Nobody who is promoting luxury goods is in any doubt that the huge marketing budgets of old are gone. Recessionary pressures have made marketers more questioning and prudent with their money and their messages are changing. Forget
bling; today marketers are defining luxury in terms of heritage,craftsmanship and longevity.
bling; today marketers are defining luxury in terms of heritage,craftsmanship and longevity.
Asia presents a particular challenge for those planning a regional advertising campaign. Luxury sales in Japan, for instance, the country with the world’s highest per capita spending on luxury products, have fallen 30 per cent.
Terence Oliver, president and CEO for Interbrand Asia-Pacific says that although luxury is ingrained in Japanese culture, expansion plans have been hit. Even Louis Vuitton, one of the most popular luxury brands among Japanese women, has put on
hold plans to open a prestigious new store in Ginza this year.
“There’s a certain amount of luxury shame,” Oliver says of Tokyo society. “The premium one pays for luxury brands are in some cases quite excessive, so there is a redefinition of what luxury means.Does it mean paying for things simply to make a statement or does it mean moving towards something of quality that lasts a long time?”
While Japan continues to suffer the affects of the downturn,others,such as Korea,saw sales of luxury goods rise as shoppers flew in from the neighbouring markets of Japan and China to take advantage of the depreciation of the won.Bangkok,Hong Kong and Singapore were affected by a decline in tourists, but those Chinese travellers who continued to travel in these markets offset the pause in domestic spending.
“There’s a popular perception that this recession has caused change. From our perspective I don’t think that is the case,” says Morgan Parker, president of Taubman Asia. “The recession in Asia was temporal. Luxury brands have been able to skip through and get out of it.”
What has changed, says Parker, is that luxury brands have a clearer focus on existing customers and are investing hard in CRM, VIP programmes and creating loyalty.
“The crisis brought a faster recognition of the importance of the VIP customer — who is the bread and butter — and the importance of repeat business,” he says. “Luxury houses aren’t just looking at sales, they are looking at the type of sales. If you take a store in Hong Kong, they are asking how much of sales are in Hong Kong? How much is to overseas tour groups? How much is toVIP customers? ”
Discounting property and related fields, as well as flurries in the stock markets, developing luxury markets in China, India and Malaysia have held firm and Parker says this is where brands are turning their attention as a major source of new customers.
Mark Heap, managing director of PHD China, which helps clients such as Tiffany, says luxury brands are intensifying their focus on Asian markets as sales slip in other parts of the world. Rolls Royce, Mercedes and BMW, for example, all chose to debut their latest high performance cars at April’s Shanghai auto show. “There are 1,200 new cars a week on the road.
That’s the highest it has ever been,” says Heap.“The number of US dollar millionaires is still rising.” While luxury companies may realise the importance of China, when it comes to advertising, Heap says few know what works best. “Marketers have experience with this category in a range of very developed markets and some developing markets, but little practical knowledge about China.”
As a result, Heap says that marketers can fail to understand that the marketing mix has changed in China, not because of the recession, but because of the changing consumer landscape.
Typically in China, luxury marketers need to target a purchaser of 30 to 40 years of age — much younger than elsewhere.In some cases,this has meant brands have shifted their attention over to non-traditional media such as digital.
In June, Cartier launched their China-wide digital ‘Love’ charity collection. A music-based micro site that asked ‘How far would you go for love?’ encouraged brand interaction through e-cards, special edition jewellery and love songs.
The campaign took account of the fact that although online is an important avenue for advertisers, the country is still less digitally developed that others in the region.The adoption of 3G is in its infancy, and online activity is concentrated around social networking sites,blogs and music videos.
Still, when it comes to digital platforms in countries such as Japan and Korea,Oliver says that societal norms can take overseas marketers second ed to the region by surprise. “For young people,virtually the only media they are interested in is what they can get off their mobile phone,”he says.
However, digital media usage is not without certain teething problems. “How luxury brands capitalise on new media platforms without compromising brand values, editorial and art direction is a big question,” says Heap.
“From a media point of view in China, online is a bit of a train wreck.The volume of text, links and ads can be immense.”
Referring to Louis Vuitton’s promotional mobile game launched in Japan last June, Parker says: “Louis Vuitton is walking a tightrope of exclusivity and democratisation. Luxury brands feel that it is their integrity and heritage that makes them successful and most are reluctant to tinker with that.”
While luxury brands are under secondstandably cautious about the digital space,media owners are far more optimistic.
Dominique Moseley, publishing director for the Financial Times’ How To Spend IT (HTSI) magazine says that in the last 12 months, advertising revenue among luxury goods advertisers at the ft.com website trebled. While Moseley says there are issues to get over — such as how luxury advertisers match their classy print ads to their presence online — the chance to engage
customers is unparalleled.
“Online offers you the opportunity to have a deeper conversation with users,” says Moseley. “You can talk about specific things relevant to your brand to a particular segment of population.”
Sunita Rajan, vice president for sales for Asia and Australasia, BBC Global Channels, said that just before Christmas there was a breakthrough in terms of an openness of luxury advertisers to using digital as a way of reaching audiences and offering them accountability and network.
“Cartier,Van Cleef and Ferragamo all showed a very positive inclination to the use of digital media, while Audi used digital to launch three new models in Southeast Asia,”she says.
In addition, HSBC Premier ran a campaign in Hong Kong last June that used a BBC mobile product for a call to action.“Mobile is quite nascent for most advertisers,”she says.
Olivier Legrand, general manager, Asia, The Wall Street Journal digital network, says that smartphones in particular have become an important platform. “The profile of a smartphone user is very good for luxury brands.Top management use a blackberry, but we still need smartphones to reach a larger audience.It has taken 15 years for the internet to get us where we are today.Many marketing departments may not be ready for such a campaign.” As Legrand suggests,until technology catches up with the need for luxury advertising to have a distinct and rich feel, luxury brands will continue to feel their way forward with care.
What this means us that despite the growing enthusiasm for digital media, traditional luxury media platforms remain a reliable and effective platform for luxury brands, although again this can depend on the specific market.
In China, for example, some luxury brands are starting to question the lack of data supplied by luxury publishers.
“Marketers are asking why they don’t know how many people read Elle in China?”says Heap.“Luxury lifestyle magazines are important because they are used as a reference point.
“People read them to get advice about trends in the fashion nations of Milan, Paris, London and New York, but publishers need to look at their business model. The clutter and ad ratio is getting horrendous. I have counted up to 15 special format ads in one magazine.”
In contrast,long-established quality press say they are cleaning up as readers turn to them for accurate news in times of economic troubles and advertisers value them for their audience.
Rather than a retrenchment, FT’s Moseley says the recession has marked a period of investment for forward-thinking advertisers. Since last year, HTSI magazine has upped its editions by two to 28 a year, while a new website will shortly be joining its print predecessor.
“We’ve seen brands investing more this year because they understand there is less clutter and it’s a good time to grow,” says Moseley pointing out that brands such as Bremont and Loro Piana have come to them for the first time.
Circulation is also up at the Wall Street Journal Asia by 6.3 per cent in the first six months of 2009,compared to the same period in 2008.To answer advertiser’s pleas for a glossy magazine, September saw the launch of WSJ.Available free with the newspaper, it has a circulation of 960,000 and also runs on wsj.com.
“Advertisers want ads to work harder for them,” says Shawn Hiltz, director of marketing, Asia, Dow Jones Consumer Media Group. “There has been a rise in direct response ads, things like an invitation to come to a show room to try on a watch.”
Just like the luxury sector itself,highend print has so far managed to avoid the worst ravages of the downturn.
Hiltz says 54 new advertisers have come to the Journal in the past 12 months,of which 19,including Chanel, Fendi and Versace, have advertised in the Asia edition.For many in the luxury sector, it is not a case of recession; more what recession?