From New Luxury to Next Premium
Understanding, assessing and creating future high end value propositions, from product to service: beyond new luxury
By definition, “luxury”, scholarly studied across the domains of leisure, clothing, shelter and sustenance, is not attainable by the masses. It is the very nature of luxury to position its propositions at best as individual, from custom made fragrances for individual scents to personalized supercars like Ferrari’s editions by Garage Italia. After all, historically, luxury is a by-product of royal courts and aristocracy, transmitted within our advanced and emerging economy cultures through the various revolutions that determined our societies and their configuration. At a deeper sociological level, “luxury” works on principles like that of “distinction”, as French scholar Pierre Bourdieu defined the ambition of individuals to differentiate themselves from others. At the same time, the notion of luxury that each specific age recognizes, is delimited and defined by the deeper cultural values of the times. In this sense, since 2007, the impact of the banking crisis first, turned into a true systemic crisis, has surely affected how luxury is perceived.
A point of reference where both luxury profiling and socially oriented contributions can be found is that of art patronage, a form of investment and / or philanthropy that determines how art markets and institutions work. Since the 1990’s and especially in the last 15 years, fine arts and the sponsoring or even creation from scratch of art museums, from Palazzo Grassi in Venice to Fondazione Prada in Milan, designed by Rem Koolhaas’ OMA, represented a growing direction of investments in both financial and social capital, where status and patronage meet at brand strategy level. The trickle down of such dynamics to brands that aim at positioning themselves as aspirational is likewise a consolidated phenomenon, from early signs like the sponsoring of Castello di Rivoli Museum of Contemporary Art by now defunct Gruppo Finanziaro Tessile in Turin to new successes, like Italian Japanese textile manufacturer Alcantara recently did with various art projects in Milan and Shanghai by renowned art maverick Davide Quadrio. This would be only a case that proves the possibility and the presence of the transfer of marketing mechanisms and design strategies from luxury makers to more attainable, yet desirable brands.
Parallel to luxury (and new luxury), is the whole conceptual field and commercial opportunity variously described as mass luxury or as premium propositions or as High End (Bevolo, Moskowitz, Jacobs, 2011). Defined in the first half of the 2000’s, when economic growth seemed intrinsic to globalization, this topic has seen top investments by Boston Consulting Group, Accenture and leading authors, who focused on unfolding its potential and clarifying its rules or “ways of working”. A tested definition of the High End, as defined by the author with Howard Moskowitz and Alex Gofman through a research program involving nearly 100 experts and statistically representative samples in US, UK, China and Italy, leverages the upward pricing stretch of 20% from mainstream pricing of a product with the same functionalities. An example of “High End” is the FIAT 500, as opposed with the Ford Ka. The two cars are the same functional assemblage, as they share plenty of components and are assembled in the same Polish factory lines, however the Italian design icon commands a premium price, that is scalable with the Abarth version up to 5 times as the price of a Ford Ka. The possibility to exercise such a pricing premium over competition resulted in the interest and ambition to understand how such an effect might be socio-culturally stimulated and industrially engineered. The result is an actionable charter that includes five key dimensions embodying the essence of the High End:
1) Authenticity and Value
2) Design and Experience
3) Innovation and Leadership
4) Marketing Communication and Distribution
5) Sustainability and Simplicity
Each dimension is articulated through four constituencies, hence offering a complete framework to analyze current brand propositions or to generate new ones. Namely:
- Authenticity and Value pertain to new luxury in terms of “Origin” and “Exclusivity”, where the High End might not perform likewise and should therefore not copycat. More interesting areas are “Pricing”, where the aforementioned optimal stretch of 20% higher than mainstream functional products is set, and “Residual Value”, where High End products might access the status of “design collectibles” by precise strategy, hence entering into the cultural circuits of museums, galleries and profiling publications;
- Design and Experience as well incorporate the constituency of “Craftsmanship”, where High End products might aspire to industrial optimization and possibly special series, however never matching the quality of higher luxury propositions. However, from the viewpoints of Holistic Design and Inclusion, the High End might rival, if not leapfrog, the status of luxury equivalents, by Design Leadership. One might think at how the whole hybrid and eco engine rapidly went from the first Toyota Prius, 1999, to being a must on the luxury automotive markets, with brands like Ferrari adopting their own solutions in this sense. In these terms, Toyota, especially through their premium brand Lexus, set the new standards before Bugatti or Lamborghini or any similar super brand did;
- with Innovation and Leadership, an even more critical dimension of the High End was identified, where manufacturers and marketers who aim at this pricing point have to constantly re-affirm themselves, either through breakthrough pioneering or by means of innovation in continuity. What appears fundamental is the ability to seed and grow partnerships, especially in the newly developing fields of High Tech-powered Internet of Things and artificial intelligence. Early examples of such partnering strategy since the late 1990’s are the co-branded and ingredient branded series of Philips technology enabled products, with protagonists like Levi’s, Nike, Alessi, Cappellini and Swarowsky being enabled to perform in the connected and digital experience realms, where their audiences naturally gravitate. Furthermore, what also appears crucial is the intellectual vision to transform these specific collaborations, and the related research programs that make them possible, into opportunities for “Thought Leadership” by means of a carefully planned PR mix, including events, publications and white papers, in order to stimulate the public debate and assume a position of cultural leadership beyond plain manufacturing or marketing;
- at level of Marketing Communication Distribution, “Placement” and “Image” represent a key constituency of the High End mix, with the careful disclaimer that pure cosmetics will not work in terms of re-positioning mainstream propositions to higher price ranges. Distribution, e.g. through sensible channels like airports and duty free shops, retail, packaging, advertising and PR must be managed according to genuine storytelling lines, that contribute to build up cultural differentiation in people’s minds. In this respect, the use of “Celebrity” marketing might offer opportunities but also and especially risks, given the “Grassroots” turn enabled in the last decade by social media, with hierarchies of prestige shifting from models to bloggers and from hedonist to activist icons. Short lived strategies like Cause Related Marketing might increasingly lose their power to differentiate, if they are not connected to the core DNA of the brand, and as such executed within a larger sustainable vision;
- Lastly, Sustainability and Simplicity is perhaps the most dynamic dimension of the High End, as just a decade ago it might not be observed beyond early signs, like the short lived Think Tank “Deeper Luxury” by Professor Jem Bendell. In the research project conducted by the author, with Moskowitz and Gofman, in the period of 2007 – 2011 it was possible to identify the emerging trend towards “sustainability” as mission-critical to luxury and premium propositions of the future. The ability and the drive to act ecologically, socially and on personal level as a “good citizen” generically emerged from the initial response to the crisis, and were rapidly transferred to brands in general, and especially to those economic actors commanding a premium in terms of perception and price. This will only expand and snowball as one of the most relevant criteria directing people’s choices to consume – and to pay a premium price.
The steps to deeply the High End Charter and its principles can be three: a first moment of “auditing”, where the current scope and the future potential of a brand is dynamically assessed; a second moment of “foresight”, where the future around the next decade of the brand and around its world is investigated, resulting in the identification of potential transformational directions and roadblocks for positioning and growth; and a last moment of “innovating”, where opportunities are quantified and shaped into action for the forthcoming 3 to 5 years, at least. The key is keeping the notion of “meaning” central, both in terms of internal stretch of meaning that is required from the viewpoint of the mindset and the associations of staff and stakeholders, as well as in terms of meaning that might emerge from society or channeled into culture by the enterprise, in order to resonate or even better anticipate what will people will love and desire in the future, by design.
From the viewpoint of planning research and observation to monitor trends, one might wonder “where” the next generations of High End might see the light. In this respect, one initially can trace back the origins of luxury as mentioned at the start of this article. Value is historically generated where desire lives, hence nowadays in the heart of our urban socio-cultural hubs. It is however also true that the conditions of Silicon Valley uniquely combine capital, IQ and culture to incubate the start up culture of today and tomorrow. Such model was replicated to a certain extent in mid size urban regions like Eindhoven, The Netherlands, or emerging creative areas like Bangalore, Shenzen or Oklahoma, as united in the Districts of Creativity worldwide network. From this viewpoint, tomorrow’s High End will be born like true luxury, as its “sister”, were historically born in cities like New York, London, Paris, Milan, Tokyo but also from “minor capitals” where style meets innovation, like aforementioned Eindhoven and its Dutch Design Week or like Turin and its slow food and design movements, by incorporating socio-cultural, aesthetic and narrative elements way beyond plain technology.
One might say, that the birth and evolution of luxury is a great story of emergence and democratization of our advanced economies. Likewise, it is mission critical for High End propositions to generate storytelling beyond fairy tales, combining the possibilities of future High Tech with the qualities of authentic values. So, what’s next? The “Next High End” will be of course “Smart and Digital”, as this is a pervasive condition of our short term future, and beyond. It will leverage 3D printing and Internet of Things possibility to express a whole new global – local personality, where “Craftsmanship” will be increasingly accessible as a modality of production, however machine assisted. What will not change will be the relevance of “Cultural Roots and Connections”, as in the case of FIAT 500, a great Italian narrative for a car that is actually “Designed in Turin” and “Made in Poland”. Authenticity will translate into “Residual Value”, perhaps the “hardest”, most econometric but also clearest parameter. Because High End and premium propositions of the future must be all about new values and higher value, or they will simply vanish as irrelevant and fake.