The on-going economic downturn in the US has caused Hyundai to market its new 2009 Genesis sedan as the new alternative for value-conscious prospectvei car buyers.

In a move to tap into the luxury market from the bottom up, the Genesis is Hyundai’s most expensive model to date and full of amenities which make it comparable to other luxury car brands.

A recent review in the Washinton Post highlights the fact that the Genesis offers as much or more than its luxury rivals, but leaves open the question of whether consumers will use this as a basis for their decision-making:

The Genesis also offers every technical advantage provided by its rivals an serves up more standard safety features — eight air bags, electronically enabled head restraints in the front seats, and electronic stabiliy and traction control — than those usually offered by competiitors.  It styling is attractive inside and out.  And the car is loaded with amenities, including thoughtful touches such as a power rear sunshade.

Is luxury becoming practical?  Grounded in features instead of fashion?  The success of this car will be able to give us some insights…

Ahh, wine. Beginner and expert connoisseurs alike can appreciate it for different reasons. I was reminded of this earlier this month when I saw this story about wine psychology in the New York Times. Food writer Robin Goldstein has written a book called "The Wine Trials" in which he found, in a survey of 500 volunteers, that less expensive wines were being rated higher than more expensive wines in blind tests. However, there’s more to the story than that–he found that novice wine drinkers don’t appreciate the same things as more experienced drinkers, and that, as Eric Asimov notes in the article:

Most people in the wine trade understand that consumers have any number of reasons for their buying decisions, whatever their psychological and financial state. Some are reassured by easy-to-understand labels with friendly animals. Others want only naturally produced wines or bottles with a modest carbon footprint. Some are status-seekers and score-chasers, while others are contrarians, or only drink red wine.

The story also mentions how people seem to appreciate wine more when they think it’s more expensive (something we’ve noted on Janus Thinking before). When people are interpreting an item and figuring out it’s value for themselves, how much should the price matter, and how much will this differ among beginners and true connoisseurs?

[Photo by rpeschetz]

scenarioDNA, a research and branding consultancy based in New York, published a very interesting trend report ‘Redefining Luxury’ earlier this month.

The basic premise: for Generation Y (the cohort born after Generation X, now in their mid-twenties or younger) to choose a given product, it really needs to captivate. Just being tied to a well-known brand won’t be enough, because with more information and the tools to hunt and find what they want, Gen Y are less likely to stick with a name.

The article discusses how young people long for rare moments and special, unique experiences. As Gen Y grew up in McMansions, luxury brands became increasingly ubiquitous at the expense of originality and exclusivity. Now young people have fractured expectations for luxury.

This theme resonates with an article in the FT from earlier this month by Michael Schrage, “Customers want loyalty not perfection.” Marketers and brand managers are upset that consumers today are “brand sluts” who seek immediate gratification without any loyalty. But really “established brands have cheated on and betrayed their most loyal customers” as they’ve charged more and more for less and less and added complexity rather than value to their products.

Once again we’re reminded that unique experiences and value worth the premium are what keep people coming back to the brands they trust.

When we initially envisaged this connoisseurship series, we thought there would just be four posts (the definition of connoisseurship, aspects with which to engage an object, connoisseurship’s academic legacy, and sham connoisseurship), but the material keeps coming. In this fifth post, we discuss value’s place in connoisseurship.

A great example of a modern connoisseur is Mark Resnick. A vice president at Twentieth Century Fox, he (along with his wife) has amassed a very highly-regarded collection of American posters dating from the 1890s. In an interview from last November, Mr. Resnick said that his connoisseurship of posters ties together lifelong interests in art, commerce and popular culture.

I collect posters for the love of it. Not a day goes by without my trying to expand my knowledge—for its own sake—of graphic design. That isn’t to say I’m not rather businesslike about my collecting. I have to be, in order to build and manage what is now getting to be an archive. If there’s a “recipe” here, I think it’s to combine a sharp eye, deep knowledge of the material, and solid business skills.

I thought the most interesting part of the interview was Mr. Resnik’s description of the entry standard for posters in his collection:

The collection’s breadth means there are few restrictions. I do avoid purchasing even great posters, however, if they’re excessively priced. And I’m more cautious still when it comes to “good-but-not-great” posters, posters in poor condition, or posters in a category already well represented in the collection. I know that if I don’t stay focused (price-wise) on posters in good condition that truly fill a gap, then the goals I’ve set for the collection will never be reached.

Indeed, as people have more sources of information and more choices, value becomes something that both the not-so-rich and the ultra-rich consider when choosing which objects to appreciate. One can look to the Helium Report to observe this. The Helium Report is a luxury portal that allows users to comment on and compare resorts, private jets, exotic cars and other topics a wealthy connoisseur might be interested in. Throughout the site, the prices of such luxury (and how to calculate a figure when it isn’t immediately apparent) are readily listed.

Thinking beyond monetary value for a moment, the real value a luxury good provides for the purchaser/connoisseur is how it makes him or her feel, whether the object is intended to become a gift or part of a collection. Some might find paying a million dollars for a piece of jewelry a bit extravagant, but if it provides the buyer with exactly what he or she wants, then it’s a good value. In fact Tiffany *is* offering a million dollar piece of jewelry, and that includes the experience that goes along with it. From an article in the Atlanta Journal-Constitution last December:

“A Victoria Secret bra covered in diamonds is a beautiful piece of lingerie. But, a true connoisseur wants to go to the mines, choose the diamonds, then design the item,” said Carol Brodie, chief luxury officer of Robb Report magazine. “It’s creating your own personal preference.”

High-end jewelry retailer Tiffany & Co. offers just such an opportunity. For a cool $1 million, shoppers can select their own 24.3-carat rough diamond from an undisclosed mine and then travel via private jet to the company’s diamond-cutting facility in Antwerp, Belgium. The experience ends in New York, where chief gemologist Melvyn Kirtley will help create the perfect setting and mounting for the bauble.
“A stone of this size can produce as many as three stones,” said Kirtley. (Consider it a three-for-one deal.) And, as if there were any question, first-class accommodations are included throughout the trip.

This type of experience certainly provides value for the connoisseur who wants something extraordinarily unique and customized.

Our next post on connoisseurship will expand on this customization idea, discussing several ways that connoisseurs use their accumulated knowledge to customize and specialize objects.

Sales of diamonds, at least from the consumer’s point of view, are almost uninfluenced by the world’s economy. After all, the global diamond jewelley market is very small – $60 -70Bn and it is a drop in the bucket when compared with the size of the world economy. Say it differently, there will be always wealthy people who will buy these diamonds.

Speaking about the price of a diamond, the question is what is really its price? Let us ask even a more fundamental question: why do people buy diamond in the first place or what need does a possession of a diamond satisfy? Unfortunately, it seems as if nobody in the industry bothered to find an answer for these questions.

It took me several years of research to find out that the reason for buying diamonds is the enhancement of self-esteem. This is a complicated issue that needs to be studied in detail as to understand the role of price in marketing of diamonds and other luxury. It is enough to say that selling luxury in a discounted price is an oxymoron or shooting in the seller’s leg. Luxury has to be expensive or it will lose its attractiveness.

I have to add here two notes: first, one needs a bit of Chutzpah when asking a high price and not giving up. Second, while people will ask for a discount, they do not want it. What they say is not what they mean. They need the bargaining as they feel respected, an activity that enhanced their self-esteem but, paradoxically, they want to pay the full price for the very reason that when paying more their self-esteem increases. Unfortunately, once the jeweler imagines that the buyer might ask for a discount he is offering it immediately.

As this discounting backfires when the luxuriousness of the diamond disappears, its value declines. The decline in price is a clear indication that the industry fails to understand what it markets. While an entire generation lacks a proper education in marketing of diamonds, causing the industry to shrink in the last 25 years, the last few years were disastrous.

Organizational

The main point is that there is no leadership and the market does not know how to cope with paradoxes. You have more than enough there.

Financial

Idem. The key is that people try to close the sable when the horses are away. There is no money available and people try to raise funds even when they have to assume losses with the hope that tomorrow will be a better day. It is looking at the past, trying to fix things instead of looking at the facts, as bad as they are and ask: “what can we do now with these lousy facts?”

I would finish with two comments:

First, what surprises me is the resilience of the market. While the diamond industry is unique and cannot be comparable, I would anticipate a total collapse and low morality to happen long time ago. I am proud to be part of such an industry that show that robustness and morality are rooted deeper than the level of the balance sheet.

Second, we should be able to assess the facts without fear. The facts are there and hiding from them is useless. Trying to change them, or “fixing” them is impossible as the problems are more fundamental. Thus, it is important to face clearly the facts and ask: what can we do? There is always an alternative for those who have the courage to face reality.