The term “luxury brands” brings to mind exalted names such as Louis Vuitton, Cartier, Gucci and Rolex. All these brands—indeed most brands traditionally considered luxury marquees—share some common features. They are associated with expensive categories such as leather, jewellery, cars, watches, champagne and automobiles. They are the product of superior design and fine craftsmanship. They are consumed mostly by the super-rich. And most have their origins in Europe—a continent seen as the natural home of high style.
Photograph: Harikrishna Katragadda / Mint
However, a very different insight into luxury brands emerges when we scan the recently released list of the world’s “100 Most Valuable Global Brands 2009” published by Millward Brown. This “BrandZ list” is accepted as an objective annual ranking, with brands being ranked by value. The brand value published is based on its intrinsic worth, derived from its ability to generate demand. Both financial performance and extensive customer opinion are inputs for determining such value.
There are two big surprises as we scan this list: First, brands such as Wrigley’s, Gillette and Pampers suddenly appear to be fairly close to luxury brands, enjoying a similar quality of consumer worship and obsession. None of us would normally consider chewing gum, razors or diapers as categories associated with luxury. Yet, Wrigley’s has been described in the survey as “Bite-Size Luxury” and enjoys the same highly bonded group of customers as a Louis Vuitton.
Second, the value of brands that offer consumers these small luxuries—including Wrigley’s, Gillette and Budweiser—is suddenly far larger than the value of traditional luxury brands. Wrigley’s has been valued at $10.8 billion and a brand contribution of 5 (which indicates the strongest bonding with consumers), higher than the value of all conventional luxury brands except Louis Vuitton. The value of Gillette, at $23 billion, is higher than every single old-world luxury brand.
Clearly, consumers are actively redefining what luxury means to them. Luxury no longer implies a fancy car or high-end diamond jewellery or a crocodile leather bag or European brands. Luxury simply means products which make you feel luxurious and indulge your senses. Therefore, Wrigley’s provides a little daily luxury, because you are indulging yourself on the world’s best, softest, smoothest chewing gum without down trading to a lesser brand. When you bathe with Dove soap, you are indulging yourself because it is the finest and most expensive bar of soap widely available in India today. When you use a Gillette Mach3 razor, you are pampering your face by using the smoothest and snazziest razor known to man. In all these three examples, luxury is about brands which are the best in their league. It does not matter to consumers that chewing gum, bathing soap and razors are everyday categories far removed from the rarefied boutiques of Paris and Milan.
These new luxury goods—which have broken the shackles of “expensive” categories, and also democratized the concept of luxury—are described variously: everyday luxuries, bite-sized luxuries, affordable luxuries. The implications of this everyday luxury phenomenon are far-reaching. In every product category, be it tea or toothpaste, marketeers can now dream of building luxury brands which deliver the same strong emotional loyalty, status value and indulgence that a Rolls-Royce or BMW provides in cars. Imagine luxury toothpaste or gourmet rava idli mix. These brands can command high premiums. Simultaneously, they are accessible to millions of upper middle-class and affluent consumers who use them on a daily basis. Contrast this with traditional luxury categories such as cars and high-end wristwatches, which are relevant only to a fraction of these households that is in any case likely to purchase them only infrequently.
Indeed, in the challenging economic environment of today, consumers will be even more predisposed to indulging in such everyday luxuries, because they either do not have the resources to buy into expensive product categories or, even if they do, they may feel that it is in poor taste to buy or use these when the world around is suffering a downturn. Mr Affluent Banker may not want to flaunt a new Patek Philippe watch today, but he can surely enjoy the luxurious feel of a Cadbury Bournville rich dark chocolate or a quiet and elevated evening with a Glenfiddich Single Malt. These are the new luxuries of our new world, because they make consumers feel good without feeling guilty and without making an unaffordable dent in their wallets.
Once again, the implication for marketeers is significant. Companies and marketeers who can create top-of-the-line products and luxury imagery in everyday categories will greatly appeal to a large number of consumers.
Since the potential base of such consumers is very large, these “luxury” brands can create enormous financial value for their owners. No wonder the world’s most valuable apparel brand in the BrandZ list this year is the relatively lesser known H&M from Sweden, which does exactly this—it offers consumers the high style associated with luxury at affordable prices, and is now worth a staggering $12 billion. Luxury can make both its users and owners feel very good.
Harish Bhat is chief operating officer, watches, Titan Industries Ltd. These are his personal views. Comment at email@example.com