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Which Fashion Houses Have the Hottest 'Brand Temperature'?

Louis Vuitton, Fendi, Gucci, Bottega Veneta and Valentino are amongst the "hottest" brands, earning editorial coverage that matches or exceeds their print advertising spend, says Luca Solca.
Louis Vuitton Spring/Summer 2014 and Prada Autumn/Winter 2014 | Source: Courtesy
By
  • Luca Solca
BoF PROFESSIONAL

LONDON, United Kingdom — Think of brand temperature as the ratio between editorial press coverage and print advertising spend. On a brand thermometer, zero degrees is when equal editorial mentions by brand are matched by equal print advertising spend. Brands that achieve more editorial space than their advertising spend should warrant to be understood as "hot" — brands whose advertising spend is not rewarded with proportionally equivalent editorial space should be viewed as "cold." In other words, with equal levels of marketing effort, a "hot" brand can reap significantly higher returns than a "cold" brand.

This can be measured relatively directly in terms of spontaneous brand recognition and editorial press coverage versus marketing spend. More indirectly, a higher temperature should be associated with higher brand desirability among consumers, and higher demand by wholesale and license partners. A rising temperature can be expected to translate into higher full-price sell-through in wholesale retailers and greater space productivity in the brand’s directly-owned stores. This, in turn, would normally increase brand profitability and support sales in terms of both organic growth and space growth. Conversely, a “cooling” brand would see all of these metrics deteriorate at the same time.

Over time, a brand temperature cycle can develop. Good marketing heats up a “cold” brand by enhancing its desirability. As marketing momentum builds, the brand gets “hotter,” climbing beyond the average to achieve spontaneous top-of-mind brand recognition and desirability. But there can come a point where “more of the same” marketing fails to maintain the brand’s high temperature and it begins to “cool.” In the absence of vigorous new advertising measures, the temperature plunges back to where it started.

Source: BoF

Measuring brand temperature can reveal opportunities for investment. The obvious opportunity is to invest in smaller brands whose temperature is rising. This is often within the realm of industry players. But companies with long portfolios of "question mark" brands, such as LVMH, Richemont and Kering, could offer this opportunity to institutional investors too.

More defensively, it would be desirable to step away from “hot” brands that are headed into “colder” climes. This would spare investors the experience of simultaneous performance deterioration, in terms both of economics and of brand’s fundamentals.

As ever, print visibility trends within the luxury sector vary widely. According to my research, LVMH's Louis Vuitton and Fendi, Kering's Gucci and Bottega Veneta and Italian designer brands Armani, Valentino and Versace, are all benefiting from higher print visibility (which includes print spend and editorial coverage) with year-on-year increases of more than 20 percent. Louis Vuitton, Bottega Veneta and Gucci are all getting "hotter," with rising temperatures that are calculated by measuring spontaneous editorial coverage against marketing spend.

At the other end of the scale, some American fashion brands, notably DKNY, Ralph Lauren, Guess and Calvin Klein are in reverse, as are Burberry, Salvatore Ferragamo and Diesel in Europe. Changes in print advertising spend and visibility can likely be explained in part by the brands' decisions to shift their advertising spend to the digital sphere. This is especially the case in the USA, where the digital channel is more important.

Louis Vuitton, Gucci and Bottega Veneta are getting hotter. This should help dispel concerns about the ability of mega-brands Louis Vuitton and Gucci to stay centre stage and continue to provide healthy growth. Prada, on the other hand, it still ranks “cold, getting colder”. Burberry is hot, but cooling.

Luca Solca is the head of luxury goods at BNP Exane Paribas.

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