consumer insights luxury fh v4 150612 - uni-muenchen.de · ranking of the top 50 german luxury...
TRANSCRIPT
Confidential
Ludwig Maximilians-Universität
21 June 2012
Consumer InsightsUsing the example of luxury productsConsumer InsightsUsing the example of luxury products
“The real luxury is not to look at the price.”Karl Lagerfeld
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Today we will look at luxury consumers to generate some insights
Mind the gap
Luxury is different
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Non-branded luxury
Today we will look at luxury consumers to generate some insights
Then we will see that luxury is in the eye of the beholder...
Luxury is different First, we will check some cultural differences:La Grande Nation vs. Made in Germany
2
branded luxury …and how this insight leads to a totally new type of luxury products.
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Luxury is different
3
We want to start with the classic marketing mix framework…
Marketing is essential for companies to create a competitive advantage and influence consumer behaviour
Consumer behaviourPrice
Product
1
2
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Product
Place
Promotion
+Emotion
3
4
5
We want to start with the classic marketing mix framework…
Marketing is essential for companies to create a competitive advantage and influence consumer
Competitor 1
4
Competitor 2
Competitor 3
…and check how luxury fits right in there
Revaluation
► Luxury product lines can increase the attractiveness of the company‘s core products (e. g. Daimler)
International
► Luxury products address international clientele and make the brand wellbeyond borders, e. g. Porsche is a worldwide synonym for German luxury cars
6 reasons why companies play in the luxury segment
1 2
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German luxury cars
► In the automotive industry luxury product lines are often used as development carrier for technical equipments. Later on these equipments become standard equipment in other car models
Pride
► The chance for celebrity clients can be a reason for a luxury product line. Roman for example has ordered a yacht at Blohm + Voss Shipyards. Originally, Blohmbeen building naval vessels
2Research & Development
…and check how luxury fits right in there
Luxury products address international clientele and make the brand well-known beyond borders, e. g. Porsche is a worldwide synonym for German luxury cars
► The more exclusive the luxury product is, the less own marke-ting/PR is necessary. Companies are contacted by renowned magazines asking for permission to image their products (for
6 reasons why companies play in the luxury segment
3 4 4PR/Marketing
5
German luxury cars to image their products (for example Gaggenau)
The chance for celebrity clients can be a reason for a luxury product line. Roman Abramovichfor example has ordered a yacht
+ Voss Shipyards. Blohm + Voss has
been building naval vessels
Specific passion
► Making a luxury product can also be a specific passion of the manufacturer as in case of Gumpert Sportwagen-manufaktur
5 5
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Split by production type
In Germany a broad range of industry segments is playing on luxury…
German luxury companies are engineering and handicraft affine: “
15
8
Split industrial segmentation
29 100
A B
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Industrial production
Manufactures
Services
Consumer Insights
15
7
Engineering/handicraft
Core segments
Other new segments
29 100
►►► “Made in Germany” is internationally still recognized as seal of quality
18
9
657
Industry segments with luxury products B2C (without services)
1
Split by production type
In Germany a broad range of industry segments is playing on luxury…
German luxury companies are engineering and handicraft affine: “Ingenieursland Deutschland”
100
C
100
6
65
5
57
Fashion Furniture
Automotive Watches
Accessories Other
73
Industrial production
Manufactures
100 100
“Made in Germany” is internationally still recognized as seal of quality
…which sets us apart from the classic “luxury segment” definition…
We have identified 177 German luxury companies in 29 industrial segments…
YachtsAerospace
Chinaware
Optical instruments
Cutlery
CarpetsHousehold appliances
Toys
Lamps
…
…for which we have gathered financial data, revenue and employee numbers and other hard facts like year of foundation.
For an selection of 98 we have collected further information on
Confidential – all rights reserved – Ernst & Young 2012 Consumer Insights
ChampagneExpensive cars
Fashion & AccessoriesPerfumes & Cosmetics
JewelryWatchesFurniture
OOptical instruments Consumer
electronicsHotels
Stationary ►►
►
Besides the hard facts, an external expert jury has also assigned marks on certain soft facts. Thus, a ranking of the Top 50 German luxury companies was created.
…which sets us apart from the classic “luxury segment” definition…
We have identified 177 German luxury companies in 29 industrial segments…
…for which we have gathered financial data, i. e. revenue and employee numbers and other hard facts like year of foundation.
For an selection of 98 we have collected further information on
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► No. of points of sales (POS)► Media features (number of press articles
mentioning the brand name)► Price multiple compared to a comparable no
name product that is as cheap as possible
Besides the hard facts, an external expert jury has also assigned marks on certain soft facts. Thus, a ranking of the Top 50 German luxury companies was created.
…and deliver some surprising names in our ranking
Here are the results
No Company Segment 17 C. Bechstein
1 Montblanc Stationary 18 Tamara Comolli
2 Burmester Consumer electronics 19 Bulthaup
3 Leica Camera Optical instruments 20 Chronoswiss
4 Büttenpapierfabrik Gmund
Paper 21 Jan Kath
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5 A. Lange & Söhne Watches 22 THONET
6 Porsche Automotive 23 Miele
7 WALTER KNOLL Furniture 24 Dorothee Schumacher
8 Steiff Toys 25 Glashütte
9 Graf von Faber-Castell
Stationary 26 Rolf Benz
10 JIL SANDER Fashion 27 Daimler
11 DEDON Fashion 28 Robbe & Berking
12 Wiesmann Automotive 29 GUMPERT
13 Gaggenau Household appliances 30 T+A elektroakustik
14 Roeckl Accessories 31 Wilhelm Schimmel
15 Meissen Chinaware 32 Rena Lange
16 Nymphenburg Chinaware 33 St. Emile
…and deliver some surprising names in our
Musical instruments 34 Comtesse Accessories
Jewelry 35 Tobias Grau Lamps
Kitchens 36 TECNOLUMEN Lamps
Watches 37 Hugo Boss Fashion
Carpets 38 MYKITA Glasses
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Furniture 39 Dornbracht Valves
Household appliances 40 Kempinski Hotels
Dorothee Schumacher Fashion 41 Sinn Spezialuhren Watches
Watches 42 Strenesse Fashion
Furniture 43 Iris von Arnim Fashion
Automotive 44 Interlübke Furniture
Cutlery 45 ESCADA Furniture
Automotive 46 Poggenpohl Kitchens
Consumer electronics 47 BREE Accessories
Musical instruments 48 RIMOWA Accessories
Fashion 49 Koch und Bergfeld Cutlery
Fashion 50 van Laack Fashion
Why is the right bag ~3.5 x more expensive?
Higher quality? Brand? Design? … Which one would you buy?
BREE
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Material: genuine leatherSize: 36 x 28 x 9 cmPrice: 489 EUR
Why is the right bag ~3.5 x more expensive?
Higher quality? Brand? Design? … Which one would you buy?
Louis Vuitton
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Material: genuine leatherSize: 34 x 28 x 16 cmPrice: 1,690 EUR
Because people buy more than a product!
Why people buy luxury products/brands
► Love to afford expensive goods (“macht das Leben
► Like going into exclusive shops
► Be surrounded by beautiful things
► Want to have a certain image
1
2
3
4
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► Want and trust in best quality promise
► High standard even in everyday’s life products
5
6
Because people buy more than a product!
Leben schöner”)
34,638,3
25,5
28,1
30,2
32,9 1
2
51 – 60 year old 21 – 30 year old
NA
in %, share of age group
10
38,3
47,2
37,4
41,7
54,5
43
39,9
46,4
26,3
56,5
43,3
52,6
31,4
60 3
4
5
6
2011 2008
NA
Source: Roland Berger 2012 Luxury Study
LVMH has realized that…
Admiration
Reward
Image
I am worthy it
Enjoyment
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Brand
DesignFeel good
Image
...
Prestige
Emotion
LVMH has realized that…
Fascination
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LVMH
Trust (in quality)
Status symbol
…and concentrates on the 4 segments where this can be done more easily
LVMH is a French luxury group that comprises many well
LVMH defines its mission to “represent the most refined qualities of Western "Art de Vivre" around the world” in the following categories:
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► Wines & Spirits
► Fashion & Leather Goods
► Perfumes & Cosmetics
► Watches & Jewelry
…and concentrates on the 4 segments where this can be done more easily
LVMH is a French luxury group that comprises many well-known luxury brands.
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On the contrary German luxury companies have decided to play more on the “hard facts”
That’s why Germany is rather well-known for luxury cars and watches than for perfumes and fashion
+
Cutlery
Household appliancesBikes Optical instruments
ShipbuildingAircrafts
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-
Ratio
nal
CutleryFurniture
Paper
5 6+
On the contrary German luxury companies have decided to play more on the “hard facts”
known for luxury cars and watches than for perfumes and fashion
Cars
Consumer electronics
Cutlery
Household appliances
WatchesOptical instruments
Shipbuilding
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+Emotional
FashionAccessories
Wine
PerfumeCosmetics
Consumer electronics
Hotels
Cutlery
CarpetsJewelry
Bathroom fittings
LampsPens
Chinaware
Musical instruments
ToysShoes
LVMH’s segment
1 4-
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Mind the gap
When buying luxury products the buyer can be emotionally torn…
Buyer’s perception
+
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-
When buying luxury products the buyer can be emotionally torn…
Public perception
+
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-
…if the brand is not established as “positive brand” in the public perception
Buyer’s perception
+
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-
…if the brand is not established as “positive brand” in the public perception
Public perception
+
16
-
Therefore people love luxury if they can answer the following questions with “yes”
► Does possession create admiration?
► Is the product bought because of beauty, status, effect or similar reasons?
► Is the product bought to keep it and hand it down?
► Is buying the product rather emotionally driven?
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► Is buying the product rather emotionally driven?
► Is the product fascinating/enchanting?
Therefore people love luxury if they can answer the following questions with “yes”
Does possession create admiration?
Is the product bought because of beauty, status, effect or similar reasons?
Is the product bought to keep it and hand it down?
Is buying the product rather emotionally driven?
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Is buying the product rather emotionally driven?
Is the product fascinating/enchanting?
How do luxury companies ensure that their products are perceived as “positive luxury”?
Which brand is it?
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How do luxury companies ensure that their products are perceived as “positive luxury”?
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They let their products look less luxury
Simultaneously, brands loose a bit of “uniqueness”, they are hard to distinguish without brand label
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Hugo Boss Hilfiger Louis Vuitton
They let their products look less luxury
Simultaneously, brands loose a bit of “uniqueness”, they are hard to distinguish without brand label
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Jil Sander Armani Strenesse
Do not move for 3 days (and nights) to keep your chance of buying a pair of Nike Air
Precondition:
1. Be on the waiting list
2. Wait for a preset time at a specified place on the street that Nike defines
3. Be there when someone comes around to check if you are still
Sometimes reward is taken
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► Designed by Kanye West
► Limited to 200 pairs worldwide
► Price EUR 260
► Sold on ebay for USD 90,300
“It’s a pain – but it is fun. The thrill if you get a pair is an additional appeal.”Participant of the Hamburg event
►►►
3. Be there when someone comes around to check if you are still there (every 2
Nike has been keeping alive the interest on this second edition of Nike Air Yeezy sneakers by only using social media channels.
Do not move for 3 days (and nights) to keep your chance of buying a pair of Nike Air Yeezy 2
Be on the waiting list
Wait for a preset time at a specified place on the street that
Be there when someone comes around to check if you are still
Sometimes reward is taken literally
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but it is fun. The thrill if you get a pair is an additional appeal.”Participant of the Hamburg event
Be there when someone comes around to check if you are still there (every 2 - 4 hours). Otherwise your chance is gone…
Nike has been keeping alive the interest on this second edition of sneakers by only using social media channels.
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Non-branded luxury
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Classic rankings are always based on some kind of brand value
Looking at classic rankings global branded luxury seems to be the only way to come to the top
Brand Brand Value $M
Brand Contribution
Louis Vuitton 25,920 5
Hermès 19,161 5
MillwardBrown Top 10 Luxury Brands 2012
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Hermès 19,161 5
Rolex 7,171 5
Chanel 6,677 5
Gucci 6,420 5
Prada 5,788 5
Cartier 4,843 5
Hennessy 4,596 5
Moët & Chandon 4,217 5
Burberry 4,090 4
Brand Contribution measures the role brand plays in driving earnings on a scale of 1 to 5 (highest)
Classic rankings are always based on some kind of brand value
Looking at classic rankings global branded luxury seems to be the only way to come to the top
Brand Value Change
7%
61% 25
30
35
Purchasing luxury products: extremely/very important in your personal life
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61%
36%
-2%
-14%
NA
-9%
-8%
-8%
21%
Brand Contribution measures the role brand plays in driving earnings on a scale of 1 to 5 (highest)
0
5
10
15
20
% w
ho a
gree
2010 2011
Also in valuation brands are in focus
Price premium
Valuation methodology for brands
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Market pricecore benefit
Market priceadded value
Price premiumbrand
Total price
Fair Value-Oriented Cost-Oriented
► Direct cash flows► Excess profits► Analogy to price for concession► Residual value
► Reproduction costs
► Replacement costs
Value = Discounted cash flow Value = Costs
Also in valuation brands are in focus
Quantity premium
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Required quantity
Additional quantity marketing
Quantity premium brand
Total quantity
Fair Market Value-Oriented
► Active market
► Analogies
Reproduction costs
Replacement costs
Value = Multiple
Finally, also studies proof the power of brands
468
101214
Our latest study* seems to proof that, especially during the Crisis, luxury companies achieve higher multiples during transactions. We have noticed five recurring models:
Enterprise Value/EBITDA (median)
1 Expanding in emerging markets
As the number of middle class and the high net worth individuals increase in the emerging economies,
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024
2007 2008 2009 2010 2011
Luxury & Cosmetics Consumer goods
* „Luxury & Cosmetics – The Ernst & Young Financial Factbook“ – Winter 2010/2011 edition
3 4Brand stretching Brand acquisition
increase in the emerging economies, notably in Asia and Latin America, so too does the appetite for luxury goods.
Groups have also seized opportunities to reinforce their portfolio of brands in order to complete their portfolio of offerings, such as L’Oreal’s acquisition of Yves Saint-Laurent fragrances.
Some luxury players have been able to take their brands into new domains, new businesses, such as Armani’s entry into the hotel business in Dubai.
Finally, also studies proof the power of brands
Our latest study* seems to proof that, especially during the Crisis, luxury companies achieve higher multiples during transactions. We have noticed five recurring models:
2Expanding in emerging Brand strengthening
As the number of middle class and the high net worth individuals increase in the emerging economies,
Rather than risk compromising their brands’ image by slashing prices or cutting quality, some companies
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Winter 2010/2011 edition
Brand acquisition 5 E-commerce/e-luxury
increase in the emerging economies, notably in Asia and Latin America, so too does the appetite for luxury
cutting quality, some companies developed new products (notably accessories) with more accessible price points to enlarge their customer base.
Groups have also seized opportunities to reinforce their portfolio of brands in order to complete their portfolio of offerings, such as L’Oreal’s acquisition of Yves
Laurent fragrances.
The same Internet that some analysts once predicted would be the death of luxury goods is now turning out to be an important way to enhance brand identity and increase revenues.
…especially if you are from Gen Y. Companies mainly use social networks for 3 things:
The perception gap
Discount Learn about new products
Consumers’ ranking Businesses’ ranking
Confident
But things may change as social media as “new” marketing channel is gaining importance…
1 2Individualization is easier Minimize product distance
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Purchase
Discount
Purchase
productsGeneral info
Feel connected
Feel connected
Be part of a community
Be part of a community
Source: IBM Institute for Business Value
Higher education
What’s in for me
…especially if you are from Gen Y. Companies mainly use social networks for 3 things:
Self-expres-
sive
Liberal
But things may change as social media as “new” marketing channel is gaining importance…
3Minimize product distance 1:1 marketing
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Upbeat
Open for
change
Use of techno-
logy
Gen Y
Now
…and enables companies to use other levers to generate luxury
Often several levers are combined in a luxury product
Price
► A high price multiple is one possibility to make your product a luxury product as it only a certain clientele is addressed, e. g. Lange Uhren
Limited edition
► Producing a product in a predefined number, e. g. 333 exemplars of the Sakura or Skeleton series
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Design/function
► A unique design combined with “normal” functions can turn a product into a luxury product, e.g. THONET furniture
Special material
► Precious drapery or an apartment key made of gold and diamonds let a product become luxury. For example, Jan Kath carpets are made of handwool from Tibetan highlands
…and enables companies to use other levers to generate luxury
Often several levers are combined in a luxury product
Limited edition
Producing a product in a predefined number, e. g. 333 exemplars of the MontblancSakura or Skeleton series
Exclusive distribution
► A luxury product can also be formed by exclusive distribution channels, e.g. only authorized specialist dealers as it is the case for Glashütte Uhren
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Special material
Precious drapery or an apartment key made of gold and diamonds let a product become luxury. For example, Jan Kath carpets are made of hand-spun wool from Tibetan highlands
Persistence/sustainability
► Of course, luxury products have to meet the high quality expectations of its customers. That’s why they are processed in high-quality and – at best –recyclable like DEDON outdoor furniture
Some examples of non
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Some examples of non-branded luxury
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Thank you
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Thank youThank you
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Thank you
Ernst & Young
Assurance | Tax | Transactions | Advisory
© 2012 Ernst & Young - all rights reserved.
The global Ernst & Young organization refers to all
Florian Huber
Tel +49 89 14331 14882Mob +49 160 939 14882Email [email protected]
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The global Ernst & Young organization refers to all member firms of Ernst & Young Global Limited (EYG). Each EYG member firm is a separate legal entity and has no liability for another such entity’s acts or omissions. Ernst & Young Global Limited, a UK company limited by guarantee, does not provide services to clients.
+49 89 14331 14882+49 160 939 [email protected]
Christian Leu
Tel +49 89 14331 14804Mob +49 160 939 14804Email [email protected]
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