Luxury category not dead, says Diageo Reserve MD

By Brendan Coyne | 26 March 2014

In the aftermath of the global financial crisis, and the cultural shift away from ostentatious flaunting of wealth, the luxury brand category is not dead, according to Diageo Reserve MD James Thompson. It is just “sitting up in bed asking for another cup of sweet tea”.

In recent years, attitudes have shifted towards the luxury goods category, he told delegates at the Global Marketer Conference in Sydney today, and not all companies have yet caught up.

“Conspicuous consumption is out of fashion. The logo-driven culture of the last decade is out of favour... it is disdained.”

The new category black is “less conspicuous luxury”, even in markets such as China, where the new rich have had less time to become accustomed to their money. He cited the growth of Hermes, with its “understated”approach delivering 20% growth last quarter as evidence.

“Those that shout loudest might win some of the time but it is about doing it the right way, Thompson said. ”It has to be soulful and discreet. People won't write about it read about it if it is not genuine and true.”

While the luxury category remained by definition a market for the world's moneyed elite, Thompson said that the aspirational masses, those that may become rich enough to afford luxury goods without thinking of their cost, were also key. He cited BMW as a brand that advertises to aspirational customers some years before they can afford one as an example of other high-end brands that think the same way.

Thompson described it as the "1:9:90 rule". The 1% is the demographic that can afford the most expensive products and the primary target. The nine percent, the “writers, the bloggers, influencers” amplify the message and the 90% are those that may be future customers, he said. ”It used to be a sign of separating mass from class. Now it can be a sign that you are still on your way [up]. Anyone can buy-in, whether through experience, buying a product or a download, or all of the above.”

That “democratisation”of the luxury brand category created a challenge, he said, because “you then have to keep the one per cent feeling special. So you have to keep refilling the pipe with new ideas.”

Diageo's strategy is around experiences, products and personalisation, he said. Creating the high-end experiences such as the Johnnie Walker House in Beijing, or the Talisker Race, and selling premium and super premium products to those that buy-in.

The amplification of those high-end experiences requires brands to invest in content and editorial, said Thompson. Somebody has to seed the stories, and it is prudent for brands to invest in their content resource, he added, citing hundreds of millions of page impressions and shares accrued by the Beijing House and the Race, plus product shifted and brand uplift as a result.

“It is all about stories. But they have to be … true.”

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