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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.

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Brand Building Brand Management Brand Strategy Brand Strategy for Start-Ups Branding Psychology

Luxury Branding Psychology: How to Implant “High-Quality” in the Mind of the Consumer

Is building a better quality product the same as building a better brand?

One would think so – and it’s not uncommon for new marketers to think so. But when creating a strong brand marketing strategy, this is not the case. There are almost no correlations between best quality and most successful brands. We’ve seen it many times –  where the most preferred brand, is not the leading one.

Why is the Pepsi Taste Challenge so successful? People enjoy Pepsi a lot more, yet Coca Cola is the leading brand. The reason is because the idea of quality is something that resides in the mind of the consumer. The idea of quality is something that is implanted in the mind of the consumer.

One of the surest ways to do this is through further constricting the focus of your brand. This is something I will cover in depth in a future article. For now, what you need to know is that by becoming an expert and by becoming focused on one thing as opposed to many, your brand becomes perceived as being of higher quality.

If you’re creating a soccer team, would you choose the athlete who plays every sport or would you choose the athlete who plays only soccer? Obviously the soccer player. That’s how consumers view brands.

A brand that claims to do everything is less trustworthy, than the brand who claims they are the best at one thing.

Be the best at one thing. 

Be a big fish in a small pond, not a small fish in a big one.

Another way to build the perception of the quality of your brand in your consumer’s mind is through high-pricing – something you may have already realized to some degree.

Below are examples of a few brands that the average individual would associate with being ‘high-quality’. These are also brands which profit immensely from their high price:

  • Mercedes
  • Montblanc
  • Jack Daniel’s
  • Rolex
  • Rolls-Royce

What often happens is that brand owners either feel that their brand should be a high-quality brand but are afraid to make the price equivalent to what they think their brand is worth… OR some brand owners feel that their brand is a high quality brand but in reality it isn’t, yet they still charge the higher price.

Before even considering charging a higher price, you need to be confident in the high quality of your brand. Quality comes first. 

If your brand has products and services with a high price but has a low or average quality perception of a brand, that will discourage consumers from sticking around for very long. That violates the idea of brand consistency. But if your quality is on higher level, don’t be afraid to charge a higher price for your brand. Having a higher price on your brand, can in fact be a benefit to the consumer. By buying a product of brand that is associated with high quality, consumers feel a certain level of satisfaction from the purchase.

The individual who purchases a Movado, doesn’t do so to tell time better, but to make others aware that he or she can afford it. There’s a quote I heard somewhere ; it goes something like… “if your watch costs more than $50,000, it’s no longer a time-telling device, it’s jewelry.” Also, don’t rely only on quality to develop a successful brand. At the end of the day, it is the brand with the better strategy that wins.

The other most important thing to think about when employing high quality strategy, is how you will justify the increase in price of your product or service? What can you emphasize? You need to pick one thing that you can be the best at and be a leader in – this comes back to the idea of constricting the focus of your brand.

Take a look at Whole Foods, who earns most of its profits in prepared foods, where the price premium is very high, with operating margins of approximately 7%. They justified their premium price by emphasizing luxury with organic food, sophisticated in store presentation, and knowledgeable staff. That was enough to convince customers to pay a higher price for prepared food.

Leverage the psychology of how consumers think to build your brand – that’s what Brand Marketing Psychology is all about.