Counterfeits vs. Rental

Isaac Mostovicz writes...

The luxury world’s relationship with the counterfeit industry is puzzling. The counterfeit industry seems to cannibalize the luxury industry by offering products that presumably people would have bought from the luxury industry in the first place. However, as I commented in the past (I need to find the article) the luxury industry does not fight the counterfeit one wholeheartedly.

The luxury industry has very good reasons to allow the counterfeit industry to exist. Having counterfeits means that the original has increased status, as Prada’s CEO announced recently, “We don’t want to be a brand that nobody wants to copy.” The counterfeit industry allows the wider society to become fans of the brand while those who use the true product feel more elite and more respected. More significantly, a Sloan MIT business professor Renee Richardson Gosline found that people use counterfeit as an entry-point to luxury. Gosline discovered that within two years, 46% of buyers of counterfeit subsequently purchased the authentic version of the same product they had purchased the counterfeit of — even though other people could not necessarily tell the difference.


However, there are problems with buying counterfeits. James Lawson, director of Ledbury Research, points out that most of the time their quality is inferior and it is socially uncomfortable to admit to using a fake. Therefore Lawson suggested that renting luxury products could become a superior substitute for counterfeits, and provide an entry-point to the brand as well. Renting genuine luxury products seems to offset the problems of low-quality and social discomfort associated with fakes. One can experience the thrill of having true luxury products at a lower cost, and then return them later.

It is true that renting luxury may eliminate some of the problems with buying counterfeits. However, from the luxury marketer’s perspective, a major difference exists between them: the time span. People who buy counterfeits become accustomed to having the product in their lives. They identify with the brand that the counterfeit is imitating, and often seek to buy the real thing eventually. Renting luxury doesn’t give this experience at all. People have the great feeling of using luxury, but for a short time only. They don’t necessarily identify with the brand, and there is so far no evidence that they move on to buy the real product. While renting luxury may replace buying counterfeits in the short-term, it is clearly inferior from the perspective of being an entry-point to the brand.

I feel ambivalent about this increasingly popular phenomenon. I would argue that a major component of the luxury experience is purchasing a luxury item at a high price. Renting luxury does not provide a luxury experience just because it involves luxury products. Unlike counterfeits, it is also not an entry point to luxury. However, while it may not fit the definition of luxury, nor lead to a luxury experience, who does not want to be king, even if only for one day?

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Value for Money?

Isaac Mostovicz writes...

Value for money is a well-known economic concept – but does it really reflect the reality of how people buy? Years ago, economists observed that individuals pay a price for service or a product. However, observing individuals was not very helpful for economists who always try to measure and quantify. So they exchanged individuals with “the market”, a virtual entity that is difficult to define. This allowed them to talk more generally about the exchange of money for products or services in a way that was detached from the human psyche and its motivations. Next, the principle of exchange was introduced. Economists argued that we determine the value of products and services by the amount of money we are willing to pay in exchange for them. Following this logic, economists claimed that a person will always try to pay the least amount of money possible for the goods or services that he desires. The term “value for money” (VFM) was born.

Exchange Value and Commodities

In this discussion I’m focusing on exchange value and how it relates to marketing. This term, widely used in political economy and especially in Marxian economics, is one of the four major attributes of commodity. Commodity is defined by its fungibility, or the ability for one unit of the commodity to be fully exchangeable with another unit of the same commodity. For example, a $10 bill can be exchanged with another $10 bill or one barrel of petrol can be exchanged for another one. However, would you exchange a $10 bill for a stack of quarters? Are all petrol barrels similar? Finally, did you notice that services were dropped out of my discussion?  Actually, whenever we exchange our money for goods they are always bundled with a service, whether it is in the form of who serves us, how easily we can obtain the goods, or something else. How do we factor service into the value of the “commodity”? We’d like to think we can talk about two items that cost the same or that are exchangeable having the same value, or being similar to commodities, but in reality it’s hard to find such items. Practically speaking, value is hard to quantify.

And yet, economists tend to relate to all products as commodities. From the buyer’s perspective, when we relate to an item as a commodity, we tend to feel that the supplier has no right to mark up the item by one cent. We should be able to pay the cheapest price available and nothing more. Think about exchanging money in the airport – who doesn’t resent have to pay a commission? Because money is a commodity, we don’t think anyone should be able to charge more than it’s worth.

Luxury – the Antithesis of VFM

Luxury is the antithesis of the value-for-money economic thinking. Luxury consumers are definitely not looking to maximize value by taking the cheapest offer. After all, the principle of luxury is needlessly overspending. Moreover, the element of paying in luxury is not just about exchanging a price for the goods or services received. Paying is an integral part of the luxury experience. Luxury can never be free and the more we pay, the stronger the luxury experience is.

A Different Principle: Value or Money

From my experience, value for money is an illusion based on only observing the act of exchange without really understanding the psychological dynamics behind it. I have found that economic exchanges are always about either value or money. When we focus on the value we’re getting, we do not think much about the price. Nobody chooses a dish in an expensive restaurant based on its value for money, (“I think the 250g entrecote is a better deal than the sea bream, price-wise”), unless he is an economist. We have a general idea how expensive the meal might cost and we simply select the dish according to our liking.  Likewise a person who values high quality, comfortable shoes does not fret over their expense, nor does he extensively weigh the value against the money he spends. Because he values the shoes enough, he regards the price as simply instrumental in getting the value.

By contrast, when we focus on the price of an item and not its value, we commoditize the item and start looking for the cheapest price possible. We will buy because an item is comparatively cheap or not buy because an item is comparatively expensive – and not really consider the value at all. We all know of items that we choose based on price. For some people maybe it’s napkins in the grocery store, for some maybe it’s movie tickets or a music album. Somewhere in our minds, the value of these items is unclear or appears insignificant. And the moment we disregard value, we tend to focus on price alone. “The supplier shouldn’t charge more than the bare minimum” is the mantra here. And if a person were to choose not to buy at all for this reason, often it is not be because he thinks the value and price are not commensurate. He doesn’t really think about the value, he only thinks that the offer is “too expensive,” a term that economists cannot live with because it is unquantifiable, subjective, and personal.

How We Feel About It

When we buy based on value we feel positively toward the offer and sense that we are getting something we need and desire. When we buy based on price, we feel hostile toward the offer, as if someone is demanding that we pay money that we would rather hold on to.

Price and value are not two sides of the same equation. We either purchase for value or we purchase based on price. Moreover, whether we relate to the price or the value of a product is psychologically determined, and is subjective, personal, and unquantifiable. I do not know what economists do, but as a marketer I know that by creating value my customers will recognize, I can always get a good price.

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Sustainable luxury design at the 2012 Oscars

Isaac Mostovicz writes that ecologically aware designs at 2012's Oscars mean greater exposure for luxury brands ...

An interesting article in the Financial Times talks about the prevalence towards sustainable design in this year’s Oscar dresses.

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.

Image courtesy of Stock.XCHNG

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 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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Chinese Luxury Market looks after its own

Isaac Mostovicz writes that home-grown Chinese brands may have the opportunity to overtake their European counterparts in the near future...

A recent article in Black Friday Magazine talks about how, for the first time, luxury Chinese brands could be overtaking overseas companies in terms of popularity with their domestic audience. The old guard of Hermes, Gucci and Louis Vuitton could see themselves ousted by Chinese luxury brands like Shanghai Jahwa United, which sells highly regarded yuan perfumes, and Eve Group, which offers luxury menswear to high-profile customers such as martial arts actor Jet Li.

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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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Pandora’s (thinking outside the) Box

Isaac Mostovicz writes that Pandora represents a great example of a luxury brand seeking to personalise and empathise ...

Previous posts on this blog have discussed the necessity of emotion in luxury marketing, and the jewellery retailer Pandora is the latest to demonstrate a good understanding of this.

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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 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.

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Hermès to examine provenance through exhibition in London

Isaac Mostovicz writes that Hermes is choosing to focus on the quality of its products for its latest campaign ...

Luxury Daily reports that Hermès, the French fashion retailer, is to demonstrate the craftsmanship and history behind its brand through a new exhibition in London opening later this year.

Hermès official image for Leather Forever exhibit

The Hermès Leather Forever exhibit will demonstrate the antiquity and provenance of the brand, founded 175 years ago this year, and is the latest step in terms of demonstrating to affluent customers that its price points are reflective of the quality of its product.


Hermès has initiated several campaigns of late around its provenance. It has created a microsite called Hearts and Crafts that examines the detailed craftsmanship and quality of its products through biographies and interviews with the craftsmen, from the leather-cutters to the silk-drawers.


The site also hosts a documentary, which tells the story of the many people who contribute towards the creation and manufacture of Hermès products.


Of late, even high net worth customers who may not be directly affected by the economic downturn question the quality behind some of the prices charged for luxury goods – so this campaign aims to reassure and establish Hermès as one of the ultimate quality brands.


Chris Ramey, president of Affluent Insights, Miami commented: “Authenticity is one of the platforms for luxury. Hermès will continue to emphasize their craftsmanship, history and quality because it’s part of their DNA.”


Within Janusian thinking, this campaign will appeal to those of a Lambda mindset – who see an item’s value not in terms of price, but in terms of the time invested.



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Best of British celebrate the Queen’s Diamond Jubilee

Isaac Mostovicz writes that celebrations in 2012 could lead to a profitable summer for British brands based in London ...

The Evening Standard reported recently that luxury brands are set to benefit from a series of notable events taking place in London this year. From the Queen’s Diamond Jubilee to the biggest sporting occasion of 2012, notable high net worth retailers such as Burberry, Walpole and Selfridges are all hoping to see sales increase as they take part.

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Luxury department stores Harrods and Selfridges are also gearing up for increased footfall from the influx of international visitors expected in London around that time.


Walpole, the body created to promote the British luxury industry, will hold a Jubilee Pageant along the Thames and is joining forces with the Queen’s bank Coutts and Getty, the photography agency, to host an exhibition of photos with the Queen – some of which have never been seen in public before. The exhibition will move around London, stopping at suitably luxury venues including Claridge’s in Mayfair.


Stacey Cartwright, Burberry’s finance director, said: “Due to our heritage anything that celebrates Britain is good for us. The jubilee will be a key time in the UK this year.”


Previous blog posts have discussed the cachet of luxury British brands abroad; with the world’s eyes upon London during this key time, UK luxury retailers look set to profit from the celebrations.





Luxury Lifestyle says of this article...

I have noticed that several brands are in fact launching Jubille related campaign such as the Faberge Diamond Jubilee Egg Hunt,, and the Johnie Walker Jubilee Decanter,–sons-for-sale-at-100000.

Both items are worth an estimated 100 000$.

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The “Made in China” quality gap closes

Isaac Mostovicz writes that "Made in China" is coming to stand for high quality, artisanal and crafted ...

A recent article in the Financial Times describes an evolution that Chinese consumers are undergoing. As the country begins to encourage domestic spending, attracting consumers at home has become a priority for retailers – who are finding that their own consumers are some of the most difficult to please.

Image courtesy of Stock.XCHNG

And it’s not just within the luxury sector, when consumers are buying big-ticket items such as handbags and cars. Food, electronics, gadgets and homeware are all being scrutinized with an increasingly eagle eye.


Tesco, the UK retailer, says the Chinese middle class is “becoming increasingly sophisticated in the quality of products they purchase”, including buying more foreign and high-end brands.


The Chinese appetite for fake goods seems to be diminishing, too. Escada, the women’s designer clothing group conducted a survey which found that Chinese consumer willingness to buy fakes has diminished, from 31% in 2008 to 12% by 2010.


Despite an appetite for luxury carrier bags in the past, as salaries increase and tastes become more cultured, a cheaply-made item with a designer logo is no longer good enough. The middle class is attracted to provenance, to an appreciation of quality, to the story or time invested behind the product.


Within Janusian thinking, this posits the Chinese as moving towards the Lambda mindset – seeing an item’s value not in terms of price, but rather, in terms of craftsmanship. They’re interested in the time that it took to make – whether it’s unique, and overall the quality of the item – rather being attracted to the glitz of a fake logo.



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The classic rules of “exclusivity, rarity and scarcity” must be adaptable

Isaac Mostovicz writes that one size may not fit all when it comes to luxury marketing ...

A recent article in Marketing Week describes how the luxury goods sector, as one of the few within general retail that has endured the muted financial environment, is marketing itself to its customers. Brands such as LVMH continue to post excellent profits and consider their outlook for 2012 as “excellent” whilst ordinary high street retailers struggle.

Image courtesy of Stock.XCHNG

As a result, more and more brands are reaching upwards to try and appeal to these high net worth consumers. But some marketers claim that there’s no secret formula to attracting the attention of luxury purchasers – and that tried and tested is the best way forward.


Peter Cross, business partner of Mary Portas at the retail branding agency Yellow Door comments that while luxury purchasers are now more open to value purchases and more discerning of what they actually buy, traditional luxury marketing is still very much at the fore.


True luxury is still based on exclusivity, rarity and scarcity,” he says.


By making their most valuable customers feel special and singled out – for example, through special “gifts” that may not be available to other consumers – marketers are able to generate emotions of goodwill, rarity and exclusivity – as well as word of mouth from their customers.


Looking at this from the point of view of Janusian thinking, it could be argued that this classic “exclusivity, rarity and scarcity” tactic will affect one type of Janusian personality differently to another.


Lambdas, who seek achievement and uniqueness as an ultimate end goal, are likely to be very influenced by an individual, personalised gift or product as this will help them to stand out against the crowd – a key goal for Lambdas. Thetas, on the other hand, who generally seek acceptance into their social crowd, may find this technique attractive as it will help to establish themselves within their specific social class.


Within luxury marketing, one size does not fit all and marketers must remember that overarching “rules” may not suit every brand when considering a tailored strategy.

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Geo-targeted campaign launches Stella McCartney fragrance L.I.L.Y via Aurasma

Isaac Mostovicz writes that making the customer part of the story is key to engaging with your consumers' emotions...

An article in Luxury Daily reveals that Stella McCartney has debuted its first fragrance in nearly ten years, L.I.L.Y, via a mobile application and partnership with retail department store Selfridges. Using augmented reality app Aurasma, consumers will be able to access content related to the new perfume – and Selfridges has also provided iPads instore for those shoppers that don’t have smartphones or iPads to access it. The department store will also have interactive windows featuring a film by British artist Dan Tobin Smith where shoppers will be able to “edit” the film themselves by moving around.


Image courtesy of Stock.XCHNG

The campaign is also geo-targeted – through the fragrance’s Facebook page, consumers can check in to Selfridges on Foursquare to win exclusive prizes and “like” the page to win free samples. Then, when these customers are actually in-store, they can use the app on their smartphones or the provided iPads to activate a 3D display of a behind-the-scenes video or a large animation of the L.I.L.Y bottle.


Aurasma technology appears to be the latest means of multichannel for luxury brands to connect with their consumers. Net-A-Porter used the app to promote its new Karl by Karl Lagerfeld collection, where consumers could interact with window displays in New York.


Emmet Shine, founder and president of Gin Lane Media, New York which created the campaign commented: “Real 360 degrees is being in the hands of a user anywhere at any time, in person, to online to a combination of both.”


Tapping into customers’ emotions by making them “part of the story” as with the brand interaction through store windows is key. I have argued previously that luxury marketers must focus on the human characteristics that drive consumers. By a simple characterization of consumers into two personality types – Theta and Lambda, marketers will better understand how consumers behave according to their values, unconscious motives, and desires.

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