Unlocking the DNA of luxury

A major research study across three continents into what drives consumers towards luxury brands reveals it to be the most primal of triggers: the need to feel more desirable.

Commissioned by Walpole and undertaken by Added Value, the research cracks 'the DNA Code' of luxury brands, categorises luxury consumers and compares their motivations in different markets.

"One hundred years ago luxury businesses knew their customers. Often by sight. Today, too often, luxury brands don't really understand the fast-changing, varied and complex set of attitudes of the people who buy their products," says Guy Salter, deputy chairman of Walpole. "This is partly because there is surprisingly little good data compared to other consumer sectors. We commissioned this unique research to help to change that. We were particularly interested in comparing motivations of customers from different markets - and understanding what resonates with them and what doesn't."

The research identifies the DNA of luxury brands - a formula of six essential ingredients: Heroic Myth, Exquisite Product, Iconic Communication, Engineered Celebrity, Ultra Selective Distribution and the power of 'Cultural Cool'. Added together, they ignite desire for luxury brands.

Even within this formula some ingredients are more potent than others.

"The power of myth, cool and celebrity are greater than many luxury brands wish to acknowledge," says Paul McGowan at Added Value. "While for luxury consumers, it is essential that they feel they are buying into the luxury label of the moment."

The research identifies two key elements which, in various combinations, make luxury consumers tick. They are "show" and "know". That is, their degree of outer and inner motivation and the extent to which consumers perceive luxury to enhance them, or to maintain them in the desirable position which they already consider themselves to be in.

The research took place in two of the fastest-growing emerging markets - Russia and China - and the world's three most established markets for luxury brands: Japan, the USA and the UK. Defining "show" and "know" attitudes by country inevitably results in some generalizations, however there are clear centres of gravity for luxury consumers in each market.

Says Abigail Bray, head of Luxury Practice at Added Value London: "In the UK, consumers like to think they know their luxury and many of them enjoy showing it. US consumers are pretty well versed and they definitely like to show it.

"Japanese consumers come in many shapes and sizes, but can be amongst the most knowledgeable and, in the main, they wear their knowledge with discretion.

"In China, with some obvious exceptions, status and show are the principal drivers. Whereas Russian consumers were similar to this in the 1990s, they are moving rapidly towards Western attitudes."

The "Kang Xi" watch

To test out its insights, the authors created a hypothetical luxury watch brand, which they named Kang Xi. Made in China, it ticked most of the boxes for success in the luxury market - a hero product, significantly expensive by timepiece standards ($10k), iconic PR (Johnny Depp), and a unique place of distribution (four holistic Spas deep in the Middle Kingdom).

The consumer response was fascinating and different in each market, but with a common trait: it was greeted with complete indifference. The new brand was just another unknown brand in the segment, with no particular fame or kudos, missing the essential element in luxury: reputation.

The research study concludes with practical tools that luxury brands can use to improve their business. Currently, only ten of the world's top 70 luxury brands produce 80 per cent of the profit. This means that many other brands are simply shooting in the dark, according to the authors.

Sir Martin Sorrell, CEO of WPP, who writes in the foreword of the research study, sums up the challenge and the opportunity: "The demand for the West's luxury brands is best symbolised by the twin poles of Moscow and Shanghai. Although at slightly different stages of market development, they represent the opportunity for mature Western businesses to experience an extraordinary learning curve. This study is an essential reference work for those whose job it is to create, define and develop great luxury brands."

According to Alison Tucker, Managing Director of Added Value SA, South African consumers fit somewhere between their Russian and Chinese counterparts, exhibiting both "show" and "know" behaviours in varying degrees. She notes that the traditional high end luxury brand market in South Africa is relatively small and largely dominated by a niche group of high income consumers who are competing with dollar and pound buyers.

However, says Tucker, nearly all South African's aspire to luxury purchases on some level. "It's all relative. Our experience in South Africa shows consumers making luxury purchasing decisions that are as much about the big things like cars and custom luggage as they are about the small things like a spa treatment, a weekend away or even a fast food fix or a decadent chocolate.

Luxury brands in SA are firmly linked with the desire for perceived status and success, but more so, luxury is about how a brand makes South Africans feel. Consumers will spend luxury Rands on brands that genuinely deliver a luxury promise - the challenge for the market is to make the feeling of luxury accessible, but still aspirational and indulgent."

The UK study, "The DNA of Luxury - Cracking the Luxury Code", is available in a 48pp book designed by Added Value. For more information please contact Kate Wolters at .