How Luxury Brands Can Overcome The Industry’s 3 Biggest Challenges

As a brand manager, your goal is to build a strong, recognizable brand, but this is no easy feat to pull off. Unfortunately, there’s no silver-bullet solution to hack your way to success, what works for one brand might not work for yours. Whether a particular strategy will gain traction depends on your product, your target audience, your brand’s existing identity, and the trends within the industry that it competes in.

Despite this, there are certain universal truths and principles that all brands should be using as the foundation for their diverging campaigns. Whatsmore, brands in the same industry face similar challenges, and there’s a strong likelihood that, with a little adaptation, what works for one brand should work for yours.

If you’re building a luxury brand, you might find yourself grappling with some particularly stubborn challenges — how to curate a sense of prestige and exclusivity that helps justify your prices, how to find audiences that can fuel your growth, and, indeed, how to grow without compromising your brand’s identity.

Luckily, your brand can play a big role in overcoming these challenges, so let’s find out what you can do to overcome these obstacles.

The Universal Foundations Of A Strong Brand

First, let’s first go over some of the fundamentals that every brand needs to get right, regardless of industry. If you haven’t got these pinned down, you might struggle to get your luxury brand off the ground at all.

It’s important to understand that the most important role of a brand is to act as the recognizable face and emotional core of your business — indeed, for luxury brands, your identity and how it shifts perceptions will be fundamental in drawing in big spenders. Regardless of the industry though, a brand should give consumers something memorable and emotional to latch onto, while also positioning your product or service in an exciting and favorable way.

You’ll already know some of the main considerations needed to start achieving these goals. Your brand needs a logo and accompanying visual identity, a tone of voice for your content across both marketing collateral and other customer-facing material, and a series of values that are consistently represented in everything your business does — both internally and externally. The more consistent you can make all of these disparate elements, the stronger your overall brand will be.

Getting the foundation right can be tricky, but it’s vitally important. Brands that invest in market research and analytics can give themselves a huge helping hand. Knowing more about how your target audience perceives your brand or your competitors, understanding the size of your market, and acquiring insights on consumer behavior trends are all essential if you want to build a sturdy foundation from which to grow a successful brand.

This might sound like a lot, but you should consider investing in a brand tracker, which could allow you to achieve these goals while setting you up to optimize your brand’s performance as you grow.

Once you know more about your target market and have used that to build the bones of your brand, it’s time to start thinking about some of the specific challenges that you’ll face when trying to take your luxury brand to the next level.

Why Luxury Brands Need To Create An Aspirational Identity

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The line that divides luxury goods and necessity goods is a fuzzy one, but, ultimately, the assumption of need drives demand for the latter, while the former must create their own demand.

Since we can make the assumption that there is no inherent necessity to purchase a fine wine, a designer handbag, or a Swiss watch, it’s important to think about why consumers might feel compelled to spend on these types of products. So let’s break down the key purchase drivers of luxury goods:

• They can be used to mark a special occasion, bought as a gift, or perhaps even as a one-time treat.

• A luxury product might be purchased as a status symbol because the customer in question feels social pressure to look, act, and shop in a way that reflects their position in society.

• Finally, for some — particularly those with large amounts of disposable income — a luxury good may simply be preferred due to its superiority; whether that’s because it is handmade rather than mass-produced, uses finer ingredients, or is made from better or rarer materials.

Looking at these purchase drivers gives us a clearer idea of what a luxury good’s brand identity needs to achieve, so let’s break them down too:

• For those making one-off purchases for special occasions, the brand must distinguish the product from the norm, by promoting its rarity, the quality of its materials or ingredients, or its elevated value.

• For those purchasing a status symbol, the brand must form strong associations between the product in question and a desired social class.

• For those purchasing on the basis of quality alone, the brand must celebrate the factors that elevate it above non-luxury goods,

In summary, we can see that, regardless of the purchase drivers, a luxury brand’s identity generally must focus on what sets it apart from the norm while fostering strong aspirational associations in the minds of consumers. But how should this be done?

How To Craft An Aspirational Identity

It’s no easy feat to create a luxury brand with an aspirational identity that encourages consumers to spend big. Ultimately, it requires multiple functions of your business to operate in tandem, but your brand, as ever, can play a big part.

Luxury goods need to be desired. Making your products scarce, either through rarity — creating limited numbers — or by pricing them out of reach of most consumers will help create a sense of exclusivity around your product that will breed desire.

But you can’t just throw a huge price tag on your product and wait for millionaires to show up at your store. In order to desire something, consumers need to know about it — and in order for a product to hold the type of cultural capital that might allow it to become a status symbol, it needs to be known and desired by many consumers who may never actually become customers.

Think about brands like Rolex, Chanel, or Lamborghini — the average consumer has strong awareness of these brands, but most will likely never purchase them. This unequal relationship isn’t accidental, in fact, it drives the sense of exclusivity that luxury brands need to survive — although, it isn’t typically achieved through traditional advertising either. Can you remember the last time you saw an ad for Rolex or Lamborghini?

Rather, luxury brands can raise awareness through PR campaigns; think about how red-carpet events are used by luxury fashion houses, how prestigious awards for wines and whiskeys generate buzz, or how luxury cars might feature in films and TV.

Exclusivity and prestige are useful tools for appealing to wealthy consumers who have the means to splash out on a treat — or those wanting to appear richer than they are — but the quality of your brand can also play a part in forming bonds with wealthy consumers.

Luxury brands can build interest by showcasing the process behind their production and weaving this into their brand story, distinguishing themselves from the competition and marking themselves out for those consumers with a taste for the finer things in life.

The Insider YouTube series “So Expensive” is a great example of how superior ingredients, materials, or design processes can form the backbone of a brand’s story.

Why Luxury Brands Need To Master Customer Experience

Your luxury brand should “feel” elevated above the standard alternative. Not only is this a vital factor in building loyalty, but it will help generate positive word-of-mouth buzz around your product if every interaction with the customer feels optimized or tailormade.

Brand managers then need to focus on nearly every aspect of the customer experience and think about how it can be elevated. Indeed, you need to remember that you’re not just selling a product, you’re also selling a unique, exclusive experience. As James Brown, CEO of Brownstone Hotels & Resorts puts it, luxury customers “seek stimulation, not standardization.”

These experiences can be varied and span the entirety of the customer journey; it might be the ritual of opening a bottle of champagne, it might be the mystique of entering a designer fashion store with the intent to buy, it could mean next-level customer service and assistance or personal touches that demonstrate time, effort, and care have gone into fulfilling your order.

Let’s take a closer look at how luxury brands can master customer experience.

How To Master a Luxury Customer Experience

There’s a reason that luxury brands have been a little slower in taking on eCommerce. While “rarity and exclusivity often lie at the heart of the luxury business model…digital communications are all about global access.” Creating that exclusive experience is certainly easier in a physical setting, particularly because we have decades of precedent to draw from.

In a store, the customer can be placed in the well-trained hands of a salesperson who can guarantee the luxury experience, while lighting, design, and decoration can all play their part in building a unique and memorable atmosphere. Indeed, the simple fact that shopping at a particular store is only possible in person, rather than at the consumer’s convenience adds to the exclusivity of the whole experience.

That isn’t to say that luxury brands aren’t confronting eCommerce and finding their own ways to deliver exceptional service on digital channels and platforms, too.

Burberry is a good example of a luxury brand that has found interesting ways to use digital channels to boost interaction and create memorable experiences online in ways that have also positively affected its bottom line. Its focus on digital experiences helped deliver a “marked increase” in sales in 2020, while attracting “new and younger consumers”.

Vice President of digital technology, Rajeev Aikkara, explained that “one thing we are looking towards, in particular, is storytelling…I think technologies like VR, AR, gaming are all going to open up new possibilities for storytelling.” This open and experimental approach to online experiences is certainly demonstrated in the brand’s collaboration with Minecraft, which combines “an in-game adventure, capsule collection and real-world experiences” in a way that is precision-targeted at younger, digital natives who expect to find brands in online spaces, even luxury ones.

This fine-tuned, ritual-driven approach to luxury customer experiences should even influence your brand’s name. Adam Alter, a psychologist and professor at New York’s Stern School of Business, explains that “people associate more complexity with luxury products and so disfluency, or cognitive difficulty, makes luxury products more appealing.”

This is why mass-market products often have simple, easy-to-pronounce names, while luxury brands are free to make things a little difficult. Names like Louis Vuitton or Dom Pérignon, for example, force the consumer to spend a little more time reading and working out the pronunciation. An ornate label with a cursive type might increase the difficulty further, but ultimately they all add an “intangible value to a luxury product” to “enhance our perception of their overall value.”

Why Luxury Brands Need To Scale Without Compromising Their Identity

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The third challenge that luxury brands often face in their pursuit of growth is finding a viable way to scale up, reach more consumers and increase sales, without compromising an identity that is based on exclusivity.

Indeed, all brands need to grow and, though the world’s rich are getting richer, this might not always be the case — so luxury brands need a solid strategy for expanding their business without losing that special spark.

How To Scale Without Compromising Brand Identity

In order to demonstrate how you can achieve success when scaling your luxury brand, let’s go back to Burberry. Back in the early 2000s, the brand had achieved huge success in building strong brand awareness, becoming highly sought after by consumers and increasingly associated with wealth and status.

But just as the brand reached an all-time high, it became apparent that something had been lost along the way — credibility. The brand relied heavily on its famous Burberry check, but the print become overexposed, driving demand for fakes which, in turn, undermined its exclusivity. Burberry’s popularity led it to be simultaneously associated with both “ostentatious luxury” and “Chavs” — a negative caricature of working-class people that rose to prominence in early 2000s Britain.

Fashion designer Christopher Bailey helped the brand recover by pulling back the brand’s reliance on its iconic print, raising prices, and refocusing on exclusivity. It drove the trend towards statement pieces like the “it” bag and pioneered ready-to-wear fashion, available to buy straight off the catwalk — all of which not only rehabilitated the brand’s image but also led to its growth.

In order to compensate for the loss of customers after its prices were raised, the brand launched Burberry Beauty in 2010, a luxury make-up brand with “prices that match competitors like YSL and Estee Lauder” allowing the brand to tap into “the younger generation who can afford a lipstick but not a catwalk dress…It means you can fill your home with Burberry even if you can't afford a £10,000 bag."

Final Thoughts

Managing a luxury brand is a delicate balancing act that requires constant analysis of consumer perceptions — so that you can always deliver high-quality experiences and retain a sense of exclusivity and aspiration, while still finding ways to speak to new audiences and achieve brand awareness.

Unfortunately, there’s no magic pill to turn your brand into a status symbol overnight, but if it has history and heritage, if it can demonstrate and deliver unmatched quality, and if it can successfully navigate the tides of public perception — then with time and a riveting brand story, it might just be the next Burberry, the next Rolls Royce, or even the next Rolex.