How to Sell Luxury Goods

7/31/2019 How to Sell Luxury Goods

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Trading Up | Michael J. Silverstein and Neil Fiske

About the Authors

hy do people happily pay

for a anera anini insteadof for a sandwich at the deli

r for a ictorias ecret brainstead of for a generic brand

r for a instead of for ahevy

rading up has becomea fact of life

hese purchasesreflect an importantworldwide behaviouralshift onsumers todayare willing to pay a significantpremium for goods and servicesthat are emotionally important tothem and that deliver the perceivedvalues of quality performance andengagement ut in other categoriesthat arent emotionally importantthey become bargain hunters apassionate ercedes driver will

shop at arget every weekend a

construction worker who splurgeson a set of allaway golclubs will also buy storebrandgroceries

or many companiestoday trading up isa smart strategy forachieving growth andprofitability in a worldof costcutting andshrinking margins n

dozens of categoriesnew luxury brands areselling at premiums of percent to percentover conventional goods

and in much larger volumes thantraditional old luxury goods

he authors estimate that in justtwentythree categories mass luxurygoods amount to billionin annual sales with tremendouspotential remaining for futuregrowth

Mr. Silverstein joinedThe Boston ConsultingGroup in 1980. His secondbook, Treasure Hunt, waspublished in May 2006and has received criticalacclaim. With Kate Sayre,he is coauthor of a third

book, Women Want More,which is being published inSeptember 2009.

Neil Fiske was named ChiefExecutive Officer in June

2007. He was recognizedas Marketer of the Yearand Retailer of the Year in2004 and 2005 by WomensWear Daily.

Whats Inside:WHY YOU NEED THIS BOOK

NEW LUXURY IS MORE THAN MARKETINGTHE PRACTICES OF NEW LUXURY LEADERS

Business summaries.

com

December 28, 2009

By Michael J. Silverstein and Neil Fiske, Penguin Books, 2003

Trading UpThe New American Luxury


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WHY YOU NEED THIS BOOK

rading p combines social insight rigorousresearch and business acumen to tell thefascinating story of the consumers who trade upto the new merican luxury and the companiesthat create it

NEW LUXURY IS MORE THAN

MARKETING

ew uxury good cannot be imagineddeveloped manufactured distributed ormarketed following conventional middlemarketbusiness attitudes or practices although manybusiness assume they can be

ompanies assume that the ew uxuryconsumer will be seduced by a high pricepoint but ew uxury consumers do notautomatically assume that if it costs more itmust be better hey are sophisticated enoughto evaluate the technical and functional benefitsof a product and to trust their own emotionalreactions to it e heard over and over againfrom consumers that the most expensive entryin a category is not always the best

s one consumer put it uxury can sometimesmean better quality and last longer butsometimes its cheap and flimsy

uthors ichael ilverstein and eil iske

ublisher enguin ooks

pages

ew uxury is much more than a marketing

exercise although marketing is of course a keypart of the process ut ew uxury goods arenot created solely in the marketing hey arecreated through all the management disciplines and often through unconventional marketingmethods

THE PRACTICES OF NEW LUXURYLEADERS

ew uxury leaders and their companies followa set of management practices that are differentfrom those of conventional or ld uxury goods

About the Book

BusinessSummaries.com

The Nutshell


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creators sing them ew uxury companieshave shattered conventional beliefs in nearly allaspects of product creation and distribution

including ideas about price ceilings price rangesbrand extendibility consumer sophisticationmarket stability and the innovation cascade

Never underestimate the customer. n everyew uxury category consumers are moreaffluent better educated and more sophisticatedthan ever before n the categories they care aboutthey consider themselves to be knowledgeable

and even expert hese consumers appreciatetraditional quality technological innovationand emotional authenticity hey care aboutthe heritage and history of a brand and areinterested in the category as a whole

Shatter the price-volume demand curve.he masstige segment for example is to of many personalcare categories and growing at

twice the industry average ubero shatteredthe conventional wisdom that there was nosubstantial householdappliance market abovethe price point is the mostprofitable car company in the world with unitvolume of its ew uxury models ten times thatof other superluxury cars

Create a ladder of genuine benefits. erhapsthe most important of the ew uxury practicesis ensuring that the products deliver a ladder ofgenuine differences technical functionalphysical and emotional

Escalate innovation, elevate quality, anddeliver a flawless experience. he market forew uxury is rich in opportunity but it is

also unstable his is because technical andfunctional advantages are increasingly shortlived as new competitors enter the market andbecause of the relentless download pressure ofthe innovation cascade hat was luxurious anddifferent today becomes the standard brand oftomorrow

Extend the price range and positioning of

the brand. any ew uxury brands extendthe brand upmarket to create aspirational appealand downmarket to make it more accessibleand competitive and to build demand

Customize your value chain to deliver onthe benefit ladder. ew uxury creators oftenwork outside the established value chain inorder to overcome the structural barriers that

stand in the way of small producers hey putthe emphasis on control rather than ownershipof the value chain and become masters atorchestrating it

Use influence marketing; seed yoursuccess through brand apostles. n ewuxury goods a small percentage of categoryconsumers contribute the dominant share ofvalue n intense continuing focus on thesecore customers will yield early signs of a shifting

What was luxurious and differenttoday becomes the standardbrand of tomorrow.



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market and ideas for nextgeneration variantsfeatures or products

Continually attach the category like anoutsider. ew uxury creators look beyondtheir own categories for the trends and patternsthat will generate the next breakthrough

THE WORLD IS A SEXY PLACE

ooking and feeling sexy is a powerful emotionalplace for ew uxury

essons rom ew uxury ingerie ictoriasecret

ver the past twenty years the brand hastraded up its customers to higher levels of taste

and aspiration across multiple categories hebrand took its customers from bland departmentstore staples to more fashionable foundations

nd then exner traded them up again to a functionally superior emotionally engagingbra which became a bestseller

rands are able to draw emotional responsesbut only when there is a level of quality that

serves as a tangible and relevant foundation

y steadily increasing the upper price limitthe ictorias ecret brand has increased its

average unit retail price for bras by almost percent in five years

he most important brand apostles forictorias ecret are the supermodels heywear the lingerie and are brand advocates heycreate the aspiration of joining a club of themost beautiful women in the world

The brand keeps topping itself. odayictorias ecret owns the emotional space of

feeling and looking sexy for merican women

EATING AS AN EMOTIONALEXPERIENCE

mericans love to eat and always have but theeating habits and preferences of middlemarketeaters are changing

essons rom ew uxury ood uppliers anera read

ustomers of rader oes and anera readhave proved that when offered a higherqualityand emotionally engaging alternative to thenorm they will go out of their way for the

experience and theyll happily pay a premiumfor it

arol the administrative assistant claims thatshe loves taking first timers to anera read



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ord of mouth enabled rader oes to builda billion retail franchise despite the outoftheway store locations and lack of broadcast

advertising

ike obert ondavi in the wine industryanera read onald haich usedhis position as an insider to understand theopportunities presented by the shortcomings ofthe status quo

INSIDE THE NEW AMERICAN HOME

he changing character of the merican omeis one of the clearest indicators of major shifts inour society

essons rom ew uxury ome layers hirlpool

argeting the average customer and testingagainst the general population are commonpitfalls of traditional market research

hirlpool uet is disproving the conventionalwisdom that there is limited volume in premiumpriced household durables

n comparison to conventional washers uethas genuine technical differences that translateinto functional beliefs that lead to unprecedented

emotional engagement for consumers owoften have you heard a consumer say that sheloves her washing machine

hey offer unique high quality productsby scouring the world for new and interestingitems hey tell product stories that appeal toconsumers emotions and provide inspirationand guidance for product use

AWAKENING THE AMERICAN PALATE

TO WINE

he story of trading up in wine reinforces theeight key practices of ew uxury leaders

essons rom he aster lenders ew uxuryractices endallackson ine

obert ondavi and ess ackson neverunderestimated the customer hey believedthey could trade up the middle market to highlevels of quality taste and aspiration even ifthere was not a proven model to follow tbecame their mission and guiding ethos

ackson saw the potential to create a new

segment in the market with both higher pricesand higher volume oday his major brandscontinue to occupy a position off the demandcurve for the industry as a whole



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onsumers traded up based on the ladder ofgenuine benefits he big breakthrough was intaste and affordability but the category overallplayed to an emotional need for pleasuresocial connection affinity self expression anddiscovery ttaining knowledge of wine becamea way for consumers to make affiliation andconnection with other wine enthusiasts

ackson used an opensourcing model toovercome structural barriers e put theemphasis on control not necessarily ownershipof the value chain nd he proved to be themaster of orchestrating the value chain from anend to end

ondavi and ackson recognized that the

inspiration and innovation will increasinglycome from wine countries of the ew orld

DEMONSTRABLY SUPERIOR ANDPLEASINGLY DIFFERENT

essons rom he allaway corecard

ou cant fool the public allaway said fthey are going to buy your product it has to bebetter it has to be right t has to be truly moresatisfying than the existing product


allaway understood the importance ofinvesting in technology allaway knew thathis customers many of whom thought ofthemselves as club junkies wanted a steadystream of new products and he provided them

allaway has chosen not to extend the pricerange of its clubs as broadly as other ewuxury makers

ut of necessity at first allaway helpedmake gold equipment more accessible to playersby offering it in sports equipment retailers offthe golf course

n both golf and wine allaway saw industriesthat had become stagnant and he enteredthe industry as an outsider unfettered by the

conventional wisdom ike all ew uxuryinnovators allaway was infatuated with hisproduct in a way that industry lifers rarely areou have to be almost crazy in love with theproduct that you want to make or the servicethat you want to sell he said ou have tobelieve in it

FACTORS THAT WILL CONTRIBUTE TO

THE SPREAD OF NEW LUXURY

ust as ew uxury has arisen as the result ofthe confluence of social changes and business

If they are going to buy your product,

it has to be better, it has to be right.


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capabilities its spread will be further enabled bya number of factors

reater globalization and influence of overseasmarkets s the uropean nion continues toexpand and accept new member nations andas hina and other sian countries becomeincreasingly welcoming to both businesses andtravellers the tradingup phenomenon willbecome more globally influenced onsumerswill discover new tastes and styles ideas andinterests and look for their mericanized

versions back home usinesses will have greateraccess at lower cost to ideas and supply chainservices in countries throughout the world

eightened role of the eb and ecommercecommerce is currently a minor source ofrevenue for ew uxury creators but it isgrowing fast and contributing to sales and brandgrowth in many ways beyond the direct sales ofbrick and mortar stores

nfluence of solo females oung singles rocketin a relatively small number of categories butdivorced women told us they rocket in as manyas thirty different categories

eniors as heavy spenders eniors represent an

enormous potential market that ew uxurygoods creators have yet to fully tap hereis an opportunity to better serve the seniortravel market with clothing luggage health care

products and services food supplements photoand electronic imaging systems travel planningand support services and more

extgeneration consumers smarter and moresophisticated than ever t is the juniors agedsix to eighteen however who represent thegreatest potential for continuing and expandingthe tradingup phenomenon hey are interestedin learning travel extensively and are highlyattuned to brands and products

2009 BusinessSummaries.com

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How to Sell Luxury Goods