Showing the importance of social media among luxury shoppers, Kay Hammond of TAMBA points out several takeaways. First he claims that the notion of exclusivity is changing and that young people are purchasing luxury brands as a way of expressing personality as opposed to acquiring rarity. Secondly, he says that social media is about personal connection; despite its being seemingly removed from the customer, it is actually used to reach customers in more personal and direct ways. Lastly he proposes that luxury consumers are increasingly prominent social and mobile media users.

I think that some of Hammond’s claims are questionable. Throughout his article, Hammond refers to luxury products and services as “exclusive”, relates luxury to “exclusivity” in general, and then claims that “exclusivity” is an unappealing “old European myth”. However, throughout my years of research I never found “exclusivity” used to describe any facet of luxury. I personally do not fully understand what the term “exclusivity” is meant to convey. Though customers might use the term to inaccurately describe the value they find in luxury items, serious luxury researchers never refer to “exclusivity” when talking about luxury. Hammond presents a quasi-professional claim with no serious basis about “exclusivity” being related to luxury, and then claims that times have changed and this relation no longer stands. However, without first establishing what “exclusivity” is, it is meaningless to say that people shun it in luxury today.

A term more accurately used in luxury is rarity (which was perhaps what Hammond intended by “exclusivity”). However, without understanding what rarity it, it is impossible to judge its value among luxury consumers. Rarity comes in two forms, depending on the individual. Some see rarity in a product itself. To this person a diamond would be rare, since there is only a small amount of diamonds in the world. Others perceive rarity in the difficulty of obtaining a product. Such a person would not perceive diamonds as rare if he worked in diamonds because they would be easy to obtain, but would perceive as rare an antique Persian rug that took him years to acquire.

If you see that luxury consumers are less interested in certain items that are generally perceived as rare, that does not mean they are not interested in rarity. It just means that those items do not satisfy their definition of rarity. Rarity is not a European myth, although it is very old. Searching for rarity is based on a psychological need that is embedded in human nature and it is certainly still a part of luxury consumption.

Once we understand rarity, we can critique Kay’s claim that customers are concerned with “personality…over the notion of rarity.” Personality and rarity were never competing values. People use what they perceive as rare to express their personality. One person might use an unusual, handmade dress that she searched many stores to find to express her personality, while another might invest in an expensive pair of shoes to express his personality. Both perceive the items they acquired as rare. And both use those items to express their personalities. People did not choose the value of personality over the value of rarity – the two values work hand-in-hand.

Regarding Kay’s other claims about social media –though Kay may be correct that marketing luxury through social media is effective, we have to keep in mind that selling luxury is a different matter. Proper marketing and sales require a dialogue between seller and consumer. It is easy to engage in this dialogue face-to-face but difficult when our connection with our customers is purely technological. For most luxury products, selling requires establishing a relationship with the customer through direct contact – and for this contact, social media is not quite direct or personal enough. Perhaps established brands, such as Tiffany’s and Burberry, can cash in today on the successful dialogues they created over the years. However, it is worth checking whether these dialogues become richer and spread wider. Without continued direct contact with their customers, it is hard to imagine that they would.

Luxury consumers did not change, they simply changed the way they express their interest in luxury (which is something that will always be changing!) Rarity is and will always be an aspect of luxury. If we see luxury consumers losing interest in what we think is rare, we have to question what rarity means for them. Also, though social media is widely used by consumers and may be a useful tool for marketing luxury, it cannot provide the necessary personal dialogue between seller and consumer that selling luxury needs. Only being faithful to the principles of proper luxury marketing can assure us that we will thrive in today’s luxury market.

Upon presenting my arguments, I received an e-mail from someone who claimed that there is a tool that answers marketers’ need to “delve deep” and truly know their customers. He said this tool was Customer Relationship Management (CRM) – in particular, his version of the software.

CRM is a widely used model for managing a company’s interactions with its customers and potential clients. It utilizes technology to track, organize, and automate its sales, marketing, and customer service activities. Its purpose is to utilize prior information about customers and their buying habits to enable the company to synchronise its activities so as to retain existing customers, identify new customers, and reduce operation costs.

Can the CRM method help up us understand our customers enough to truly satisfy them? As an example, take a popular version of a CRM program which I was recently introduced to. This CRM program proposes that when talking to a prospective customer one should ask four questions: What product is the customer interested in? What is his budget? Who is the decision-maker? When does he plan to purchase?

What kind of information do these questions give us? A man walks into a hardware store, looking for an electric saw. He says he’d like to spend no more than $100. The decision-maker seems to be him and he says he wants to purchase today. Using the above questions, we know is that he wants a particular product, feels comfortable spending a particular sum of money, will make the purchase himself and wants to purchase soon. Yet the customer himself – his motivations, his needs, and his values are completely unaddressed.

Answering these questions answers the “What?” “How much?” “Who?” and “When?” questions, but does not even touch the “How?” and “Why?” questions. Yet it is precisely the “How?” and “Why?” questions that teach us who our customer is, what he wants, and how a particular purchase addresses his needs. Does the fact that he wants an electric saw tell us what project he is working on and what it is for? Does his budget tell us what values may be motivating his purchase – whether they be family enjoyment, efficient storage, creative expression, or any number of other things? Not at all.

In the luxury market, customers often do not even have answers to the CRM questions. For instance in diamonds, a woman may not know what she is interested in, may assume she does not have the budget, might defer the decision to someone else, and certainly does not know when she plans to purchase. So what do we gain from using this CRM approach here? Not only do we not learn anything about our customer, we basically disqualify her as one. Because of this, Randy Pearson, the manager of Kahro Diamonds inRaleigh, says, following this kind of CRM method might cause him to lose all his customers. If we had been asking the “How?” and “Why?” questions to begin with, perhaps we could have appealed to what she was looking for on a deeper level and helped her make a truly satisfying purchase.

So we return to the question, does the CRM method help you know your customer enough to truly satisfy him? While the above and other CRM methods sometimes give us an abstract, map-like knowledge of the customer, they do not reveal his deeper needs. Though sometimes we can use such a map to make sales, we cannot use it to truly know our customers. We need to know the territory – who our customers are, why they want a particular product, and how that product addresses their needs and values – in order to truly satisfy them.

As a marketing approach, CRM is shallow – it barely scratches the surface of the customer. RM at least seeks to understand the customer and is therefore effective, though it can be used manipulatively. However, for the most part both are based on the wrong principle – self-interest instead of interest in the customer. We might as well rephrase the questions above: What product can I sell you? What’s the maximum that I can make selling it to you? Who should I speak with to make the sale? When will I make this sale? When CRM is used in conjunction with true knowledge of the customer, it may be very helpful. But used as the only tool for knowing the customer, it easily degenerates into a self-centered marketing tool with the seller’s interests at the center and the customer, a pawn for serving them. By contrast, we seek to know more than the surface of the customer and ask the “How?” and “Why?” questions in order to help us address the wellbeing of the customer and his values and needs.

CRM might be an excellent tool once we know who our customer is and what he wants. But CRM cannot replace real knowledge of the customer. More so, if we rely solely on CRM to know our customers, we may fall into the trap of merely satisfying ourselves. Alone, CRM cannot be an effective marketing tool. Using it, we may realize that not only do we not know the territory of our customers, but the map we are using is actually a map of our own interests. To market effectively and morally, we need a tool that enables us to look deeper.

Well, Dichter emulated this approach too and we at Janus Thinking operate in the same manner, with a slight difference. To expand on this, I will explain a little about psychology. It all started with Sigmund Freud, the champion of behavioural psychology, who theorized that we have our preconscious and subconscious which guide us. Our motives are deeply hidden in our psyche and influence our behavior. Freud went on to develop psychotherapy, a dialogue between the therapist and his client to treat diverse psychological distortions. Over the years, different theories emerged and different techniques were introduced. However, all these techniques and theories had one thing in common – you need to delve deep into your client’s psyche if you want to really understand him.

Cupid and Psyche

Dichter was the first to adapt this approach to marketing. The popular maxim in marketing is that people   buy with their heart and attempt to justify their behavior, post-sale, with logical arguments. Dichter explored the first part of the maxim and gave it a scientific basis. However, he did not have the tools to address the second part of the maxim and did not understand the psychology of this logical justification. To understand what lies behind the logical justification we need to explore another branch of psychology, the cognitive one introduced by George Kelly in the 1950’s. Kelly’s theory, the Personal Construct Theory, postulated that “a person’s processes are psychologically channeled by the ways in which he anticipates events.” In other words, we constantly build theories that will arrange the world around us according to our own brand of logic. We see a series of dots and immediately we look for a pattern whether it exists or not. Using Kelly’s work, I was able to find out the way people try to explain their behavior. These justifications have nothing to do with our perceptions but with the format they use. However, understanding the language allows us to read between the lines. Again, one of the most important tools for discovering what lies behind these claims of logic is developing a dialogue with the client.

Each approach, whether Dichter or Kelly’s, has its own merit. When dealing in mass marketing, for example, then we actually try to go over the head of the salesperson to have a dialogue with the customer. We may find that in that situation, there is nobody there who is qualified enough to build such a dialogue at all. Things are different in luxury, for example because we mainly deal with our clients face to face. I haven’t met every diamond salesperson on the planet, but after thirty years I can recommend only three who are able to do a good job.

Dichter, following the tradition of behavioural psychology, faced an ethical challenge. Behavioural psychologists deal with our ugly hidden secrets that we try to repress. Taking these theories into marketing, there was always a sense of trying to manipulate the customer using sophisticated methods. Since Dichter was aware of this possible negative manipulation he tried in his books to persuade readers that this was not the case.

However, are our motives based on these ugly hidden, archaic and primitive motives? I don’t think so. The role of these unchanged, hidden values is to help us find our ultimate goals that are worth pursuing. Such a noble task cannot be based on ugliness and cruelty but on something very pure and beautiful. One man to address this in a professional way was Victor Frankl, the father of Logotherapy whose approach was to search for real meaning in life. Yes, this search puts the responsibility of searching squarely on us. We, as consultants, cannot advise because this takes away the responsibility from our client. Our job is to guide them to face reality, to discover their beauty within and to use it for self-development.

The marketing of luxury is a challenge. It is very easy to manipulate people to spend more and more; neuroscientists show that by acting this way we manipulate the region in the brain called Nucleus Accumbens which is responsible for our pleasure and laughter but also for addiction, fear and aggression. However, other areas in the brain can be influenced which are responsible for altruism, for example. As a marketer, understanding this and choosing the right way to use this is key to sales. And it needn’t all be about fear – when we manipulate the positive values of man then we can create through marketing someone whose self-esteem is enhanced, who is more refined, and who cares for the world around him.

Reflecting on luxury, I think that we sometimes err in our thinking. We believe that if we could only define what marketing or luxury or brand are, we’d have found a Holy Grail. Thus, with the mysterious exception of luxury, many articles and textbooks try to create as accurate as possible definitions of what marketing or brand are. The question is, of course, once we have a definition what can we do with it? The answer is very obvious – nothing.

Isaac Mostovicz presents at the "Marketing & Consumption: What future?" conference

Well, some of us enjoy knowledge for the sake of it and there are experts in brands and marketing just as there are experts in medieval Mongolian poetry, pre-historic music or other esoteric topics. However, when we want to put this marketing knowledge to use, we fail. One of the leading journals in marketing checked how many practicing marketers research their field or read the findings that appeared in that journal, which claims that its audience consists of both academia and marketing practitioners. The answer was, as you might expect, that nobody cares to read or learn what those findings are.

In my opinion, we make the cardinal mistake of asking the wrong question. The question is not what marketing is but what marketing /brand/ luxury does. How does it affect us, what benefits do we draw from it and how can we properly use this knowledge? This question is not simply a different question but indicates a mindset that is opposite to the one prevailing in academic and practitioners’ circles. While trying to understand what a term like marketing is reflects on us and on our egoistic satisfaction, asking what something like marketing does recognises that there is a world around us that we need to satisfy, that we want to affect and influence and that we need to consider first.

Others agree with my approach, e.g. Ernest Dichter, the father of motivational research that changed the landscape of US marketing . Additionally, in 1960, Theodore Levitt published “What is Marketing?”, arguably the most popular article to appear in Harvard Business review of all time and said, “when a customer asks you for a ¼” drill he actually asking for a ¼” hole”. Both of them told us that marketing starts with knowing who your customer is and what they want. However, despite the sound nature of this simple idea and vast empirical proof, marketers are not as focused as intensely as they should be on what emotions are driving their customers. When checking who the customer is, marketers must look at the deeper psychological layers that motivate the customer to choose one product or option over the other.

This lack of customer insight is widely apparent, and to cite the recent Goldman Sachs example, it’s clear that treatment of customers can range from extremely bad to extremely good.  To take myself as an example, I would not choose Goldman Sachs as a financial provider because they are apparently untrustworthy, but it’s possible that they employ managers that are genuinely nice people who have merely acted in an untrustworthy fashion. In this way, my motivation for choosing a product has been selecting what I perceive to be a “good” brand (if such a one exists) over a “bad” one.

To use a different example – Blackberry, iPhone and Android phones are all excellent products but customers will choose one option over the other equally good option. In this instance, as marketers we should understand what the parameters are that have made each customer identify with the different product. The assumption is that the customer who wants a BlackBerry doesn’t want an iPhone – I know that some people prefer the Android operating systems over those of the iPhone, for example. Nevertheless, they might advise me to buy an iPhone since my psychological needs are totally different to theirs.

When dealing with my own customers I always ask, “Who is your customer?” and gradually, people start to realize that they cannot describe him or her to me. What I am actually looking for is a description that allows me to identify the typical customer according to defined parameters, but it seems that nobody can describe what those parameters are. For example, one client told me that he has 10,000 customers. But he was actually referring to 10,000 people he has served in his shop at one moment or another. Yes, they were his customers in the past but can he consider them future customers? Will they visit him the next time they shop? Past performance is not a guarantee for future success.

Another question I ask them is what the needs of their customers are. Of course, every jeweler will tell you that their customer is looking for jewelry and every owner of a shoe shop knows that people come to their shop to buy shoes. But does the shopkeeper know what motivates the customer? Can he recognize their deeper reasons for wanting a particular product? When dealing with my customers, most cannot answer this simple question or, in Theodore Levitt’s words, my clients know that the customer wants a ¼” drill but they do not know what the ¼” hole looks like.

Brand consulting suffers from a similar problem.  A typical request that one of my clients made was that “we need to be differentiated and we need branding”. I told him that the cheapest and quickest way would be for his entire company to paint their faces green – that would differentiate them and even attract a lot of media attention. Actually, my client realized what his company’s problem wa – all the companies in his industry (hi-tech) look the same. He failed, though by spelling out only half of the problem. While he wanted to be differentiated, he did not consider the situation through the eyes of his clients or consider how this differentiation would address his client’s needs. Well, this is the just the beginning.

Brand takes us one step further. When I asked this client to describe his customer of choice and to use a real-life example, his face lit up and he told me about two of his preferred customers. He quickly told me that it was not the money his company earned on the deals that was important to him, but the bond he created with these customers. Not all our customers are those we would like to work with and not everyone is our customer of choice. It is not enough to know who our customer is or what his needs are. We need also to know who we are and what our needs are. If we manage to match our needs with those of our customers, then we have a strong brand. Do we need to differentiate? Not exactly. What we need to understand is that if we really want to interact with only those who share the same worldview and deep needs with us, our market is limited. A brand’s profit does not come from sheer volume of sales but from our ability to address the needs of our customer of choice in a way nobody else can – because we truly and intuitively understand their needs.

Luxury marketing is the ultimate test. Luxury is the behavior of needlessly overspending. We cannot begin marketing if we do not intimately know who our customer is and what their needs really are. Describing luxury behavior as needless tells us that those needs are much deeper and cannot be logically explained. Do we know what they are and do we know who our customer is? Can we describe the parameters that will allow us to find our customers? In terms of our brand, are we proud about what we offer? Will we be able to look back when time arrives and say that we believed in what we were doing? Luxury strips away all superficial logical arguments and asks us to delve deep and to face the real questions. Do we know how to do this?

Apple is the rare example of a brand that does know how to do this. It really understands its customers and that is why its fans are so loyal. The brand also develops its products according to the needs of its customers. The fact that their systems are a “walled garden” to other technology companies and that each application for the iPhone requires Apple’s approval is not mere greed, but based on a deep understanding of their customers’ needs.

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The research shows that unsurprisingly, most brands focus all their attention on customer attraction but when it comes to retention, they could be missing out on the chance to turn brand loyalists into brand advocates. Condé Nast Ideactive examined consumers’ emotions at each stage of the sales journey and what marketing devices are used to satisfy their needs at each point.

Previous posts on this blog have discussed the importance of marketers connecting the luxury purchase process with emotions and making customers feel special, singled out, or important.

Pat Connolly, head of strategy for Condé Nast Ideactive, New York echoes this idea.

He comments: “Brands need to invest in emotion, and these gaps where people are very emotional [explore and post-purchase] is an opportunity for brands to invest in things like content and experience,” he said.

“Doing this post-purchase will create advocates and content-creators that deliver on the first gap [the explore stage].”

Post-purchase, the research has found that consumers, especially the youth market, need almost immediate validation from friends and family post-purchase – often carried out through mobile or social media.

Within Janusian thinking, this is a particularly Thetan trait – as Thetas seek belonging through bonding or affiliating with their peers. Thetas aim to fit in or contextualize themselves within their desired group and use socially derived understandings of product characteristics as a basis for their consumption.

However, the idea of a personal gift or something that singles out the buyer post-purchase is something that will particularly appeal to Lambdas. Lambdas seek distinction as an ultimate end goal – so a personal touch from a luxury brand that helps them stand out will satisfy their desire for uniqueness.

Clearly, brands should take advantage of this part of the buying cycle and view the post-purchase experience as an opportunity to reach out to their consumers.

Livia Firth, wife of actor Colin Firth and eco-fashion campaigner, launched a “Green Carpet Challenge” to high end designers in 2009 which invites them to create red-carpet designs using only sustainable materials. So far names such as Armani and Gucci have responded, creating luxury garments fashioned from ethical materials that don’t compromise on desirability.

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At this year’s Oscar’s the winning “Red Carpet Green Dress” dress which was designed by Valentina Delfino will be worn by Missi Pyle, an actress in nominated film The Artist – meaning significant exposure for an ecologically-sound design.

This kind of “upcycling”, or the next wave of recycling, is not an entirely new trend. British designer duo Clements Ribiero is one brand that has been considering the sustainability aspects of their designs for some time.

They comment: “We didn’t start off to create a conscience product. But, if we do our bit to help, it is an added bonus. For us it was more a case of finding astounding fabric at vintage fairs, beautiful hand-crafted bits that told a story – it was a pity to see that all go to waste.”

Other designers such as Christopher Raeburn and jewellery designer Katherine Alexander have embraced this trend, with lines created almost exclusively out of re-appropriated or otherwise “scrap” materials.

Running a luxury brand in a ‘sustainable’ manner makes sense from a marketing point of view – previous articles on this blog have discussed the damage to brands that could disadvantage them as they compete for global customers if they are seen to be unsustainable.

Within Janusian thinking, this kind of sustainable luxury has the greatest appeal to a Lambda. The knowledge that the product has a rich history embedded within it, particularly in the case of Clements Ribiero’s designs, is what spurs this kind of consumer, whereas for a Theta, the appeal would come more from purchasing a product from a high-end brand.

Later this spring Firth will introduce a sustainable collaboration with Yoox.com. It will be interesting to see whether increased consumer demand will force more luxury brands to consider sustainability as a central part of their business agenda.

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The article goes on to discuss how Chinese consumers are becoming more interested in reattaching themselves to their country’s heritage and culture, so there could be significant opportunities for domestic brands looking to take a slice of the $33 billion luxury market.

“China’s manufacturing was very backward 30 years ago, and consumers worshiped and pandered foreign goods and ideas,” Jahwa Chairman Ge Wenyao said. “Foreign products are still good but the aura surrounding their brands is no longer there.”

A previous post in this blog talks about the new standard for “Made in China” goods, where brands are committing to providing quality goods for its domestic consumers. It will be interesting to see if China is able to produce some home-grown luxury brands that in time will appeal not only to the Chinese audience but have global allure.

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The article, citing research by the firm iResearch Inc., sees this success looking set to continue expanding at 30% year on year over the next several years.

Previous blog posts have discussed the seemingly unending Chinese love affair with luxury goods, and this research shows that sales through luxury brands online have surged by nearly 70% compared with 2010.

However, although growth looks set to continue in the future the market is by no means as developed as it could be. As of last year, the turnover of luxury goods accounted for only 1.41 percent of China’s total online shopping industry.

“So far, China’s online luxury market remains small. We are waiting for it to explode,” Chen Xiao, founder of the luxury goods selling website ihaveu.com, told Chinese-language newsmagazine, China News Weekly.

High tariffs, consumption tax and import duty all contribute to the market being currently underdeveloped. Whether this is set to continue or the Chinese love for luxury will overcome these barriers remains to be seen.

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Unity Marketing’s fourth “Luxury Tracking” survey has ranked Pandora as the second most popular jewellery brand amongst 1,200 affluent consumers, just behind Tiffany & Co (which recently executed its own emotion-charged marketing campaign, What Makes Love True.)

More established brands like David Yurman and Bulgari were left behind as even other brands considered “mass” – e.g. L’Oreal Paris and Amazon.com are slowly making inroads with luxury consumers, the report found.

This is significant, if only because Pandora’s mainstay item is a silver charm, which consumers are able to add to a bracelet or necklace to create a personalised piece of jewellery.

This approach gives customers the ability to customise a one-off piece that others are unlikely to be wearing and something that is totally personalised.

From the point of view of Janusian thinking, where there are two opposing worldviews, Pandora’s approach appeals to the Lambda personality. Lambdas are more likely to make choices based on how a product will help them stand out, and be unique versus Thetas, who long to fit in and seek affiliation.

Pandora jewelry allows the personality of the wearer to shine through rather than be overtaken by the brand, showing that the company understands its target market.