Brand extensions are a way for luxury companies to branch out from their core competencies and expose their brand to a new audience. Done well, these create a new market for a company’s flagship products; done poorly, they produce poor products that can tarnish a brand’s image.

Chambord, the black raspberry liqueur, has just released a new vodka, colored pink and infused with raspberry flavor. Its tasting notes: “Hibiscus flower with notes of vanilla, white chocolate and the distinctive flavor of the original Chambord Black Raspberry Liqueur”. The pairing of Chambord and vodka seems to make sense as the two have been put together in many classic cocktails. It is also priced reasonably ($24.95 for 750 ml) and flavored spirits seem to be growing in popularity — last year Jack Daniels released a cherry-flavored whiskey.

Given the attention that the packaging and marketing has received, it appears as though this has been a well-thought-out brand extension. The product will still have to resonate with drinkers to be successful though.

An interesting report by the research group Mintel came out this week on how British people are living and spending money during the economic downturn. While many people are cutting costs, people are continuing to spend on small luxuries, particularly on alcohol (£622 per person annually); on smoothies, coffee and soft drinks (£230 per person annually); on personal beauty and grooming (£216 per person annually); and on clothing and accessories (£750 per person annually).

One would think that these would be the sorts of things that people could cut back on, and I imagine some have, but that the figures have remained so high shows how these very personal items represent luxuries in people’s lives. The way that one person interprets luxury could be completely different from the way someone else interprets luxury. A woman might continue to get a weekly manicure because of the way it makes her feel. She might be better off financially not doing it, but her weekly manicure gives her some quiet time to be pampered, and this relatively small expense makes her better able to tackle the challenges in her life. These small luxuries are worth it when they make people feel better about themselves.

Celebrities are often given luxury goods for free in the hopes that they will be photographed wearing or using them and seen by their fans, who might be encouraged to purchase those goods. But what about those tabloid celebrities that brands might not want to be affiliated with? Here’s an interesting trend: companies (“allegedly”) are now sending d-list celebrities their competitor’s products in order to ensure that undesirable celebrities won’t be associated with their brands. It’s devious — but does it cross a line? is it too ‘offensive’ for brands to protect their image by potentially tarnishing the image of their competitors? It’s certainly not ethical for the luxury brands doing the seeding. But I would hope that the ‘celebrity’ in question at least has the sense to pick the swag that she interprets as true luxury. Luxury, whether for d-list celebrities or luxury connoisseurs, remains in the eye of the beholder.

The luxury choices of political leaders around the world don’t often come under scrutiny because they aren’t made public — leaders don’t want their constituents to feel that they are favoring a particular luxury company or worse, wasting state resources on luxury goods. So it was interesting to see coverage of Kim Jong-Il’s luxury preferences on the Wall Street Journal’s Wealth Report blog recently. According to reports in the Chosun Ilbo, Jong-Il prefers Italian shoes by Moreschi and Martell Cognac. His suits are made from Scabal cashmere that costs $300 a yard (it takes 4 yards to make a suit) and he wears Omega watches. A North Korean defector said that his luxury consumption is so great that Jong-Il’s personal expenses take up 20% of North Korea’s budget. This may be hyperbole from a defector wishing to put Jong-Il in an unflattering light, but as Robert Frank notes, however much Jong-Il spends, it’s probably in stark contrast to what the average North Korean, who makes about $1900 a year, spends.

That Jong-Il is aware of such luxury brands within North Korea may be a sign of how pervasive global luxury marketing has become around the world.

The East India Company, which began as a British trading monopoly under Queen Elizabeth I in 1600 to ship commodities to the West from India, China and the Spice Islands, has relaunched this month as an Indian luxury company. The company has opened a store in London, selling gourmet tea, chocolate, coffee and gifts.

Though the ‘original’ East India Company stopped trading in 1874 (founder of the modern company Sanjiv Mehta bought the intellectual property rights in 2005), the name should remind many today of work that the original company did. Said The Times in 1874 in an obituary for the company (which is now inscribed on a table in the new store):

“It accomplished a work such as in the whole history of the human race no other company ever attempted, or is ever to attempt in the years to come.”

Said Mehta:

“The English language, the ports, the railway system, the civil system … the bridges — all was built by The East India Co. So there’s a huge relationship between The East India Co. and various walks of life. It is not just food products.”

It’s an interesting proposition, starting a modern company that plays upon an earlier company’s provenance. I imagine it will help the company, though the quality of its products will need to be high.

As I’ve said many times before, luxury depends on how you interpret it. Wines come in countless varieties (and can get astronomically expensive); for one person, drinking a bottle of 1947 Château Cheval Blanc will be true luxury, while for another, a glass of $5 white wine with will be pure bliss. Recently Reuters blogger Felix Salmon hammered this point home in a very interesting piece called “Vine Talk: Enjoying wine for pleasure, not price“. Salmon describes how many people don’t enjoy wine because it is often taken so seriously:

What’s missing is any sense of fun, or of simple pleasures: a bottle of screw-top rose can be cheaper, more appropriate, and much more delicious at a summer picnic than a six-pack of beer. And it would prove more versatile, too, if only people felt comfortable adding some seltzer water or cooling it down with a couple of ice cubes.

Perhaps some who take wine too seriously could try to have some fun with it, but at the same time, those who don’t know much about wine might appreciate it more (and start purchasing more expensive bottles) if they take the time to cultivate wine connoisseurship and learn a bit more about what wines they like. Knowing how you interpret luxury, and understanding the role of luxury in different situations, can really help you find more pleasure in your life.

In recent years in the US, Hyundai has been working to shed its image as a budget automaker by focusing on quality, styling and performance. They seem to have found some success, as they are now in a position where they can launch a new luxury automobile, the Equus, that could cost as much as $60,000. Hyundai is going out of its way to offer services that few other luxury automakers offer: they are driving the car to peoples’ homes to give them the chance to test drive the car at their convenience, and they are also offering a valet service, where owners having trouble will be visited by a Hyundai service technician who will fix the problem or take the car in for repairs, leaving a loaner vehicle behind. This sort of service sets Hyundai apart and may work to further distinguish the brand from its budget beginnings.

While this Hyundai scheme focuses on individual attention, Lexus recently announced a marketing strategy bound to create collective controversy. They are hosting a series of debates about climate change featuring non-scientist climate change deniers. It’s unclear whether Lexus is supporting and endorsing these unscientific views by bringing in these dubious ‘experts’, or drawing attention to them to show that there’s more to the argument than these deniers say. In either case, Lexus would be better served by hosting debates with experts from both sides of the argument.

Lexus’s attempts to go for controversy may backfire, especially as they have pushing green features in their cars for a long time now. Rather than potentially alienating some of their customers while creating a large controversy, they would be better served by doing what Hyundai is doing, offering the kind of service that people will only respond to well. Hyundai is creating good word of mouth that will enhance its brand’s reputation, something Lexus has been known for doing in the past — but this climate change controversy may cause more harm than good.

Two recent studies have found that for many luxury consumers, (1) an item’s quality is more important than its use of obvious logos and (2) luxury brands charge more for items with more subtle logos.

The first article, “Subtle Signals of Inconspicuous Consumption,” appears in the current issue of Journal of Consumer Research, and suggests that luxury consumers prefer with “discreet markers, such as distinctive design or detailing,” than obvious brand logos. And the second study, “Signaling Status with Luxury Goods: The Role of Brand Prominence,” in this month’s Journal of Marketing, said “luxury brands charge more for ‘quieter’ items with subtle logo placement and discreet appeal.”

One of my favorite fashion brands, Bottega Veneta, really takes this to heart. Their goods are made with extraordinary craftsmanship and materials, and never display a company logo. The prices match the quality. For example, they offer a pair of flip-flops, or “basketwoven leather thong sandals“, for $396. Most people wear $10 flip-flops for a summer and get a new pair each year, whereas these Bottega Veneta basketwoven leather thong sandals will last a lifetime and will only improve with age.

Perhaps only a few people will notice this level of quality, in sandals or other garments, but those that do form a very exclusive club which many Thetas and Lambdas would aspire to be part of I think.

A recent survey found that half of China’s urban residents say they prefer buying luxury items online because prices are cheaper than franchised stores.

While this fact is very interesting, and suggests that more companies should make an effort to offer their wares online in China, interest in luxury in general in China is growing rapidly. The Chinese are buying more luxury cars and SUVs than ever before — 500,000 will be purchased this year, compared with 98,000 five years ago. Luxury companies are opening stores (Louis Vuitton opened two flagship stores on the same day in Shanghai earlier this year) or are thinking of opening stores (Harrod’s comes to mind), and luxury hotels (like the Waldorf Astoria Club Hotel) are popping up all over the place.

All this suggests that marketers from the west are beginning to understand how the Chinese interact with luxury, but a great deal more can be done to enhance sales and the experience of buyers. The key is understanding how individuals interpret luxury, and this often comes down to understanding culture.

Photo by gruntzooki

Following up on my recent post about luxury companies going online, the Economist has posted an interesting article on luxury companies going online. Some companies, like Tiffany & Co., are doing quite well with their online sales, while others, like Fabergé, are taking more of a ‘wait and see’ approach. These companies say they are reluctant to put their goods for sale online because the experience isn’t the same. Says the author:

Luxury executives explain that the internet is too impersonal for their products, which need the human touch. Allowing anyone to buy online can mean a loss of cachet. Luxury firms like to dazzle customers with plush stores and sleek ads, so that they think only about beauty and not at all about price. The web, by contrast, shines a clear light on price. “That’s the last thing I want people to think about,” wails an executive from the watch industry.

Still, luxury firms are going online in greater numbers because their customers increasingly want the convenience of ordering online. I don’t think it’s impossible for luxury companies to offer a unique, exclusive experience through the online channel. It just needs to be well planned and thought out, and needs to appeal to the different ways that individuals look at the world and consume luxury. A website that appeals to a Lambda woman in one way and a Theta man in another could be quite successful.

Photo by Erin Blatzer