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Fri 14 Dec 2007 04:00 AM

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Real challenges for luxury marketers

Put simply, they have to defend themselves from brand erosion in the wake of the democratisation of luxury.

Put simply, they have to defend themselves from brand erosion in the wake of the democratisation of luxury.

According to legendary couturier Giorgio Armani, the most defining change in luxury in the last couple of years has been the move towards personalisation and customisation and an increasing desire for true exclusivity - a direct consequence, he says, of the "massification" of luxury.

New luxury providers need to fill real needs that are emotional, even spiritual as well as economic and practical.

The growing wealth of the world's consumers is creating a new and considerable trend towards mass consumable luxury goods. While this seems a good problem to have, it also means more competition, new positioning for aspiring brands in the middle and at the top and ever-higher stakes.

Over the last century the world economy has evolved from a commodities base to a goods base, to a services base, to now as the Harvard Business Review coins it, the "Experience-Economy." An independent report commissioned by American Express titled 21st Centurion Living investigated the trends changing our perceptions of luxury in the new century. A series of interviews with key business strategists, designers, architects and creatives renowned for their lifestyle knowledge provided valuable insight into the "experience culture" which typifies modern-age luxury.

Four distinct cycles emerge from the existing luxury market, as it develops in tandem with the local economy and the mindset of the individual consumer. These cycles represent what we can term the "learning curve of a luxury market", as it evolves towards higher and more subtle forms of appreciation.

Cycle 1:Acquisitive luxury - the first flush defined by flamboyance. In this cycle, luxury is all about spending and displaying; for example, a handbag showing a prominent luxury brand logo.

Cycle 2:Inquisitive luxury - the second phase sees the emergence of critical judgment and a more considered approach to luxury. Consumers distinguish between products like a discreetly handmade suit and one bought off the shelf.

Cycle 3:Authoritative luxury - luxury consumption at this level is personal rather than subject to trends. As archivists, such consumers become "extreme connoisseurs" where they are not content to simply buy good, but also travel to find them for themselves, such as the aficionados of rare truffles.

Cycle 4:Meditative luxury - many developed economies are entering the fourth cycle of luxury. Consumers at this level realise that what matters is fulfilment and new experiences, such as going to exotic destinations to sample five-star experiences in local settings.

As we pursue an understanding of luxury brands, it is ultimately the way companies connect corporate strategy with consumer psychology. It is on an emotional level that consumers interact with luxury brands. As such, the providers of new luxury need to target and fill real needs that are emotional, even spiritual as well as economic and practical.

As Tomas Maier, designer, Bottega Veneta says: "In the luxury market there has been a shift towards a product that is not loud, does not look like money, and is not identified with money."

Premal Patel is marketing director of American Express Middle East & North Africa.

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