Meaning of Luxury

Author: Jacky Cheung2011 Sept

China has surpassed the U.S., following Japan, as the 2nd largest country in luxury spending

There were a total of 875,000 individuals with personal wealth over RMB10M• 55,000 of them with over RMB100M; 1,900 with

over RMB1B

80% of luxury goods / services purchasers aged under 45• Vs. Japan 19%, the U.S. 30%

Gucci Group has recorded a 42% growth in China in 2008

CHINA LUXURY MARKET OVERVIEW

Source: VIP Magazine (2010 Aug)

Category:Hotel

Category:Watch

AND THE MOST LIKED LUXURY BRANDS…

Source: VIP Magazine (2010 Aug)

Category:Super Luxury Sport Cars

Category:Luxury Sedans Category:

Accessories

Category:Apparel

Category:Jewelry

LET’S LOOK AT WHAT “LUXURY” MEANS IN WORDS...

Oxford English- Chinese Dictionary/ n 1 [U] (regular use and enjoyment of) the best

and most expensive food and drink, clothes, surroundings, etc

豪华 ; 奢华 ; 奢侈 :

• person of extraordinary ability• hero• powerful and richbold and unconstrained; forthright

豪magnificent;gorgeousbeautifulflashy; extravagantsplendor

华

奢extravagantexcessiveexaggerate;magnifysurpass

侈arrogant;selfconceitedexcessiveindulgeenlarge;aggravate;extend; broaden

WHAT IS IMPLIED IF IN CHINESE?

豪 华 奢 侈Be bold, magnify & exaggerate what you have, we don’t care even if that is unnecessarily

excessive

And then show-it-off, tell the world we’ve got it, even if that could be considered arrogant

TO SUMMARIZE...

豪 华 奢 侈When it comes to the culture of

LUXURY, it contradicts some fundamental Chinese values, e.g. be modest 中庸 , be in harmony和谐 , blending in with the rest

(people, surroundings)

TO SUMMARIZE...

BUT WHY??????

TAKE A LOOK AT THE FUNDAMENTAL HUMAN / CULTURAL VALUES FIRST...

Individualism Collectivism

ME US

Luxury in China...

The fulfillment of INDIVIDUALISTIC value / desire / vanity with a REFERENCE / BENCHMARKING to the GROUP

ME VS. THEM

Luxury starting point – personal indulgence

Chinese culture starting point

A closer look of “Me vs. Them” in Chinese context…THE RUBBER BAND THEORY

The “Rubber Band” that binds a group together – representing shared cultural values and lifestyle preferences

To “show-off” means how far you can STRECH within this rubber band

But NOT to BREAK away, detach from the group. Otherwise, it is “Weird”, “Strange”, “Ostentatious”

Totally “US” ME VS. THEM Totally “ME”

THE KEY IMPLICATION…

Aspiration to own luxury is NOT only driven by personal desire, or “self-indulgence”, in Chinese culture, it is just as important (if not more important) that it is driven by

COVETOUSNESS 攀比

It is still originating from Collectivism, but in a rather twisted manner to what we usually expect; we move from the need to blend in, to the desire to stretch

AN AD WE SAW SHARING THE SAME INSIGHT…

“As a gift that comes with this car...

JEALOUS EYES”

“ATTENTION FROM THE CROWD”

HOW IMPORTANT CAN THIS COVETOUSNESS (COLLECTIVISM) BACKGROUND BE… ？

The 2 largest markets for Luxury are both from a strong collectivism culture – the Japanese even scrutinize others to gauge how much OT work they do to judge their income and job security; a core reason for the proliferation of those 24 hour cafes!

Next?

TO MARKETERS , ADVERTISERS, AND RESEARCHERS…

It is NOT just to understand what she wants, likes

It is just as important to understand her FRAME OF

REFERENCE:- What is the rubber band like

that binds the group together?

- How far could this be stretched?

MARKETING NOTION #1

KNOWN but not ownedBy default, luxury means exclusivity –

only a few could own / enjoy

But even though the MASS may be unable to access the brand, it has to be WELL KNOWN

to THEM (remember the rest within the rubber band – their peers)

MARKETING NOTION #1

KNOWN but not ownedDEFINITELY LUXURIOUS!!!Even a 5 year old child can name it

“Drink Louis XIII with Fan Zhi Yi (China National Football Team Leader)”

The first time when China entered the World Cup Finals (2002), the government and national football team celebrated using Louis XIII, which was widely reported in newspapers

MARKETING NOTION #1

KNOWN but not owned

Hear the consumer voice directly as he comments on luxury watches

(next page)

MARKETING NOTION #2

A STORY TO TELL – be legendary- be it true or not (even rumors will do)

A conversation with respondent perhaps self-explanatory:Moderator: Why LV is luxurious in your mind?”Respondent: You know what, it is said that when they found the sunken Titanic, the first thing they dig out from the ruins was an LV suitcase! Moderator: Wow!...(but so what...???)Respondent: Even more, when they open that suitcase, there was no single drop of water found inside (amazing water proof function)!!!Moderator: Wow, wow!! How did you know that? From where have you heard of this?Respondent: mmm....cannot remember exactly, may be my friends, on the Internet...?Moderator: Oh!? Is it true? Do you believe that?Respondent: er...???? (Who cares????)

Panda Cigarette – the most expensive brand of cigarette . Only PUBLICLY launched after 2000.

But all smokers “KNEW” this brand long before – there was a MYTH shared by all smokers that our great leader Mr. Deng Xiao Ping only smoked a special cigarette that was MADE EXCLUSIVELY FOR HIM, and that was called Panda

But NO ONE have ever seen it nor tried it before 2000.

MARKETING NOTION #2

A STORY TO TELL – be legendary- be it true or not (even rumors will do)

No sexy story or story of intrigue yet? Don’t worry.

At least get yourself into a “TOP 10 BRANDS” ranking.

- No one cares what are the evaluation criteria.- No one cares who conducts the evaluation

behind the ranking.- No one cares how you define the competitive

set.

All they care about is the result – “YOU ARE NAMED AS TOP 10”

Refer to a website called “China Top 10 Brands” (www. China-10.com) in which you can find numerous top 10 brand rankings, anything one could, and even could not, imagine. Phones, laptops for sure, and even building materials like concrete, electrical wiring is also included with a ranking of top 10 brands.

MARKETING NOTION #2

A STORY TO TELL – be legendary- be it true or not (even rumors will do)

MARKETING NOTION #2

A STORY TO TELL – be a “Top 10”At least in the Luxury Watch

market, these “Top 10” rankings are highly influential to the

extent that it is a prerequisite to consider a brand worth owning.

“We just search “Top 10 watches” via a search engine before we

buy”

MARKETING NOTION #3

BE BOLD WITH YOUR PRICE – Highest possible, even out of normal frame of reference (remember luxury implies magnifying, excessive)

How to justify the price? Don’t worry in a culture that shares the following wisdom:

“1 cent more means 1 per cent better 一分钱，一分货”

“Cheap things can’t be good 便宜没好货”

“Expensive things have their reasons for being expensive 贵的一定有它的道理”

How to justify the price? Don’t worry in a culture that shares the following wisdom:

“1 cent more means 1 per cent better 一分钱，一分货”

“Cheap things can’t be good 便宜没好货”

“Expensive things have their reasons for being expensive 贵的一定有它的道理”

Price Value

Price

ValuePrice

Value

Where,

Price defines value,Instead of value justifying price

MARKETING NOTION #3

BE BOLD WITH YOUR PRICE

An episode from the Chinese Movie (Da Wan) to further illustrate in the

next page

WATCH OUT!LOW KEY LUXURY 低调的奢华

What!? I thought you just said to be as flashy, high profile as possible!!!

Yes, yes…be patient…Things aren’t so straight forward, are they?Let us explain…

IT ALL GOES BACK TO THEIR FRAME OF REFERENCE, THEIR RUBBER BAND

Entry Level “Richies”(Personal Liquid Asset

RMB1M+)

Real “Richies”(Personal Liquid Asset

RMB10M+)

Super” Richies” – Billionaires

As China becomes stronger and stronger economically, we also see that the “Richies” in China nowadays can be further stratified.

For those Entry Level “Richies “:

• Their frame of reference is still the general mass, from where they have recently emerged.

• Brands with high profile amongst the general mass is still necessary.

IT ALL GOES BACK TO THEIR FRAME OF REFERENCE, THEIR RUBBER BAND

Entry Level “Richies”(Personal Liquid Asset RMB1M+)

Real “Richies”(Personal Liquid Asset

RMB10M+)

Super “Richies” – Billionaires

But for those Real & Super “Richies”, they have left the general mass for a long time.

They start forming small social circles of comparable affluence levels, i.e. their rubber band is re-defined.

Within these particular social circles, there is almost no barrier to attain most of the luxury brands the seek.

Consequently, those “popular” luxury brands (eg Cartier, Gucci, Audi) are just “standard” items.

- To stretch this new rubber band, they need to go for those low awareness but niche, low key brands (eg Harry Winston, Bentley) – avoid being “me-too”.

Having said that, “low awareness” only refers to the publicity amongst the “general mass” – it should still be famous, high profile within the niche circle of reference (hear the consumer voice directly in next page)

thank you