Selling Luxury in Un-Luxurious Times
This AP article notes the problem of “luxury marketing” in the current environment:
Months before a financial implosion shook shoppers straight to their checkbooks, Saks Inc. executives realized a problem might be brewing with their holiday lineup.
The luxury department store thought its extravagant gift packages featuring foreign travel and celebrity chefs might seem out of touch at a time when the nation’s economy was beginning to falter and even the wealthy were wary of what was ahead.
That’s why this summer, more than halfway through planning the retailer’s most important quarter of the year, the New York-based company switched gears and swapped elaborate trips for gift packages where half the proceeds will be donated to charity.
"We really reconsidered and thought we need to be careful with that over-the-top message, because it doesn’t feel relevant," said Kimberly Grabel, the senior vice president of marketing for Saks Fifth Avenue.
As banks collapse and investment accounts sink alongside consumer confidence, some of the nation’s most venerable brands are struggling to strike the right tone for marketing and advertising campaigns amid one of the worst economic downturns in decades.
By all indications, we are in a pretty nasty recession that will go at least through next year. The days of a guy on Wall Street making a fortune on the stock market and then buying a $5,000 bracelet for his girlfriend are, for the time being, over.
Fortunately, diamonds also have the fall-back of being an item bought out of love and emotion. And if you look at the market now, without the bridal segment, this industry would be in a lot more trouble.
Now, you could argue that buying a diamond out for one would call "emotional" reasons, and buying it because it’s a luxury item, are not necessarily contradictory impulses. Zale CEO Neal Goldberg told me last month, "When I buy a nice watch, I feel emotional." I agreed with most of what Goldberg had to say, but I am not sure about that. Granted, people can get excited (and therefore emotional) about a nicely designed piece, but most jewelry has pretty basic designs. I do think we have to re-emphasize the emotional aspect of jewelry — whether it’s emphasizing the "diamonds equal love" aspect, or linking the product to a higher cause, as Saks did with its gift baskets for charity.
Now, no one is saying luxury is dead. But it’s clearly taking a hit – and it’s not just because people are poorer. It may be because flaunting your wealth (the "over the top message," as Saks called it) may not “feel right” at a time when so many are struggling. Take this piece from the Wall Street Journal:
It’s not necessarily a good thing to show up at the tennis club with a new $30,000 crocodile handbag when your friends’ net worth has been halved and the Federal Reserve is spending billions to keep the banking system afloat.
On Monday, when U.S. Rep. Henry Waxman grilled Lehman chief Richard S. Fuld Jr. over his multimillion-dollar bonuses, he suggested that public feeling is running against the vast wealth some executives have gained in recent years. Two AIG executives got a similar congressional grilling on Tuesday for the bonuses the insurance giant showered on some employees, as well as its lavish spending on a luxury retreat for insurance agents after the announcement of a government-backed bailout. The rising tide of anti-wealth sentiment could well affect how conspicuous the rich want to be.
So …I’m interested in hearing: Are people a little shy-er about conspicous consumption these days? And, if so, how can the industry deal with it?
rebecca@royalasscher.com commented:
It is true that in tough economic times companies need to be aware
of a shift in consumer sentiment and adjust their business strategy
and marketing accordingly. This is not a time for anybody to cry
out ‘woe is me’ and ‘the end of the world is
nigh’ because crisis brings opportunity. The companies that
will ride this crisis well are, as Hedda points out, those that can
‘add value’ to their business. So business figureheads
should be assessing their businesses and objectively reviewing
their company’s value chain: Adding true value is something
which involves reviewing everything about the business: Business
owners need to look at how training and development will benefit
self and staff, to ensure their people are among the most educated,
capable and efficient in the business. They need to review how they
market, brand and promote their business, and where they could
increase knowledge and further establish market presence. They will
be taking a long hard look at daily practices. Examining their
business strategy, essentially not sitting still… by seeking
to build expertise, confidence and trust, they will be looking for
competitive advantage; which does not always mean slashing prices.
Luxury, in itself is a value proposition, money, wealth and
conspicuous consumption are some of the key connotations of Luxury.
Others are quality, rarity, social responsibility, the brand story,
the ability to withstand the test of time – all value
components of luxury goods. Adding value has to happen across the
board and be incorporated into ongoing strategy… if a company
is going to support a cause, they should do it genuinely,
wholeheartedly and on an ongoing basis. Essentially dedication in
this respect, should mirror the company’s dedication to the
ongoing success of its own business – you can’t just
bemoan the times or throw money at an issue and expect it to go
away. Thinking harder and working smarter are the order of the day.
Hedda Schupak commented:
Wow, Rob, you hit this nail on the head (again). Every study that's
been done recently points to the importance of "values" based
shopping, along with "value" based. Customers are reining in,
either due to their own financial circumstances or, as you say,
because it doesn't feel right to be flaunting wealth when others
are suffering. And when people do shop, they want to know that what
they're buying has some kind of lasting good--or at the very least,
that it isn't doing lasting harm. Saks is on the right track, as is
any product that does good for others by its purchase. Also
critical for customers is sustainability and social responsibility,
making sure that whatever luxury product they do buy, for emotion
or a treat, is not damaging the earth or exploiting workers.
