NEW YORK — Managers of luxury firms might be well-served to brush up on a little science. After all, isolating a brand’s DNA and knowing how to manipulate it are the keystones to maintaining relevance in today’s competitive marketplace.
“The essence of what made Gucci successful was leather goods and watches — not apparel,” said Michael Silverstein, senior vice president of The Boston Consulting Group and co-author of “Trading Up: The New American Luxury.”
“It was fundamentally driven by identifying a couple of core categories through which it could target a market, own that market and sell a lot of product,” Silverstein said. “That’s what a lot of luxury brands have forgotten, that there is a core product area.”
Silverstein spoke Monday night to about 120 people at the LVMH Tower here for “Luxury’s Winning Streak: How Brands Stay in Style,” a panel discussion sponsored by the New York Tri-State INSEAD Alumni Association. The panel was moderated by Edward Nardoza, editor in chief of Women’s Wear Daily, and included Silverstein; Daniel Lalonde, president and chief executive officer of LVMH Watch and Jewelry in North America; Tom Florio, vice president and publishing director of Vogue, and John Esposito, president and chief executive officer of Moët Hennessy USA.
Esposito said many managers approach luxury appointments with the intention of leaving their fingerprints on a brand.
“But true luxury brands don’t need that,” he said. “They need to be nurtured in a very different way than fast-moving products do. What’s important [in a revival] is figuring out why the brand was so relevant the first time around and what you need to do to reposition it back to where it was. It’s usually not a new position. It’s usually going back to the archives and seeing what made it successful in the first place.”
Lalonde said understanding the brand’s DNA made all the difference at Tag Heuer, which is owned by LVMH.
“Once you know your DNA, it’s very important to innovate within it,” he said.
As examples, he cited Tag Heuer’s redesign of styles from the Fifties, Sixties and Seventies that were based on auto racing, like the Monaco, which Steve McQueen popularized in the 1969 movie “Le Mans.”
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“They are the fastest-growing [products within] Tag Heuer today,” he said. “They are within the DNA, so we haven’t confused consumers, but we’ve made them more modern. Consumers are inspired by the past, but they need a new twist to them to make them more contemporary. To create a lot of value in the luxury space, you need to have a lot of ideas.”
In addition, he said, an emotional component is necessary to separate a luxury brand from a nonluxury brand.
“We don’t really need luxury goods to survive,” he said. “It’s how you feel, like when you wear your watch every day. If you don’t feel passion and emotion, it becomes more of a commodity purchase, and that applies to many categories.”
Lalonde said once the emotional connection with the consumer is established, it’s crucial to maintain it by not compromising the brand. When Tag Heuer released its entry-level-priced Formula 1 line, it put more dollars into advertising the high end of its line.
“The result was that we boosted the overall business and we added about 15 percent onto the business at the lower end, once again by sticking to the brand’s DNA,” he said.
Esposito said when it comes to spirits, the same premise applies.
“We never trivialize Dom Perignon,” he said. “When people want to do things with Dom Perignon that we don’t like, we fight against it completely. To a great degree, in luxury you need to create the culture of luxury or it’s just a thing. And once you have that culture, you need to be able to deliver on it. If you look at Louis Vuitton, what gave it heat was Marc Jacobs. The accessories were always white hot, but that ready-to-wear line gave it a necessary glamour.”
All the panelists agreed that luxury today has a more complex definition than it had in the past, which enables it to manifest itself in multiple channels, from Wal-Mart and Starbucks to BMW and even health care services, where some doctors are charging membership fees to cater to a high-end customer looking for exclusive service.
“Luxury has become every nonessential item that gives someone a sense of indulgence,” said Florio. “It can be a cup of coffee or even chunky peanut butter. The notion of traditional luxury has changed, so that luxury seems to me broader. How you play that game depends on what segment you’ve chosen to take on.”