On the philosophy of luxury, an Interview with Agenda Inc.

I was asked by the Consulting Agency Agenda Inc. (an insight and thought-leadership partner for luxury brands) to comment on my conception of luxury in an interview. It can be accessed here. The interview was shortended for the blog, the full version can be read below. I have added additional comments and references into the text. [They are marked like this to make them distinctive from the main text body].

INTERVIEW WITH AGENDA INC., 03.11.2009
Helge Fluch is the founder of luxury consulting company Japan Access, and author of the influential blog, HNWI Marketing Japan.
The focus of his Luxury Marketing Blog is to showcase his research philosophy around luxury brands, while his consulting company Japan Access offers very specialized services in the field of HNWI marketing and luxury marketing, with a focus on the Japanese market.
Almost uniquely in the field he uses a range of sources to support his arguments; including Pierre Bourdieu, Baudrillard and other post-modern social theorists, and more contemporary references such as Currid’s Warhol Economy and Kapferer and Bastiens The Luxury Strategy. He also cites and recommends Japanese writers on luxury such as Tsuchiya Kochi, with his book “HNWI Marketing”, and Takahashi Chieko’s "The Seven Rules of Selling Despite a High Price. Luxury Marketing."

Recently, we interviewed him about his point of view on luxury and his work.

- What do luxury brands mean to you?
Luxury brands embody something for which humans have striven for many ages, since the beginning of humanity. It is the desire to create something that is essentially more, transcendental, out of the ordinary, and not necessary for immediate survival. Yet all human societies develop something that can be called “luxury” even if there is not a value/price mechanism associated with it. Religious artifacts and relics can be considered a form of luxury.
For me, luxury is essentially something social. It creates, as Kapferer and Bastien (2009) say, a social distance. Luxury does not exist without human interaction and it appears where human beings within a social context want to construct themselves a place within that society, in relation to others.
By analyzing luxury brands we can learn a lot about the structure and values of a certain society. Without a profound understanding of the society in which the luxury market is taking place, any conclusion may be vague, ambiguous, or even completely wrong.
My fascination for luxury goes beyond the mere social aspect. I adore excellence in all human endeavors, and luxury products - in my point of view - fulfill the human need, as mentioned above, to strive for something more than ordinary. I disagree with the notion that luxury is something “not necessary”. I think the human mind was made to create luxury items, and history proves me right. I would be very interested to see an exception to this rule.

- What do you think luxury brands globally can learn from Japan?
Japan is in many ways a very special market. Around 40% of all luxury items in the world are consumed by Japanese consumers, inside and outside their own country. In Japan, we can see how a developing country - in which social structures are broken up and recreated within a very short time period - uses material objects that have certain value associations in the West, to substitute for social structures and class differentiations that have disappeared suddenly (Chadha and Husband 2006).
To explain the way in which Japan has developed, though, we need more than that. Without understanding the history, the education system, the employment market, and the economical micro- and macro structures, no profound explanation can be found for the special role that Japanese consumers play when compared internationally.
Louis Vuitton has proven how to define a market and how a brand can become unbelievably successful by basically creating the social rules within a country. Similar things can and are happening in China, Hong Kong, and Singapore, and, as a very young luxury market, India. What is happening now to LV, with sales decreases of over 10%, is part of the dynamic and can be very enlightening for the processes within other developing luxury markets.
The dream equation, the difference between the perception rate and ownership rate, is a very fragile construct. Without a perceived limited availability, and by losing core customer groups, a luxury company can reach a market penetration that will become a problem for the aspirational value and the prestige of a brand.
Basically, what luxury brands could learn from Japan is to thoroughly understand and research the social dynamics underlying luxury consumption in new markets, and not just to be delighted by record sales numbers, blind to the cultural processes underlying this success that might some day cause the brand to lose ground within the same market, or internationally. Success alone is not enough. You should know why you are so successful, and the risks associated with it.
It strikes me what Yves Carcelle said at the opening of the LV flagship store in Omotesando in 2002:“This is not just a store, it is a statement.” Well, marketing experts should be sure to understand what exactly that statement will be on the long run. LV still sells immensely well in Japan, and we hope that the brand understands all the reasons for its own success. Only because you sell, does not mean you got all the variables right. In luxury marketing, brand value comes before shareholder value. So you have to think long-term.
[ comment start
The statement of Yves Cartell was printed in Zielenziger (2006): Shutting out the Sun, p. 150. The case of LV is interesting in many aspacts, as the cause and effects are often mistaken. LV is not just a logo that is overrepresented in the Japanese market, it is a brand with extreme overexposure that creates dynamics unseen in any market before. What happens in a society with over-emphasis of group-harmony and social consensus, where people go for saftey choices in order to adapt, or better, to not stand out. This can be considered a social experiment of before unseen extent. It can be argued that in most other countries a saturation effect would have led to an equilibrium much sooner than in the case of Japan. People interested in answering the question why? LV is so popular should read the following resources, which are all in Japanese (I am currently working on a summary of the articles that will be posted on this blog within the next 2 weeks): セオリー：有名ブランドの秘密 (the secret of famous brands)、theory2008 vol.3 KODANSHA Theory, リアル・リッチの世界II, ルイ・ヴィトンの法則―最強のブランド戦略 (The laws of Louis Vuitton. The Strategy of the Strongest Brand). See also my comments on the luxury report from McKinsey, and this article at Luxist.com.
] comment end

- How do you see the future of luxury?
I think luxury will become more diversified and will enter subcultures that we never thought would be susceptible for the concept. It will adapt a more international language of signs as the media will penetrate more and more of our daily lives, increasing the options for consumption tremendously. At the same time, losing sight of your own ethnicity and feeling lost in the global net of offerings will lead to a new-found importance for sticking to your roots, of preserving heritage. The real luxury companies of the future will be the ones that offer some form of legitimacy that goes beyond conspicuous consumption. Social dynamics that punish luxury companies for ignoring their own heritage take a long time. But they work anyway.
The future for the growth of luxury brands lies in Asia, especially in China and India. As these societies discover not only the possibilities of consumption but also exhibit the highest growth rate for rich people in the world, luxury brands will inevitably look to achieve growth strategies there. The question will be whether they can avoid some mistakes made in Japan. Of course you could argue whether the developments in Japan can be called mistakes. They produced a lot of growth for luxury brands. But times are different now, and developments in the rest of Asia could produce unexpected outcomes globally.

[the following part was not printed on the blog of Agenda Inc.]
- What are the beliefs that guide your work?
As I work I question my own values continuously while adhering to a certain philosophy of thought that is both structured and flexible. I try as much as possible to include contradictions and oppositional points of view within my theories in order not to fall into the trap of oversimplifying in order to reach an intended outcome. If you would ask me to describe my way of thought in one sentence, I would be inclined to go for “creative destruction leading to innovation”.

1) Marketing is no science. Marketing is not about facts. It is about tendencies, probabilities, all of them with a time component, meaning, subject to sometimes rapid change. Marketing can be about trying to figure out an approximate future, not about discovering reality. No matter how sophisticated the research methods, the results are always ambiguous, never complete, subject to change, and open for interpretation.
2) In order to anticipate this approximate future within the relevant universe of the brand, it is essential to look out for possible developments in the market that are hard to perceive. Those “disruptive cultural movements/tendencies” are often situated within subcultures, lying dormant with a potential, until some combination of external and internal factors lead to a critical mass, to a tipping point that creates a trend. These trends can have profound influences on the whole market, change a whole industry or even lead to paradigm shifts in the way consumption is perceived.
3) For luxury companies, it is especially important to anticipate paradigm shifts within the value structure of people and the society at large. As luxury consumption is socially constructed, these changes affect all brands, if not immediately, then on the long run.
4) We want to uncover the underlying principles behind these paradigm shifts and the dynamics of disruptive tendencies.
5) We use these underlying principles to construct models that can be used to create strategies to counter the aforementioned disruptive tendencies and paradigm shifts.
6) We provide the contextual knowledge necessary to understand the phenomena in the market. Profound understanding of the underlying social gratification systems is needed for understanding and evaluating market phenomena.
7) For market segmentation to be effective, the marketing department has to have the ability to identify appropriate segments and to implement strategies to reach target groups.
8) By analyzing the subcultures/customer segments with a multi-level analysis, "areas of presence” are found in which the sub-culture/group is constructing their lives. Companies have to enter those spaces. To find these “areas of meaning” a combination of focus groups, interviews, media research, communication with CEOs from industry leaders in the luxury market, and theoretical reflection of basic literature is conducted. Focus groups alone could be very misleading. It would be naive to believe that customers exactly know what they want and why they do things.
9) All these insights are in need of continuous updates and critical reflection. Luxury companies should ask themselves if the people in charge of major marketing decisions are capable of understanding the respective culture and whether they are able to judge the validity of their own resources. The Japanese context provides companies with another challenge: the language barrier.
10) Most surveys exclude high net worth individuals. It is very hard to get access to the real rich opinion leaders, as they tend to not disclose their real intentions and motivations. Most can’t be reached in a direct way. The only method to get valid information from them is to enter their networks and establish personal contact with them. Japan Access has access to two companies offering concierge and other personalized services to a total of more than 10.000 high net worth individuals in the Japanese market. Japan Access takes on the role of an intermediary. We establish contact to the right experts and evaluate and explain their capabilities.

By making sure that results are interpreted in the right contextual framework, I am convinced luxury companies would not only be able to save a great deal of money, but would also be much better prepared to anticipate paradigm shifts and trends within the industry.