On June 6, 2011 he Financial Times' Business of Luxury supplement featured an article about diffusion brands and affordable luxury (you might need to register with FT to view the article). The article addresses benefits and possible disadvantages of introducing the so called diffusion brands -- a strategy often used by luxury brands to cash in on their well-established image and boost revenues by positioning a new, more democratic, child brand as affordable luxury. An example of this strategy is the luxury brand Armani launching its more affordable diffusion brand Armani Exchange. I was interviewed for this article, and you can read my views there. Whereas launching affordable luxury brands as diffusion lines is often practiced by luxury companies, creating an affordable luxury brand from scratch is also possible, and in many cases very successful. An example is Victoria's Secret in the United States.
Since the Academy Award, or the Oscar, was established in 1929, it has become a strong brand (see my previous article Events as brands: Paris Fashion Week). Its brand image is the one of glitz, glamour and red carpets. That's why this event has been so much liked by luxury brands that are all about glamour and exclusivity.
This year, however, along with Gucci and Prada, it seems like the Oscars is becoming a bit more funky and relaxed.
First, it will attract an unusual participant from the world of brands -- Omega 3 snack mixes Planter, a Kraft Foods brand. With its Nutmobile specially made for this and other promotional events, Planter will make a statement about its support for the green and eco-friendly way of life.
View image source here.
Second, many brands that are tapping into the huge advertising potential of the Oscars, will be exploring social media on a much larger scale that they've done so far. The Academy Award itself has been actively engaged in generating buzz about the event with a series of videos that feature young and hip hosts James Franco and Anne Hathaway.
Coach and Affordable Luxury brand strategy
Coach -- a brand of hand bags from the US -- has frequently featured in class discussions during my marketing courses. One could argue that its phenomenal brand success story can be attributed to a carefully orchestrated strategy of affordable luxury -- selling high quality bags at high prices, and at high volumes. In fact, its success has been so big that it has posted sales of $ 3.5 billion in the United States in the last financial year.
I knew about Coach not only from my nerdy MBA books. I visited a Coach shop for the first time during my first visit to the US, back in 1994. I went to a Coach shop again in 2000, when I was studying in Boston.
Both times, I was almost mesmerized by the almost magical effect that this brand seemed to have on those who visited its stores. American women looked happy and proud to leave with a new status symbol in their hands.
But to the Europeans, spoiled by a massive choice of high quality brands of hand bags, Coach has been literally unknown. With the competition so fierce, no wonder Coach waited for so long before entering Europe.
Coach in Europe -- lessons for other American brands
And finally, here it is. It chose to open its first European shop-in-shop in Paris -- a logical choice of the iconic capital of European fashion and style. The grand opening took place at Printemps on August 31st.
The distribution strategy that Coach will adopt will play an extremely important role for the degree of its brand success in Europe. Provided it is able to compete with many European brands in the same product category, it will establish a good pathway for other American affordable luxury brands in Europe.
A specific US brand with a successful affordable luxury positioning is Victoria's Secret. A sure winner on the US market, Victoria's Secret is likely to face a challenge of many established lingerie brands on the European market. It should closely watch Coach and learn lessons from its brand strategy in Europe.
Zigfreda is a colorful luxury wear brand that was started by a Brazilian designer Katia Wille together with a Dutch businessman Hans Blankenburgh back in 2004. This makes Zigfreda and its sub-brand for kids, BabyZig, far from being a startup, one might say. However, Zigfreda had to re-invent all of its key business elements almost entirely, when the founders decided to relocate the company from Rio de Janeiro to Amsterdam two years ago. This is why I can refer to it as a “re-startup”, and I am happy to host it as the third, and final, runner up in our funky startup contest.
SCHMOOZY FOX: What’s the story behind the brand name Zigfreda?
Hans: We came up with this name while sitting at a cozy cafe in Amsterdam several years ago. Back then, we knew that we wanted to create an exclusive brand for women, so we wanted the name to sound feminine. We don't talk about Zigfreda as belonging to a specific country, Brazil, The Netherlands, Italy, you name it. We believe that neither design nor the name have to be linked to any particular geography!
SCHMOOZY FOX: Tell me about Zigfreda’s beginnings in Brazil. Was it a smooth start?
Katia: After Hans and I met, we spent several years in Europe, and then decided to move to Rio and start our new brand there.
I come from a family of couturiers, both of my grandmothers were making bridal clothes, and I was drawing from a very early age. After studies at a design school I worked for Nike, Tommy Hilfiger and O’Neill. While I was on holiday in Rio, I met my old aunt and she showed me her vintage collection from the fifties, sixties and seventies. She wasn't using any of these clothes anymore, and she gave them to me, simply because I liked these pieces so much. When I saw them, I suddenly had a creative urge to do something different with this collection!
A friend of mine, who was an owner of a popular fashion boutique in Rio, encouraged me to alter the vintage pieces, and then organize a vernissage at her shop. I transformed the entire collection by mixing prints, making skirts out of dresses, and so on. As a result, I created 30 unique pieces out of the original clothes. The vernissage had a phenomenal success in the press, and all of the collection was sold out. I sold it under the name of Zigfreda, and our brand story was born.
In 2002 I also received a job offer to work for one of the prominent fashion houses in Rio, so Zigfreda did not materialize right away.
In 2004 we started to sell in luxury boutiques and department stores in Brazil. This led to an invitation for Fashion Rio (The Fashion Week of Rio de Janeiro) followed by Sao Paulo Fashion Week. We grew organically, and in 2008 Zigreda clothes were sold in Brazil, Japan, South Africa, Hong-Kong and Singapore, to name a few.
SCHMOOZY FOX: With a business running smoothly, why did you decide to put everything on hold and make a totally new start in Europe?
Hans: Though Brazil is a great country with major opportunities in luxury market space, often better profit margins can be reached from more international strategies that allow higher quality and lower cost of fabrics, machinery and production. We decided to change our strategy to Europe & Asia to allow more scale for sales, PR and production.
There were many advantages for us to make Zigfreda a truly international brand by operating out of Europe.
This decision coincided with the market downturn, and we had to reinvent our business almost from scratch. True, we had developed a lot of knowhow and expertise in many areas during our time in Brazil, but such important elements as team, production process, and sales channels, had to be launched from zero!
SCHMOOZY FOX: Did you have to put your collections on hold during this business re-start?
Katia: Yes, we skipped three collections. With our Spring-Summer 2011 collection we want to bring a new beginning to Zigfreda, now located in Europe with production facility in Italy, Portugal and Asia.
BabyZig, a new brand for kids from 3 months to 8 years of age, is a very new brand, for instance. We did test it in Brazil, but the real launch took place this past summer in Milan during the Pitti-Bimbo trade fair. The Zigfreda Spring-Summer 2011 sales season will be launched in Milan (White fair) 24th -26th September and our showroom in Paris (TENT Showroom, Rue Charlot 33, 1st – 5th October).
SCHMOOZY FOX: How could you summarize the brand essence of Zigfreda?
Hans: Zigfreda as well as BabyZig are international brands that don’t know any geographic boundaries. Although both are certainly upmarket brands (the average price of Zigfreda is Euro 350 and BabyZig Euro 160), they are also very democratic. This is especially true as regards the way I myself talk about them.
We are very open about sharing knowledge. I share my business life through social media, help and coach other business owners and also receive a lot back from them. The outdated notion that sharing might be counterproductive is simply not valid, in my view. You share, you learn, and you grow. We also want to find and create an environment in which people could find ways to explore their connections with Zigreda.
Katia: Zigfreda is almost like a favorite painting -- it can be a matter of personal taste, and perhaps not for everyone. But once chosen, it lightens up your day, every day! I want my clothes to trigger the emotions of empowerment, femininity and happiness in women. Femininity is really key to Zigfreda. I’ve heard many people refer to Zigfreda as a “Southern” brand, probably due to the exuberance of colors, but my color palette is beyond North or South, it’s just my vision of true happiness that I translate into fabric prints and designs. I think it’s this happy emotional outburst that people like so much.
SCHMOOZY FOX: What are your plans for the future?
Hans: Our main objective is to establish brand awareness in Europe, select the right sales channels, and also introduce a line for teenagers (bridging the gap between BabyZig and Zigfreda) -- of course all in due course!
Katia: the main plan for me is to remain in the mindset of a startup! I believe that it’s never a good idea for a brand to become comfortable with the status quo. I want to be able to have enough challenges to overcome so that the brand grows ever stronger! I want to press the Refresh button over and over again!
Here is a direct link to this new LinkedIn group and I invite you to join it!
Another LinkedIn group recently created by SCHMOOZY FOX is called Affordable Luxury. It is also very relevant to all those who are in the business of building innovative, striking (aka "funky") brands. Here is the direct link to this LinkedIn Group.
In one of my previous articles called How Funky Brands Can Be Profitable, I discussed how a consumer product or service could succeed if positioned in the affordable luxury segment. This segment can also referred to as mass luxury or new luxury.
From SCHMOOZY FOX's perspective, there's a close link between two groups.
The Affordable Luxury group falls nicely with the concept of funky brands.
There are several ways of looking at it.
In fact, most of SCHMOOZY FOX's clients are consumer goods or services seeking to craft a brand strategy that will aim at their positioning as affordable luxury brands. And in our experience, most funky brands are exactly affordable luxury products or services!
Just have a look at our Funky Brand Interviews with all those brilliant businesses that have been built based around such elements as creativity, design, affordable luxury and fun!
SCHMOOZY FOX invites you to become members of one of both groups on LinkedIn!
Schmoozing and fun are guaranteed! :)
A significant advantage that successful luxury brands have, is that they have a good chance to launch diffision brands. Diffusion brands are a form of a line extension, discussed before. They are “step-down line extensions of existing luxury brands, normally less expensive than the main-line merchandise.” ((How Young Adult Consumers Evaluate Diffusion Brands: Effects of Brand Loyalty and Status Consumption, Ian Phau Edith Cheong , Journal of International Consumer Marketing, 21:109–123, 2009)) They are often called second lines, subbrands and endorsed brands. Think of them as “children” of their more established “parent brands”.
Examples of diffusion brands abound in the fashion world, for instance. Armani launched Armani Exchange, Calvin Klein introduced CK, and Prada started a diffusion brand with a whole new name: Miu Miu. In all of these cases, the important condition for introducing diffusion brands was very high brand loyalty and brand recognition of parent brands. In other words, unless the brand equity of your parent brand is high, it might not be even a good idea to start considering diffusion brand launches.
There are several observations that I want to make in relations to diffusion brands:
- By launching a diffusion brand, a parent luxury brand de facto enters a whole new world of new luxury (also referred to as mass luxury and affordable luxury). I wrote on this subject before. New luxury is where many funky or funky-to-be brands develop. If done properly, the new luxury positioning can bring enormous benefits to both: a child brand and the parent.
- Diffusion brands are a good way to target consumers who are usually much younger than the main target market of parent brands. They can tap well into the trend of status consumption, “The motivational process by which individuals strive to improve their status through the conspicuous consumption of consumer products that confer and symbolize status both for the individual and surrounding significant others.” ((Status consumption in consumer behavior: scale development and validation, Eastman, J. K., Goldsmith, R. E., and Flynn, L. R. Journal of Marketing Theory and Practice. Summer 1999, 41–52.))
- Empirical research demonstrates ((Phau, Cheung, Journal of International Consumer Marketing, 21:109–123, 2009)) that diffusion brands have the same quality and status perception among younger target market as parent brands. This is a great way to appeal to a younger audience, and chances are that it will later on develop preferences for the parent brand as well.
- Importantly, the success of diffusion brands is often determined by a brand naming strategy. To put it simply, if a child brand bears the name of the parent (like Armani Exchange has a name of the parent brand, Armani), the benefits reaped from the existing status of a parent brand are almost immediate. If, however, a child brand is given a totally new name (Miu Miu vs Prada), such benefits are much less apparent. ((ibid.))
Diffusion brands are not a phenomenon characteristic exclusively for luxury products and services. On the contrary, they frequently occur in a very vast and complex area of brand architecture.
In December 2008 I published a post called Right moment, right message, right place: how to build luxury brands using social media. It seems that only a year ago most luxury brands were so hesitant to embrace the power of social media and the Internet in general!
Back then, I personally had a bit of a challenge to spot the funkiest first-movers in social media among luxury brands. There was a good debate on some LinkedIn groups related to my search for such pioneers, but the overall opinion of those I asked to share their examples was this, "Luxury brands won't embrace social media because they fear to lose their exclusivity appeal."
And look what's happening in December 2009!
Stefano Gabbana, a co-creator of the Dolce&Gabbana brand, is on Twitter (@stefanogabbana).
Chanel and Alexander McQueen have Facebook fan pages.
It looks like luxury houses have taken note of the fact that even people with the biggest purchasing power -- their potential customers -- hang out on various social media platforms.
"(The web) is very important by the sheer fact people are spending more time online, on Facebook, Twittering," said Emanuel Ungaro's chief executive, Mounir Moufarrige, quoted on brandchannel.com.
As I mentioned in that article a year ago, even if resistant, luxury brands would eventually explore social media, because their customers would digitalize their brands for them. It looks like SCHMOOZY FOX's predictions are coming true to life! ;)
Is this democratization of luxury? Let's watch this trend and see what shape it takes next December.
An important one is the fact that they are not driven by innovative and creative ideas alone, but are or have the potential to be profitable. This, of course, requires a good deal of business development and brand building work done.
In today's post, I want to talk about how your brand can benefit and become profitable from mass luxury brand positioning.
Mass luxury (often referred to as affordable luxury or new luxury) brand management essentially combines characteristics of building brands that have the luxury and exclusivity appeal, with techniques that can lead to relatively high sales volumes.
My marketing professor at ESSEC (a Paris-based business school famous for its luxury marketing program) was a former Armani guy. He certainly knew a lot about sustaining those "old luxury" brands like Chanel and Gucci (and Armani, of course). But he was nevertheless fascinated how some innovative companies managed to combine classical Kotler marketing with the know-how of luxury brand management by building extremely funky brands in the mass luxury segment.
Some of these brands were created completely from scratch (for example, Coach and Victoria's Secret in the US, Agent Provocateur in the UK, and a Dutch brand Marlies Dekkers whose founder spoke in an interview on this blog), and others were born under the umbrella of already existing "true luxury" brands (for instance, Armani Exchange as a modest brother of the brand Giorgio Armani). Over the past decade or so, many brands were launched to satisfy a desire for a better lifestyle expressed by wealthier middle class eager to splash out on previously unaccessible items.
So, what can you learn from mass luxury brands in order to make your brand profitable? You'll be surprised how many potentially funky start-ups fail just because they are disconnected from their potential customers. So, the most important rule of thumb is that you gotta get to know your consumers, their lifestyles and their desires as much as you can.
Stop for a moment doing this tedious market segmentation based on geographical location, age and gender. This stuff tells you nothing about your consumer's deep emotional needs and desires. Unless you've understood what emotional connections they can make with the products you sell, you'll be wasting your time.
Besides that, keep in mind the following factors which, in my view, may trigger consumers' interest in purchasing your funky mass luxury goods or services:
- The lifestyle factor: Whereas splashing out on a single Gucci outfit is an extremely rare occasion for most people, and buying a Lamborghini is simply out of the question, a sizable market out there still wants to have a luxurious lifestyle. "Luxurious" can mean different things for different customers, and the trick is to find your loyal segment for whom your product will be a luxury. The right combination of such items as furniture, consumer electronics, food and drink, beauty products and fashion can do wonders and make our lifestyles luxurious and enjoyable. Not every item in your customer's home has to be of super funky design and great quality, but make sure your brand can end up on your customers shelves!
- The self-worth factor: people appreciate goods and services that can contribute to their enjoyment of life (e.g. high quality perfumed candles, a meal at a gastronomic restaurant, or a visit to a spa) and feeling of self-worth. Do you know what contributes to the feeling of self-worth within your customer segment? If not, the first step towards making profits is to find that out fast and act on it.
- The funky factor: people like standing out from the crowd, and making a statement about who they are. They often express themselves through the clothes they wear, or items they use (computers, phones, cars). If your customers have created emotional connections with the products you sell, and even made them part of their personal brand, you've for sure kept the funky factor in mind successfully! Again, if you know how the attributes of your brand can enhance the funky factor of your customers, you've certainly moved forward towards a beefed up bottom line.
Mass luxury is the most profitable segment of many markets because attractive margins can be combined with sales volume. But the challenge is, mass luxury brands do not sell themselves . They are driven by hard-to-define factors like fashion, word-of-mouth, and constantly evolving preferences of your customers. If you've managed to apply a rigorous framework to identify these factors, and closely monitor them, you'll certainly be on the path towards making sizable profits and building funky brands.
Finally, a good article on the subject that I can recommend is "Luxury for the Masses" by Michael J. Silverstein and Neil Fiske, published in Harvard Business Review in April 2003. Have fun learning the tricks of the funky brand trade!
The summer 2009 Matthew Williamson collection for H&M is not a new trend: luxury fashion houses have cooperated with high street labels for quite some time already. The blog post discusses advantages of such cooperation for both parties, and lists examples of Matthew Williamson for H&M and Sandrina Fasoli for Mango.
Massively criticized, the launch of its first instant coffee by Starbucks might be successful long-term, provided the company chooses its target markets well, and pursues the right pricing strategy in relation to its freshly brewed coffee.
This post is a reaction to an article by Martin Lindstrom about luxury brands in a recession. It addresses the main question: does it make any sense for luxury goods and services to ensure ongoing sales by lowering retail prices?
This article illustrates use of Russian-sounding names in product marketing in Western Europe. It also identifies the gap of Russian brands outside of Russia's borders.
Is it time for luxury brands to get engaged in more pro-active marketing in social media, or does the concept go against their brand values? This blog posts addresses these issues and gives a couple of examples to illustrate them.