Prada for mass market? Devil in the details
CAN you sell to a wider audience and still be exclusive? Luxury brands have to walk a fine line when they look to attract new business.
As post-industrial economies drive the democratisation of high-end consumption, traditional "luxury" brands have been reaching out to a broader spectrum of society and finding innovative ways to appeal to an aspirational clientele.
Typical strategies have included introducing entry-level products, launching brand extensions and licensing.
But while brand equity afforded these types of growth strategies, too much mass availability and appeal could hurt the brand in the long run by diminishing its role as a status symbol.
While luxury brands have walked this fine line between luxury and mass market in order to generate revenues in the short term, their ultimate goal has been long-term growth.
First, appealing to a broader spectrum of society - and not just the super rich - could help a company drive up sales.
But that said, luxury firms have also wanted their entry-level consumers to mature into the higher-end offerings of the brand.
Unfortunately, the second component of this type of strategy was not always successful.
The first and most important consequence of a failed "affordable luxury" strategy has been damage to brand equity.
Some luxury brands have learnt this the hard way.
Burberry, Diane von Furstenberg and Pierre Cardin are examples of brands that have at some point over-developed entry-level offerings, mismanaged licensing and diluted their brands' luxury status.
Licensing has proved particularly dangerous when it was mismanaged as it could easily spiral out of control.
When you could buy Pierre Cardin lighters on every street corner, the "exclusive" image of the brand was almost irreparably damaged.
Similarly, after over-licensing in the 1970s and 80s, Diane von Furstenberg had to slowly rebuild the luxury image of her brand almost from scratch.
Firms such as Louis Vuitton, Gucci and Burberry have in recent years been trying to amplify their reputations as true luxury retailers by limiting the use of their "monograms" and concentrating on new designs, unique fabrics and limited-edition products with higher price points.
Although the number of luxury consumers has tripled over the last 30 years, emerging markets and younger generations in developed markets remain prime targets for the future of the luxury industry.
These consumers are among those who are increasingly adopting a "trade-up" shopping strategy: Rather than stick to mid-market products, they're investing now in a few choice luxury goods. And as their buying power increases over time, they'll then be poised to "upgrade".
For example, the owner of a Louis Vuitton wallet might invest in a handbag if the consumer developed a taste for the brand.
In a study with Ms Vanessa Patrick of the University of Houston, we looked at the factors that made a successful entry-level luxury strategy.
In other words, we were trying to figure out what made customers want to "trade up".
Above all, we found that it boiled down to whether the consumer desired the brand overall or whether the desire was tied to specific products.
Specifically, we showed that the more specific the consumer's desire for flagship products, the lesser the impact the lower-end extension could have on diluting the overall brand.
Brands that were built around strong, iconic flagship products - such as the 2.55 Chanel handbag or the Tiffany diamond solitaire ring - were the most successful in terms of trade-up.
The luxury image of these products was so strong that owning a Chanel wallet or Tiffany silver-collection bracelet was not likely to impact desire to own the iconic products.
Conversely, damage was more easily done when consumers desired the brand, but this desire was not tied to a specific product.
In this case, consumers were more likely to be satisfied by their entry-level purchase.
When Marc by Marc Jacobs began selling very low price-point products, the strategy backfired because consumers were quite happy to just buy those extensions and not trade up.
But even when following these trade-up trends, consumers needed to be nuanced.
Surprisingly, we found that extensions and entry-level products were most effective in triggering a "trade-up" among those consumers who already owned the brand.
In other words, if I had never owned anything from Prada, just buying an entry-level bracelet was more likely to fulfil my desire for the brand.
But if I knew the Prada brand and I was familiar with its DNA, the extension would be less likely to impact my desire to own its true luxury products.
Above all, the successful strategy was about developing products that fitted with the DNA of the brand.
Although the entry-level products might have much lower price-points, they should maintain quality and brand codes.
The writer is marketing professor and head of the LVMH-ESSEC Chair at ESSEC Business School. This article was first published on ESSEC Knowledge, the online portal for the school's research, expertise and thought leadership. It was also published in The Business Times.