Luxury Brands
Definition
- Many terms have been used to define luxury, such as ‘ultra premium’, ‘prestige’ and ‘deluxe’. While there is no definitive definition, luxury goods are broadly agreed to be associated with status, exclusivity and high quality.
- Luxury is considered distinct from any other category – as such, it is believed luxury brands cannot be marketed in the same way as non-luxury. For example, unlike mass market brands, it is thought that luxury brands should limit their availability to preserve desirability (for more on this see How Brands Grow 2, Chapter 11).
Key Findings
- Empirical evidence shows luxury fashion/accessories and makeup/skincare brands conform to the Duplication of Purchase Law (DoP Law)*. As such, people who own luxury labels tend to own multiple brands and these brands share customers with rival brands mostly in line with brand size. This means your brand’s buyers likely buy from your (larger) competitors as well… and that is normal.
- As seen in different categories (e.g. supermarket brands, car brand selection, holiday destinations etc), luxury goods follow the DoP size-related pattern of competition: the amount of sharing between one brand and a competing brand is mostly driven by the size of the competing brands.
- This means the bigger fashion/accessory brands (e.g. Burberry and Gucci) share fewer of their customers with the smaller brands (e.g. Miu Miu, Bottega Veneta and Alexander McQueen), while the smaller brands share more of their customers with the big brands.
- There are some deviations from this pattern, but they are less common than you may think. Some deviations are due to functional differences. For example, some brands that specialise in menswear compete more intensely with other menswear brands. Some brands compete within similar price brackets (e.g. Coach and Kate Spade compete more intensely than Coach and Ferragamo). These deviations are small and rare compared to the main pattern of size-related sharing.
*See Report #53 for more information about Duplication of Purchase analysis.
Best Practice
- While different luxury brands have their signature look and feel, brand size has more influence on the way luxury brands compete.
- Knowing the DoP Law applies to luxury provides strategic focus to luxury brand managers who should monitor the activities of larger brands more closely, instead of becoming distracted by brands that pose less of a threat (e.g. those with similar positioning).
- Knowing luxury brands share customers in line with brand size provides norms for luxury brand competition in novel contexts (e.g. entry into new international markets or new product categories). It is still necessary for brands to be aware of competing brands within a submarket (e.g. those with similar ranges, price tier etc). There may be greater competitive intensity between these brands (but this is rare). Treat size-related sharing as the norm and then look for deviations from this pattern.
- Opportunities for luxury brand growth lie in focusing marketing efforts on appealing to as many category buyers as possible. Treat luxury brand communications as an opportunity to speak to potential and existing buyers of the category.