium brands, balancing heightened brand exposure and strategic growth remains daunting. Participating in high-visibility events such as Coachella can be enticing for premium brands, but it’s essential to stay mindful of the difference between brand awareness and brand strategy. Building a luxury brand goes beyond the spotlight of trendy events — it requires brands to stay true to their values and create meaningful connections with their audience. By establishing a true connection to their audience, luxury brands can maintain dominance without succumbing to the trappings of those empty brand calories.
One of the key factors contributing to the success of a luxury brand is building personalized relationships with top customers. Neiman Marcus Group is a prime example of a company that has mastered this art. By focusing on the individual needs of their most exclusive clientele and providing unrivaled personal service, NMG has earned the loyalty of affluent shoppers, resulting in a recent 3% increase in comparable sales. In contrast, brands like Nordstrom create a disconnect in their customer relationships by trying to cater to both mass-market and luxury segments. Tesla, arguably, had a luxury brand given its loyalty and the cult-like stature that Elon Musk has amongst his fans. Tesla’s recent strategy to lower its prices to achieve its growth rate by increasing delivery volume and sacrificing profits in the short term raises concerns about its brand strategy and future profit potential. Tesla risks losing its accessible luxury status when more EVs with stronger brand positioning start to proliferate in the space. Imagine what Elon will think of then. This lack of focus and inconsistency in fostering its values and customer relationships makes it difficult for the brand to capture the essence of true luxury.
Luxury brands create a sense of exclusivity that goes beyond material wealth. They align their values with deeper, more intrinsic concepts that resonate with their customers. The secret to maintaining luxury status lies in the depth of customer relationships, redefining exclusivity, and resisting the lure of tempting but unsustainable discounting practices, hosting empty-calorie brand awareness parties, or trying to manufacture relationships with poor digital apps. Neiman Marcus Group has succeeded in redefining exclusivity by offering carefully curated selections in dream-like settings and collaborations that result in unique expressions of their brand that their customers keep coming back for. Brands like LVMH, Hermes, and NMG stand as a testament to the power of authenticity in the luxury market, where personalization and attention to detail remain paramount.
The tempestuous world of retail requires brands to adapt to the ethos of consumer preferences and economic fluctuations. But the greatest brands can illuminate the stage, leaving a lasting impression on the hearts and wallets of their audience because they cultivate authenticity, align events (such as LVMH’s splendid soirées) with their brand values, and deliver exclusive and personalized experiences that reinforce brand loyalty. To survive in the future retail terrain, premium brands need to understand luxury tactics, prioritize genuine connections with their target audience, and stay true to their core values to evolve meaningfully with their consumer’s changing preferences. Not just adapt to the environment, customer, and brand be damned.
