LuxuryLab Innovation Forum

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LuxuryLab Innovation Forum | Source: LuxuryLab

NEW YORK, United States — On Friday, BoF attended the LuxuryLab Innovation Forum, a half-day conference hosted by Scott Galloway, associate professor at NYU’s Stern School of Business and founder of LuxuryLab, a think tank that attracted attention earlier this autumn with a report ranking luxury brands by their “Digital IQ.”

Billed as TED for the luxury business with “high-velocity presentations,” the forum may have felt a bit unfocused at times, but from the stream of speakers, three important themes emerged.

THE DIGITAL TIPPING POINT

In the last five years, cost and time-to-market for digital assets have come down dramatically, while adoption and engagement rates amongst consumers have skyrocketed. “We have reached a digital tipping point,” observed Scott Galloway in his opening presentation.

Next up was Martin Nisenholtz, head of digital operations at The New York Times. “We’ve seen a massive shift in consumer behavior,” he said, citing internal statistics, as well as an eMarketer study that showed a doubling in digital media consumption from 2004-2008, with the fastest growth coming from affluent baby boomers. Indeed, luxury consumers are twice as active online as the general population, said the next speaker, Bart Sayer of global management consulting firm Booz & Company.

But with notable exceptions like Louis Vuitton, Ralph Lauren and Burberry, luxury brands are failing to fully embrace the digital zeitgeist. “Luxury firms are under-invested in digital,” said Mr. Sayer. They are falling behind, either because they don’t have the digital competence, or their digital teams are not empowered within their organisations.

But it’s not too late to take action. Despite the ongoing economic turmoil, now is the time for laggards to make major strategic investments in digital innovation, said Mr. Galloway.

We agree. While other companies are holding onto their cash, forward-thinking luxury brands will dramatically increase their investment in digital media and derive huge competitive advantage and future growth for doing so.

THE NEW LUXURY

Many of the speakers at the LuxuryLab event also noted that luxury was evolving, citing cultural, generational and psychographic shifts amongst affluent consumers. “Luxury as objects is giving way to luxury as experience,” said Ron Pompei, founder of creative services firm Pompei A.D.

While luxury goods that give individual pleasure and convey social status have fulfilled fundamental human needs since the dawn of time, their form has been variable. Today, affluent consumers are becoming less interested in traditional status symbols and more interested in “content-rich status experiences,” said Mr. Pompei, advising Prada to better integrate the cultural content created by Fondazione Prada with the brand’s marketing initiatives, both online and off.

Luxury is also becoming more personal, observed Chandler Burr, The New York Times perfume critic and one of the most entertaining speakers of the morning. In a talk entitled “The History of Scent Design in Three Acts,” he described the shift like this: “It’s the difference between you wearing the perfume and the perfume wearing you.” For Mr. Burr, luxury is becoming less about the cult of the creator and more about the individuality of the client.

But that doesn’t mean the new luxury is more accessible. Quite the opposite. “The new luxury is true luxury,” said branding guru Cindy Gallop, insisting that to fulfill their fundamental societal function (classifying and connecting people) luxury brands must be both unapologetically elitist and highly social.

CONVERSATIONS, COMMUNITY AND CULTURE

The third major theme of the day was the obsolescence of “command and control” thinking and the growing importance of online conversations, community-building and brand culture. “If you’re not living as part of the conversation, you’re not living,” said John Demsey, Group President of Estée Lauder.

In the one-way media world of the past, where consumers were mute and companies monopolised communication, brand managers focused on image. But in today’s many-to-many digital landscape, where brands are “participants” in a distributed and fragmented conversation with and amongst vocal consumers, image isn’t enough. It’s the set of intentions and actions that make up a brand’s culture that matter most.

“Brands are no longer at the centre,” explained Greg Shove, founder and CEO of Halogen Network. “People are talking about and remixing brands all over the internet.” In this new reality, he advised luxury companies to listen to what people are saying online, participate authentically and build digital applications that inspire, educate, support or entertain people.

“Brands should engage around interests and communities,” said Bart Sayer, citing successful digital platforms like Nike+ and Nike Playmaker which enhance the way people run and play football, attracting and inspiring authentic positive conversations and community around shared passions, not just products. “Nike just gets digital,” he said.

We wish we could say the same for the majority of luxury brands.

The Business of Fashion was an official media partner of the LuxuryLab conference.

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14 comments

  1. Nice summation. The first write up of the event that gives something to chew on. Also nice to see some new names addressing the Luxy clicque, but with many luxury brands still so adrift from the audience the opportunities seem clear. Now the brands simply have to choose the right advisors and partners…

    Randall from New York, NY, United States
  2. Frankly, it’s amazing people have the time to sit around and listen to so much gibberish such as this chestnut:

    “Brands are no longer at the centre,” explained Greg Shove, founder and CEO of Halogen Network. “People are talking about and remixing brands all over the internet.” In this new reality, he advised luxury companies to listen to what people are saying online, participate authentically and build digital applications that inspire, educate, support or entertain people.

    Huh? This is about as great an “insight” as the advice to “buy low and sell high” in the stock market.

    Conferences like this one (and the dozens of others just like it) simply underscores the fact that there are way to many “luxury brand consultants” competing for new business. They have to find a way to justify themselves — and they do so making grandiose sounding pronouncements which actually mean nothing when put under the microscope of cold, hard analysis.

    Luxury brands who make products that sell and take care of their customers only need to keep doing exactly that and they will survive. It’s that simple.

    David Royce from London, London, United Kingdom
  3. David – your comment is ironic. you are bashing people for going to a luxury media conference claiming, “it’s amazing people have the time to sit around and listen to so much jibberish”…yet, you take the time and effort to take shots at a conference. Interesting. The fact is – Luxury brands are terrified of the digital space. And if you checked the stock market or had any conversation with a luxury advertiser, you would know…they are in HUGE trouble. The brands that “make products that sell and take care of their customers only need to keep doing exactly that and they will survive” is the most thought-less comment I have heard. You sound like a sales rep at Gourmet Magazine, Domino, Portfolio…oh wait, they are all out of business. Luxury brands need to wake up and do something about there shrinking revenue.

    Clarence Joyce from Chicago, IL, United States
  4. Mr. Royce, you do have a point, and I want you to know that I got a nice chuckle from your comment. I know of a few luxury brands who are paying a small fortune to consultants who seem to make a very good living out of expounding the obvious. I’ve also attended a few conferences with highly paid keynote speakers who told me what I already knew to begin with. I do tend to agree with you that much of this is simply common sense, however there are actually some qualified resarch companies whom I do listen to; Bain & Company bases their information in cold hard statistical data which is insightful, and very useful. Pam Danziger/Unity Marketing is another good source of practical information based on solid data. There’s also Abrams Research.

    While this article is certainly using all of the right buzz-words, the informational content is not all that earth-shattering. I’d like recommend an article to everyone; Innovation Adoption Curve – Everett Rogers (A summary of this article can be found online). The article discusses these very same principles. It was written in 1962.

    Additionally, While I think that communicating with the market in new and exciting ways through 2.0 is fantastic, I believe that brands also need to trust their creative instincts. Becoming too consumer- centric can limit innovation. As Henry Ford once said; “If I had asked people what they wanted, they would have said a faster horse.”

    George from San Marcos, CA, United States
  5. A very interesting report which at last focuses on the real problems of the luxury industry. This industry has tried to make huge amounts of money by pandering to those who aspire to be in a certain category – they have lost sight of the fact that most wealthy people are wealthy because they are individuals with their own identity and not likely to follow ‘fashion’ in its true sense. Hence these massive corporate organisations should support the smaller true luxury makers – the real artists that create the individual look rather than just concentrating on the mass luxury – so too should the press (in its broadest sense – digital and paper) – they should show the great variety available in the world and not just publish features about those companies who pay for advertising. The old order is changing – people power has taken over – it is so exciting.

  6. One more book recommedation: Brand Hijack/ Marketing Without Marketing by Alex Wipperfurth. Published in 2005, this book was ahead of its time. Alex breaks down the dynamics of peer-to-peer communication with great detail and by using many case studies, he explains that “Your brand doesn’t belong to you, it belongs to the market”.

    George from San Marcos, CA, United States
  7. I would consider that many fashion brands albeit Luxury or not are very aware of how the Digital age is speeding ahead. I would suggest that whilst they see this as part of the way the market is moving it is also quite apparent that many do not know how to innovate or produce content that will excite, engage, and attract their customers through no fault of their own. I work with many new and emerging fashion brands and constantly challenge them to be as creative with their digital/web offering as they are with their products. Alas it takes both specialist knowledge combined with great creative skills to achieve this and both can come at a huge cost. This may be fine for Luxury brands but is a lot more difficult for smaller brands to do. Furthermore, things are moving so quickly that it is hard to be creative and forward looking in a digital content market that is almost ‘old news’ before it’s ‘today’s news’!

    David Watts from Tewkesbury, Gloucestershire, United Kingdom
  8. George – Thanks for the book ideas. Clarence, the only luxury brands are that are “terrified” are the ones not selling. Vuitton, Hermes and countless small brands seem to be doing OK. The reason 90% should be terrified is because they have no USP, no heart or soul — they are faceless companies who make expensive products that do not resonate. Brands with heart & soul, that appear “real” to the consumer are doing OK and, in fact, growing. The problem is the corporate brands want to get big fast — they want to make loads of money. That’s not the right attitude to build a long term business in luxury or unique, high end fashion products.

    David Royce from London, London, United Kingdom
  9. Great point, David Royce. Getting big too fast may work for impressing investors in the beginning, however it doesn’t usually translate to long-term sustianable growth. Many brands fail to allow time to properly “seed” an early adoptive market segment. This phase is crucial during the early stages of a brand’s development. It is only by communicating the brand message with the select few that a brand can cultivate a core audience for its products. The early market needs time to adopt the brand before attempting to reach a broader consumer base. This is what fosters brand loyalty. At the same time, a brand needs to remain loyal to their early adoptive market and continue to direct their marketing efforts and product offerings to their core consumer as the brand grows.

    The new luxury consumer won’t be force-fed anything. This consumer vehemently resists traditional marketing and doesn’t necessarily trust big corporate enterprise, therefore brands need to be authentic in everything they do. Futhermore, marketers will really have their work cut out for them as the “millennials” gain wealth in the next decade. This consumer only trusts their peers.

    I believe that there is more opportunity now than ever for independent designers to carve a niche. Managing a peer-to-peer marketing effort is certainly more cost effective than advertising, and it’s a way to communicate with consumers on a much more intimate level. It’s an exciting time for entrepreneurs.

    Having said all of that, the product must come first. Gone are the days when brands can be built on image alone. Fashion brands need to have a well-defined point of view and products must have a very high standard of quality. Luxury consumers are redefining luxury right now, and brands need to prepare themselves to exceed consumers’ expectations on all levels.

    George from San Marcos, CA, United States
  10. One mote thing – then, I’ll shut up. The last paragraph of the article is true: “Brands should engage around interests and communities,” said Bart Sayer, citing successful digital platforms like Nike+ and Nike Playmaker which enhance the way people run and play football, attracting and inspiring authentic positive conversations and community around shared passions, not just products. “Nike just gets digital,” he said. —————————————————————————————————————————————– I would like to point out that Nike has always directed their marketing efforts, as well as a high percentage of their product offerings toward the select few. Nike sells a lot of products to the masses, however they market only to the key influencers across all sports, and they’re loyal to their core consumer in every way. When Nike entered the skate sector, they pointed all of their marketing toward the pro-skaters, the die-hards, the “inner-circle” of the sport. Nike also limited distribution of some of their skate products exclusively to skate shops. Nike understands how important it is to get the right people talking. As a result, Nike is never perceived as a “sell-out” by their core audience. Nike has built a behemoth business by thinking small. This is nothing new. in fact, it has been part of Nike’s corporate culture long before digital.

    George from San Marcos, CA, United States
  11. METHODOLOGY:

    Focus group:
    • In person: three groups of women aged 18 – 24, 25 – 39 and 40 or over, between 7 and 10 people.
    • internet: two groups of women aged 18 – 24 and 25 – 39.

    Delphi:
    • Expert test: in marketing and advertisment, music and fashion.

    Deep interview was given to 50 women to many diferents nationalities; Spanish, British, North american, Brasilian, Argentinian, Venezuelan, Portuguese, German and Russian; the majority residents in Spain and Great Britain, but also in their native countries.

    Analysis of the content of gossip columns, specializing in music and fashion press. Also an analysis of internet forums about gossip, fashion
    and music.

    http://www.slideshare.net/microresearch/market-research-branding-research-chanel-lily-allen-microresearch

  12. During May 2009, news emerged that Karl Lagerfeld had asked the English singer Lily Allen to model a collection of Chanel line bags for the 2009/10 autum/winter season.

    Lily Allen, although she might be musically talented she is far from the type of model that has previously been used in Ad Campaings.

    This poses three interesting questions:

    • How will the choice of Lily Allen as its image affect the Chanel brand?

    • What is Chanel looking for with an image such as Lily Allen?

    • Does this collection pave the way for a change in the selection of models?

    http://www.slideshare.net/microresearch/market-research-branding-research-chanel-lily-allen-microresearch

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