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Luxury Branding: Psychology of the Luxury Driven Consumer (Case Study: Coach)

A friend of mine just received this in the mail after she went shopping and bought a handbag from a Coach store:

Coach Note

If you’re unable to read it – here’s what it says:

“Thank you for shopping with me at Coach today. It was my great pleasure to help you select that beautiful bag. As a little something extra, I’ve included a $50.00 Appreciation card for you, which you can use toward any item in the store. The card expires on March 1st 2014.”

Did the employee actually send this to my friend from the goodness of his heart? Or is there something else going on here?

After some research, I found out that Coach is in the process of “redefining” its brand in North America. Coach was the leader in the North American handbag market. However, recently before the recession, brands like Michael Kors, Tory Burch, and Ralph Lauren Corp moved in and grasped margins exceeding 50 percent.

Coach then, came out with the new ‘Lifestyle Strategy’. But more on that later.

First, what is it that makes a luxury brand desirable?

In the world of luxury brand marketing, the main factor we tend to look at of our consumers is their income and their assets. While this tells us their ability to purchase the luxury product or service, we know nothing about their thought process and their motivations to spend their wealth on luxury products.

Luxury brand marketing is considerably different from traditional marketing where you would just consider the 4 P’s. Most marketers believe they understand the elements that make up the desirability of a luxury brand.

Common perceptions are:

  • High quality
  • High price
  • Exclusivity
  • Scarcity
  • Etc…

Although necessary, these are features that marketers and businesses would rely upon in the past. While these are all common elements of luxury brands, there is a deeper side to luxury branding.

The consumer’s of today are smarter spenders, more selective, more opinionated, and judge based on other elements as well. If you understand the psychology of the consumer, you can cater your resources to focus on bringing the consumer towards you, as opposed to spending your resources on sharpening the quality, price, exclusivity, scarcity, etc.. and HOPING your consumer moves towards you on their own. There is a difference between waiting for your consumer and inviting the consumer. When it comes to the luxury driven consumer, effective strategy entails inviting them and calling them to your brand.

Engage Your Consumer with Invitation

The wealthy are used to being invited. It’s attesting to their status.

We know the importance of a brand story. For the luxury conscious consumer, the story plays a huge role in engaging the consumer. Through engaging them, you INVITE them to join your brand’s journey. Luxury brands have a rich history, a uniqueness, a legendary story which contributes to the brand’s personality. Joining that brand’s community is enticing. Joining Coco Chanel when she started her business in 1913 to becoming a revolutionary couturier, is enticing. Joining Tom Ford in his journey from being a common man, from struggling for achievement, to triumphing in his masculine destiny, is enticing. Both Chanel and Tom Ford consistently leverage its brand personality and uniqueness in their marketing strategies. Usually with the help of celebrities.

tom ford

The Fourth P

One of the few rational arguments that would prevent consumers from making a purchase would be the price – sometimes for some consumers, price can precede everything, no matter how much you position your brand strategically. However, although price communicates perceived value of the product, luxury brands cater to a consumer that can buy almost any material thing that he or she wants. The product or service itself, then becomes secondary.Therefore, the main rational argument that could be a barrier in your consumer purchasing from you, is gone. What’s important now is how you position your product to appeal to the emotional brain of your consumer. Focus your resources on your emotional strategy, especially when marketing luxury brands. Burberry consumers want to feel ‘authenticity’ and ‘timelessness’. Tom Ford consumers want to feel ‘triumphant’. Tiffany consumers want to feel ‘love’.

Struggle Is Part of A Brand’s Journey

So back to Coach and their new ‘Lifestyle Strategy’.

Do you think Coach is on the right path to regaining its market share?

Here is an excerpt from an article that speaks to their new strategy:

 “Coach’s new direction is rooted in the desire to speak to the consumer from an “emotional way” rather than a “functional one,” according to Reed Krakoff, the brand’s president and executive creative director, who informs the design of the collection and store layout.”

“Instead of designing accessories to fill a need, we’re thinking more about the woman, who she is, where she goes, what is her life like and how does it feel, to move Coach from…where you think of a Coach bag, to now when you think of Coach, you will think of a woman or a man and you think of their lifestyle,” Krakoff said. “You think of their lifestyle and you think of all aspects of that sense of style and that sense of how they live their life.”

Frankfort added: “By doing this, and impacting our windows, our store environments, Internet, marketing, all consumer-facing elements, it’s going to have a profound impact on consumers’ perceptions of Coach because it’s unexpected.”

Click here for the full article.

A marketing strategy as simple as mailing the consumer with a $50.00 gift card and a personal note is extremely effective because:

  • My friend is now guaranteed and motivated to visit the Coach store again and spend more of her own money because $50 probably doesn’t even make up 25% the cost of majority of products in the store
  • The note ENGAGES my friend on a very personal level; the note is hand-written, it mentions the salesperson and her experience together, it has a ‘gift’ which is a HUGE sign of caring. This entire gesture is oozing with the message that COACH cares about YOU.
  • The card has an expiry date which creates a sense of urgency
  • It’s packaging speaks to the brand’s personality
  • The gesture hits the consumer on an emotional level – gives them a feeling of “special-ness” and exclusivity

And lastly…

  • What else comes in the mail directly to someone in an envelope, in a card-like format? How about an invitation?

By implementing this simple, sophisticated  marketing strategy, it’s pretty evident that Coach understands their luxury-conscious consumer.

Struggle is a part of every brand’s journey. It’s how you adapt and differentiate yourself that makes the difference. More importantly, and especially when it comes to luxury branding, it’s when you think of your consumer, their thoughts, their values, their psychology, that you can create the most effective strategies to rise to market leadership.

By Sam Pardhan

Hi, I'm Sam. I enjoy growing brands and businesses through sophisticated marketing methods. Over the years, I have contributed to the profitable growth of my own and many of my client's companies through the exact principles I write about on Brand Marketing Psychology. It is my hope that these marketing insights will also serve you in catapulting your business and marketing success to new heights.

7 replies on “Luxury Branding: Psychology of the Luxury Driven Consumer (Case Study: Coach)”

Great article and great work from Coach. Clearly they’re making a big effort with consumer touchpoints. One more thing to add is that although the Appreciation card has a face value of $50, in reality it will cost the company just a fraction of that (based on the cost to them of producing the goods bought with it) – perhaps as little as $15-20, depending on their markup. Connecting with your consumer so deeply is even cheaper than it first looks….

In case of Coach, the differentiation is brought in by the Note and the voucher and not just by the voucher. As discounts and special purchase vouchers are provided not just by luxury brands but brands across all segments but the note brings a sense of belongingness with he brand.
The work done is truly great, maybe continuous customer relationship building by activities like building customers’ profile, lets say, a photograph at the time of purchase would be a step strengthening the association the customer has not just with the brand but with the entire purchase process!

Completely agree with your insights! The sense of belongingness is definitely a crucial differentiating factor. Thanks Gokul.

Is there some research backing the claims that luxury buyers should be addressed with emotional rather than rational appeals? Are these conclusions drawn from objective scientific research or opinion based on case studies. Basically, where did these conclusions come from as I image it would be a rich source of information to further delve into the mind of the luxury consumer. Thanks!

Hi Scott,

I’m glad to see your interest in further understanding the mind of the luxury-conscious consumer. I’d be happy to provide you with a source of information that expands on the insights discussed in this article in much greater detail!

Glyn Atwal, formerly worked at Saatchi & Saatchi, currently a Marketing Professor, and his colleague Alistair Williams, Marketing Professor at Wales University, discuss luxury brand marketing in a paper entitled “Luxury Brand Marketing – The experience is everything.” This paper was published in the Journal of Brand Management in 2009 and covers a lot of the insights that you are seeking. They also cite a huge variety of experiments, research studies, and case studies, which they use to draw their conclusions from.

Click here for the link to the article. Enjoy!

Thanks Sam for this post. I particularly appreciate the part where price should not be a barrier if your luxury branding is set up properly.

It’s also very helpful to see how a company like coach communicates with its customers!

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