Synopsis of the Marketing of a Luxurious (“Royalty”) Experience

Synopsis of the Marketing of a Luxurious (“Royalty”) Experience for soon-to-be-retired-term “Royalty” guests. 

I tied in facets of human psychology and emotional reactions, capital market, capitalism and ultimately, pulling a circle of life back to Ben Horowitz’s (co-founder of Andressen Horowitz) recent state about pricing power and moat in your product.

Since the dawn of humanity there have been objects, symbols and lifestyles specific to leading groups. Luxury is part and parcel of life in society. Marketing of modern luxury goods runs counter to most marketing—and is rich with the use of scarcity as a principle of influence.The ultimate in luxury is to be able to live vitally and to live on. Two aspects of this luxury are ever-present: great pomp and splendor during life and a highly ritualistic approach to the afterlife, afterlife used very loosely here for those with different religious preferences.

Luxury products tend to have extremely high margins.

PS just ask Tiffany or LVMH (pretty much The Godfather / Berkshire Hathaway’s level vertical integration for global luxury brands) and their shareholders. Or Hermès bag…and they strategy they use to lure buyers or indirectly, buyers are using strategies to buy their $30k worth of a single hang bag. In order to get your hands on this $30k worth of Hermes bags, one has to purchase $10k+ of other Hermes items and each Hermes store is ANOINTED with just a few of these bags…therefore, forcefully creating an artificial diamond-like demand for such an item. 

Diamond has been such a good hedge for inflation in the midst of all of us moving to a close to a full-credit based economy since the beginning of 1970’s when we started hedging our currency onto the product with the highest demand in the world, crude oil, hence establishing the first step to our current US Dollar hegemony (for now, ignoring how for every $1 of credit created in our economic system…only 25 cents worth of real economic output is being created. Talk about efficiency), in great part perhaps due to the mobility for the real well-offs to move capital in the form of diamonds across borders. Singapore has been trying to create a commodities trading market for such but black market and the general opaqueness on product pricing of diamonds makes “true price discovery” of assets challenging.

;LVMH owns not just the luxury brands like Moet, Hennessy, Christian Dior, Huge Boss etc. but they also own the premium real estate both in prime areas BUT they also own ALL the Duty-Free chain stores at all international airports. Now that’s a global-level style Rockefeller-way of doing business. 

Back to luxury…now essence of luxury, therefore, is the symbolic desire to belong to a superior class, which everyone will have chosen according to their dreams, because anything that can be a social signifier can become a luxury.

Luxury, therefore, must be multi-sensory: it is not only the appearance of a Ferrari that matters but also the sound of it, not only the scent of a perfume but also the beauty of the bottle it comes in. It is multi-sensory compression, not just sight and positive feelings, but also smell and listening. 

PS Ferrari, which went public just a year ago, is still like ~80%+ owned by the Enzo family, one of the spear head family who took Ferrari to the next level ~ World War I. in fact, so pivotal that they created a limited edition car called “Enzo Ferrari” (that the equivalent of the 1960’s Mercedes SLS AMG, gull-wing doors) Some historians have noted that the creation of the car below is the continuous display of human desire to build flying cars…since the dawn of modern capitalism.  If you are in for some fun but are not keen on shelling out $300k for a 2015 SLS AMG (MSRP goes for ~$150k but it’s limited so after market price is > $300k for used car) you can go with the convertible edition. The great irony is in today’s society, a convertible car is often correlated with great coolness i.e. Porsche Targa 4, but in the SLS world, a convertible edition of SLS is only ~$100k or basically 70% discount to that of the one with the roof, MAINLY because convertible basically strips out the gull-wing doors on these classics.

My favorite idea: The dream must always be recreated and sustained, for reality kills the dream.Every time someone buy a luxury product they destroy a little bit of the equity. Luxury has two value sides to it – luxury for oneself and luxury for others. To sustain the latter facet it is essential that there should be many more people who are familiar with the brand than those who could possibly afford to buy it for themselves.

The goal of Rolex’s advertising is not to sell Rolexes, but to make those who have the means to buy a Rolex happy that others, who do not have the means to do so, know what Rolex means. The luxury dream is boosted by the distance between those who know and those who can.

In the luxury (royalty) world, price is something not to be mentioned. As a general rule, the imagined price should be higher than it really is. It’s the opposite in traditional marketing.

The symbolic power of the brand, painstakingly acquired through quality, creativity, and status, is the lever of pricing power.

…which all runs on the circle of life, linking back to Ben Howowitz’s recent quote about “having the ability to raise price on any product / service will determine whether you have a moat or not”