Some mistakes in the luxury universe

Chivas is a well-known brand, owned by Pernod Ricard. In 2007, Chivas 12 year old, made a mistake. This is a mass prestige brand (not a luxury brand) and the error caused it step down from its prestige state. Stepping down happens but coming back up is extremely difficult.

Chivas applied the rules of classical marketing and reduced its prices in December to attract several customers. The price was reduced by 25% to keep up with the festive season. This opened its universe to more consumers, which reduced its exclusivity. The prestige ended. When customers increase, the product becomes available to everyone. By 2009, Chivas 12 year had lost 45% of its consumers. In classical marketing of Fast Moving Consumers Goods (FMCG), prices are cut to meet the demand of the customer. This should not have happened with the prestige brand. Neither is it supposed to happen with luxury brands. Volume is not the focus in this universe. Customer is king, but luxury decides what the customer needs. The customer then finds it.

Consumers, who enjoy Chivas, have the taste for this drink, and will not be disturbed by the price when it remains the same or increases. These consumers will still purchase the drink. “When it comes to luxury, the best way of reaching the very well-off is to let them come to you,” Marketing Director, BMW USA. Keep the non-enthusiasts of the luxury product off.

Another mistake made by a brand of heritage, was by Mercedes (Daimler Group). This brand messed up its luxury status several times. It first decided to apply a volumes strategy several years ago. Fail. Then it decided to purchase Chrysler. A mismatch of management between luxury management and brand management. It doesn’t work. Moving from luxury to volumes, led to the exit of Mercedes from the universe of luxury. In many emerging markets, Mercedes is still perceived as a luxury brand.

The Mercedes A class was to trade down and reach the mass market. Maybach was launched to enable Daimler Group, to re-enter the luxury universe. But this did not happen. Maybach was yet another mistake. Maybach was a costly mistake that was closed in 2012.

Ford, tried to enter luxury. It made unending attempts to be a member of the universe. Ford purchased Jaguar for $2.3 million and then created Premier Automotive Group (PAG) to make it profitable, after purchasing Aston Matin too and premium brands such as Volvo, Land Rover, etc.  The small Jaguar cars were functioning on a Ford Mondeo engine. The Jaguars increased on the road. Exclusivity ended for its clientele. There was no dream. The next step was to apply Ford business model to the luxury cars; Jaguar and Aston Matin. Fail. Aston Matin and Jaguar were soon sold off.

Rolls Royce also took its step out of luxury when it was purchased by BMW. BMW applies the luxury strategies just like Apple but this does not make the product a luxury product.

When a brand goes against the luxury strategies and the business models for luxury, the brand loses its luxury status.

Yves Saint Laurent (YSL) parfums moved from Kering Group to L’Oreal. YSL parfums lost their luxury position. In luxury, distribution is controlled. Here, YSL lost its control on distribution of parfums.

In the case of the House of Dior, the death of the founder and creator, Christian Dior, led to an irreplecable gap. John Galliano and Gianfranco Ferre tried to fill in the gap, and Dior moved from luxury known as Christian Dior to a fashion brand; Dior. It applies the rules of a fashion brand.

Calling a brand a luxury brand is common, as this is a marketing strategy to entice investors. But this fails when the brand lacks the look and feel of luxury. In the world of cars, there have been sever purchases. Bentley, Lamborghini and Bugatti were bought by Volkswagen. Ferrari is run by Fiat, and Maserati has joined this family.  Toyota also decided to keep up by creating the Lexus, a very upper range brand. This is a car without heritage; therefore it cannot be a luxury car. Aston Matin is the representative of Great Britain, Porsche for Germany and Ferrari for Italy.

Maryanne Maina

MBA in Luxury Brand Management

HEC Paris, School of Management

[email protected]

@njerimaina