From average to luxury brand: How uptrading of brands works
1. Oktober 2018 ▪ Reading time: approx. 3:30 min.
Those who manage to enrich the functional product with a status benefit, have the necessary skills for mature brand management in the Champions League!
In order to escape from ever accelerating downward price spirals, many entrepreneurs and brand managers are considering "uptrading" their brands. Because premium or, better yet, luxury brands promise new growth, good returns, and profit.
The – supposedly – right people for the job are easily called to the scene: an advertising agency that gets misty-eyed when they hear the words "premium" and "uptrading", a design agency that can't wait to update boring packaging, and of course the event agency that is already dreaming of organizing top-class events.
Advertising alone does not take a brand to the luxury class
The brand has to become more refined, more elaborate, and more expensive, but: Is a freshly upgraded new advertising surface enough to do that? Ultimately, that money has to come back in from increased sales or higher prices.
The sales department usually senses that there is something wrong with the new strategy: They know that retailers don't change their attitude toward a trusted brand over night. And that they are probably wondering if they can convey this new strategy along with the inevitable price hike to their customers.
What are the consequences? Will the brand company have to find new retailers that work in the premium segment? Would these retailers even include the brand in their product range?
Premium brand, prestige brand, luxury brand – what is the difference?
To keep the risk of failure to a minimum and boost the chances of success, it makes sense to take a close look at the performance content and boundaries of brand systems at the top of the line.
For Marketing Review St. Gallen, the marketing journal published by St. Gallen University, we tried to make the structure of brand systems in the top-end market segments transparent and further differentiate the term of luxury.
To do that, we developed a category matrix defined by the parameters "benefit focus" and "performance leadership". Starting with the assumption that luxury brands have not only a performance benefit but always have a status benefit as well, we established a four-field structure that is helpful for effective uptrading of brand systems.
These are the differences between premium brand, prosumer brand, prestige brand, and luxury brand:
Examples for these 4 categories:
- Premium brand: Swarovski
- Prosumer brand: Hasselblad
- Prestige brand: Louis Vuitton
- Luxury brand: Hermès
The selected parameters and resulting structure show: The prerequisite for uptrading is a superior set of performances. To put it another way: Surface marketing alone cannot make a mass brand into a top brand.
However: Just concentrating on the performance level also does not make a luxury brand! For instance, the watch brand Omega is trying to get established in the luxury segment. Certainly its brand battery currently appears fully charged with significant historical merits: After all, it was the first watch on the moon and adorned the wrists of many a James Bond actor. Still, the brand is in the upper premium segment but not the luxury segment.
Omega cannot keep pace with brands like Patek Philipp and Rolex – they lack the credibility for the luxury segment, the price range in their product portfolio is too wide, the distinction is not great enough for people who own an Omega watch.
Building the status benefit – the freestyle part of the uptrading process
Apart from an excellent set of performances this is the second driver: the benefit focus. An outstanding basic and added benefit is the ticket to the top class of brands. When buying a luxury brand, the customer mainly demonstrates his own value concepts and evokes separating class or group membership. Therefore, the special benefit of luxury for its buyers is that of social selection and self-realization.
Those who manage to enrich the functional product with a status benefit, have the necessary skills for elaborate brand management in the Champions League!
Unlike Omega, down specialist Moncler has mastered the challenge of advancing to a status brand. The outfitters for mountain expeditions patiently prepared their customers for the transition into the high-prices segment. With its own monobrand stores, the brand has distribution and touchpoint control and now also offers collections in the prêt-à-porter area. The necessary glamour is provided by selected Hollywood celebrities.
Imminent danger for luxury brands: drifting off into triviality
Demonstrable world record performances that also bring a status gain are particularly appealing to the differentiating luxury customer. Products by brands like Leviev or Graff in the ultra-high-end segment are unbeatable in terms of perfection.
The arch enemy of these luxury brands is therefore the descent into the ordinary: by distributing the products too widely and democratizing the luxury goods. The availability and sacral presentation of luxury brands must be delicately tuned. This takes a great deal of finesse. As soon as users no longer associate a luxury brand with sophistication, elegance, exclusivity and prestige, it would do well to make itself scarce again.
Gucci https://www.gucci.com/de/de showed us how to manage an excellent brand transformation. Just a few years ago, they were still present on all of the world's black and junk markets. Now, thanks to a daring about-face by Alessandro Michele, they are again among the best in the world. The product line was radically revised and reduced, distribution tightened, quality deficiencies remedied, and the company refocused on its brand core. Gucci is once again provocative, exciting, and casual.
Changes in the uptrading process: Please involve the target groups
The crucial point in the uptrading process is the – absolutely indispensable – adjustment of people's attitudes toward the brand. This starts in the brand's own company and continues with marketing agents, customers, observers, and influencers. Only when their views and evaluations change can an average brand become a top brand that can benefit from the high returns in the top class segment.
Absolute performance superiority has to be communicated to support the uptrading. The greatest danger lurks in a lack of internal communication. Strong brands always grow from the inside out, and of course the same goes for luxury brands.
A luxury brand that has overcome this obstacle has to realize that the brand behavior changes as well: in communication, tone, and volume. Pushiness works better for prestige brands, while elegance, discretion, and true style are only associated with luxury brands.