The Luxury Strategies: In Conversation With Jean-Noël Kapferer
Jean-Noël Kapferer is Emeritus Professor of Marketing at HEC Paris. He holds the Pernod-Ricard Chair on the Management of Prestige Brands and teaches Luxury Management in China (Tsing Hua University in Beijing), Korea (at the Seoul Luxury Business Institute) and Japan. He is known for his advanced work on brand identity, strategic brand management, brand portfolios, brand architectures and most recently on prestige and luxury management.
He is the author of 15 books, including The Luxury Strategy (2009).
Areni Global:
At Areni, we spend quite a lot of time thinking about the definition of fine wine. I wanted to ask you about your definition of luxury.
Jean-Noël Kapferer
First, luxury is not a word that belongs to business nor to wine. It’s part of a common language. So I have picked three definitions that make me think a lot.
The first definition is luxury is “what is most socially desirable but not accessible to all.” That is a notion of desire. We don’t need luxury, but we want it, we desire it, but it’s not accessible to all. The source of its value is that there are obstacles, and this is true as much for fine wines as fresh air or silence. Silence is very desirable, but very few people can access silence.
A second definition that I like — I read it in the blog of a California expert called Seth Godin, an American— “Luxury is needlessly expensive.” The very high price you pay for luxury has nothing to do with the function itself.
A third definition, which I like because it’s quite precise, is “outstanding products with emotional qualities.”
There is an evolution of what we think the etymology of luxury is. Luxury doesn’t come from lux -light in Latin- but is closer to luxatio, which is something apart, something that goes astray. Luxury is not more of something, luxury is “somewhere else”.
How much does the notion of luxury evolve depending on the cultural context?
If we were in Italy, we would not be talking about luxury.
I love Italy because I think it’s the country of culture or beauty, but they don’t call it luxury. The conception that they push in Italy is quite different from the French conception. Italy, for instance, doesn’t care about the past and cares a lot about the fabrics, the material, the craft. They are not bragging. They are very humble. Even the wine industry in Italy, they keep on being humble. It’s very, very different from, for instance, the Bordeaux Crus Classés, who are built on hierarchy and aristocracy. So the meaning of what we call luxury — beyond the fact that some countries don’t use the world — is different.
Can we talk about the French luxury? Why did it all come together and how did it become a benchmark for the rest of the luxury world?
The competition is a competition of visions. The French historically have exported their vision; the Chinese have been influenced by this vision because brands like Hermès or Vuitton have entered China. The Chinese have therefore learned about this world through what it meant for French brands opening stores in Shanghai or in Beijing.
And there is behind this a hierarchical vision that is very different from that pushed by Americans for instance or pushed by Italians. And this vision is coming from the 17th or 16th century. It has considered luxury as a key element of soft power.
It’s part of our diplomacy. It’s like the French food or the French whatever. It’s part of politics. It’s part of the expansion of the reputation and of the power which expresses itself through armies, through weapons, through soldiers, through wars, but also through culture, through elegance. And this is why luxury is a political asset.
This is tied to a period when France was very successful. Now it is less successful politically, but we have kept the elements of success from the past called luxury goods.
France has history, has land and has knowhow. We push these elements in the definition of history and of luxury. Whereas, as I told you, Italy doesn’t stress so much about the notion of history. They are much more in the present time, because the creation of Italy as a single country is much more recent than the creation of France.
So how do other countries react today? What would be their definition of luxury?
Well, they differ in the way they do things. It’s very interesting. I once took part in the discussion with John Idol, the CEO of Michael Kors. And John Idol said, “We are the fastest growing luxury brand in the world.” And he was very pleased to be the CEO of the fastest-growing luxury brand in the world. Now, you will never hear any CEO of a French brand or a French group stressing the speed of growth. Because if you want to have the speed of growth, you will favour a lot of channels of distribution that give you the speed of growth, and you will not hesitate to go into outlets and off-price channels. In fact, you’ll consider that taking time is not as useful as going fast.
And so the difference between American luxury and let’s say European luxury is the relationship to time and the relationship to speed. It’s the way you manage the brand that makes the difference. And I think that in the US which is an immigrant country, the notion of exclusivity, which means excluding people is not very well accepted. This notion of luxury as a stratification is not in the culture of the United States. So their luxury brands, Tiffany etc., are not as exclusive.
The difference between American luxury and European luxury is the relationship to time and the relationship to speed.
Jean-Noël Kapferer
We see a new generation coming that sees the world in a different way. Will they change the understanding of luxury?
The meaning of luxury will change all along our life. If you take any new generations, I’m not sure they value craftsmanship, tradition, history. When they enter the market, they value creativity, singularity, and what you may do in terms of sustainability. But we all evolve and I think that through time the new generations as they grow older will rediscover the benefits of what we call the traditional luxury. But when they enter the market, they want things that resonate with the reason why they consume. They want more creativity, they want new things.
As they grow older, they change. There is this notion that luxury accompanies you not only generationally but also within your own lifecycle.
If you look at the Bain data, the Bain data estimate that the whole luxury market is 5% of the population, which means 400 million people and there are eight billion people on earth. So we are talking about young people who have enough money to buy things which are needlessly expensive. The question is: are we addressing the young people who need expensiveness as part of their building of their own status?
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Are we going to see new luxury brands catering to young consumers at the beginning of their journey or do traditional luxury brands have a better chance to seducing the youngs?
Each new generation needs gods and goddesses. It doesn’t mean they forget everything else, but it’s like music. New generations have new cult musicians, new music, new heroes. It doesn’t mean that the party is over for the former ones, but the first thing when you are young is to create your own identity and identity needs elements of cult. And this cult is not generally what your parents loved. This will come later in your life, discovering the value of things.
But at the beginning, younger consumers usually value the social value of things more than the inner value of things. And this is why there will be celebrity wines, celebrity champagnes. And later they may come back to Dom Perignon or to Pol Roger or whatever. But at the beginning each generation needs to say, “Here we come with our own vision and culture”.
Each new generation needs gods and goddesses […] new cult musicians, new music, new heroes. It doesn’t mean that the party is over for the former ones, but the first thing you do when you are young is to create your own identity and identity needs elements of cult. And this cult is not generally what your parents loved.
Jean-Noël Kapferer
I’ve heard you say that luxury value consists of two elements, the luxury for the self — you do it to feel good — but the luxury for others which stems from the emotional pleasure of flaunting prosperity.
This is very important. If you are buying only for others, you are a snob. A lot of people, when they buy things, they don’t understand the value, but they know the name is very well-known and by being known it’ll make others look at you and say, “Ah, look, they are drinking this or that.”
The main motivation is a social motivation, which is what happens with the newcomers to the luxury world. I travel to Asia, I go to Korea, to Seoul, and people order the most known Bordeaux or Burgundy wines. Maybe later they will understand why these wines are so expensive and it has nothing to do with the social dimension. It has to do with the inner dimension.
I want to come back to the obstacles that a brand creates for consumers. Can you touch base on those different obstacles that may or may not have been invented by the French?
Not only the French, if you produce a very rare single malt whiskey, there are obstacles. Now these obstacles can be divided into many parts, which means by the way, that luxury is not something which is, it’s something you create. My book is called Luxury Strategy. It’s not called What is Luxury?
Price is the first obstacle, distribution is the second obstacle, availability is the third obstacle.
Hermès is very known, for instance, for managing a kind of scarcity by not producing enough. Ferrari does the same. Ferrari produces 13,000 cars per year and Porsche is 200,000 and more. So in fact each brand defines the level of exclusivity they aim at and some are very, very exclusive.
But creating too many obstacles has a problem if the volume at the end is too short to be profitable. But in the meantime, if you open the doors and there are no obstacles, you are not in the luxury business, you are in the premium business, you are in the whatever business you want and it may be very profitable, but you are not in the luxury business.
My book is called Luxury Strategy. It’s not called What is Luxury? Luxury is not something which is, it’s something you create.
Jean-Noël Kapferer
There are other obstacles which are cultural. There is a big difference between advertising for a luxury brand and advertising for a premium brand. Advertising for a luxury brand does not need to be understood. When you look at advertising of Prada, you see bizarre pictures, bizarre photography, which cannot be understood by everyone. So there is what I call a cultural obstacle.
This is why luxury is close to art. When you see the Mona Lisa in the Louvre, there is no explanation of why she’s smiling. They don’t give you any explanation. You just have to take it as it is. Whereas when you are not in art, people ask, “What does it mean? What does it represent? What do they want me to think?” As soon as you are in this frame of mind, you are more in the realm of premium brand marketing, because premium products have to explain why they are premium. In luxury you don’t explain anything. It’s a statement plus a behaviour.
The issue of luxury therefore is always to build a difference, which says, “We are another world. You cannot compare us to anything else.”
Is absolute luxury always absolute through time? Is it always going to be cars and jewelry and things like this?
It’s true that the luxury industry likes to say they think long term. Will Apple still be there in 100 years? Will Apple still be there in 20 years? The high tech, the Silicon Valley, they are successful because they don’t think that way. What is important is the pace of change, the speed of change, and high tech is by definition a constant redefinition of what is the most progressive form of technology.
An American futurologist says that the modern luxury are the three Ts: time, truth, and trust. And I’ve heard “luxury is a hot chocolate on a rainy day reading a wonderful book.” Can moments be luxury of will it always be related to objects and goods?
In the business context, luxury is interesting as long as it creates value, as long as it creates a market.
There is absolute luxury, relative luxury and my luxury. And whenever you ask the question, what is your luxury? People never mention products. They generally mention things which are not in the market, but they are things they wish they could be doing much more.There is always this notion of obstacle to a goal, an idealised goal. So a lot of people would say, “I wish I had more time in my business life to spend with my children.”
But if you want to create a market, it must be transferable into money. And this is why, so far, silence is not a market, but it could. It will become a market if there is a price attached to it, and that price is expensive.
Somebody said: You are a luxury brand if by asking an incredible price, everybody finds it normal. And if you are not a luxury brand, then people will say this is just stupid and crazy and meaningless. When Hermès ask €100,000 for a Birkin crocodile bag, people say, “Oh, it’s Hermès.” Now let’s suppose Coach ask this. People say we’re totally crazy.
Luxury is not more of something, luxury is “somewhere else”. When your strategy is to create a luxury brand, everything you do must look from another planet.
Jean-Noël Kapferer
What are the differences between Luxury and Premium?
Premium means Prius from Latin Prius which means first, and if you say I’m the first, there must be a ladder somewhere of comparison.
And if you are in the premium market, generally you make your quality explicit.
Can wine be a luxury?
I’m a bit provocative, but I think there are no luxury wines . I think that wine can be part of a luxury life.
I think there are no luxury wines because even a 5,000 pounds bottle is accessible to the rich. It’s fun. It’s not an obstacle at that level of price. This is not a yacht, this is not a private island, this is not a private jet. To be an absolute luxury, you need to be totally unreachable to the majority of people. A bottle at 200pounds is not inaccessible for enough consumers to be considered an absolute luxury.
Then, I’ve never seen anyone coming to a restaurant and say, “give me a luxury wine”. People ask for a luxury watch, a luxury car or a luxury hotel but there is a reluctance to talk about luxury wines.
Prestige has less difficulty entering the stage than luxury. People ask sommeliers for their more prestigious bottles.
It is true that part of the luxury strategy is to get direct contact with your end consumer. Spirits and wines don’t control their end client, they control the middleman, the importer, the agents, and then the experience of drinking wine A or whiskey B or Cognac C is in fact delegated to someone else. Now a good luxury brand generally is very selective about the distributor. There is no luxury brand without selective distribution. The selective distribution is the intermediate just before selecting your end clients.
We could also argue that wine can’t be a luxury good because we usually don’t have control over our distribution channels.
It is true that part of the luxury strategy is get direct contact with your end consumer. Spirits and wines don’t control their end client, they control the middleman, the importer, the agents, and then the experience of drinking wine A or whiskey B or cognac C is in fact delegated to someone else. Now a good luxury brand generally is very, very selective about the distributor that in fact are in charge of being the ambassador of your brand in different countries, because there is no luxury brand without selective distribution. The selective distribution is the intermediate just before selecting your end clients.
Selective distribution is the last step before selecting your consumers. Should wine brands decide on the exact consumers they want to sell to?
Well, what you want from your customers is not only their money, it’s their prestige. Because prestige does not come onto brands by a kind of holy miracle, prestige is given by the key clients. We want from our clients not only their money but their aura and reputation. So the idea is that there are some brands who try to control the people who will become the ambassadors of their brand, because as soon as you wear a luxury brand, you become somehow the ambassador of that brand, which says because of its logo and the visible signs on it, this person is wearing my signs. And you cannot let anyone and everyone carry your values.
What you want from your customers is not only their money, it’s their prestige. Because prestige does not come onto brands by a kind of holy miracle, prestige is given by the key clients.
Jean-Noël Kapferer
This is criticized, but this is the basis of the success of Hermès. They don’t sell to anyone, but they don’t tell you, we won’t sell to you. There are a number of products anyone can buy and others you say, “Oh, I’m sorry, you have to take an appointment and maybe we don’t have it anymore.” This is called creating artificial scarcity. Artificial scarcity is a way of in fact selecting people.
I see more wine brands trying to become invisible. I see wine brands that now only distribute through private collectors network. So it’s not just about the money, it’s also about the connection that you have. I can see the short-term value of this, but in the midterm, if you become invisible, then how can you continue to be desirable in 30 years?
The problem with this approach is that it’s often an excuse not to address the new generations, the new clients, the new values. It’s relying so much on the past that you become hostage of the past and in fact you don’t evolve as society.
So you need to be visible to be desirable, but not accessible enough so that too many people can buy your brand.
The equation of dream is a statistic model we’ve developed to explain the relationship between desirability and accessibility.
We ask two questions. The first question is, do you know these brands? And we list 50 brands. Second, have you bought ever anything from these brands? If we take Chanel, it can be a lipstick, it can be a fragrance, it is not always haute couture. It can be anything from that brand. The third question is, how much do you dream of this brand?
And we noticed that desirability was a function of the difference between level of brand awareness and level of ownership. Which means that if you have no brand awareness, you cannot have desire. And the second thing is when this thing is too ubiquitous, too many people are owning it. It’s not a problem in normal marketing because everyone knows Zara and everybody buys Zara, but they are not in the luxury market.
You cannot have desire for things nobody knows.
But you can’t be bought by too many people.
This interview has been shortened and edited for clarity. It is only part of a much longer, fascinating interview, which you can find here.