Even in tough economic times when value may dictate purchasing decisions, brands continue to seek new ways for consumers to experience luxury, and brand strategies for luxury product and package design must continue to adapt to remain competitive. However, luxury has no standard meaning – it means different things to ever-changing consumer demographics. In addition luxury products have wide-spread appeal, whether they are part of a weekly shop or being bought as a one-off treat or gift. Therefore brands need to ensure the packaging for its products appeal to a diverse audience.
So how are brands meeting these challenges? Let’s discuss fragmentation of the luxury market and the extension of “luxury goods” into affordable product ranges in a process known as premiumisation. For the most part, when we talk about luxury brands, we are speaking of the established brands from mature markets – Europe, the United States and Japan. There are exceptions, but luxury brands from other markets are yet to have the impact on the traditional markets. The fragmentation of the luxury goods market is happening on two levels. It is happening by virtue of luxury goods now being sold in areas of the world where they were not previously available, for example in Africa and India.
They are also being sold to distinct and different generations – purchasing power is moving from the baby-boomers, a phenomenal force in consumption starting in the 1950s, to Generation X, who are new consumers born between the 1960s and 1980s.
As baby-boomers age, their spending patterns are changing and Gen Xers’ extremely powerful force in luxury purchasing is increasing. The two groups do not share the same aspirational and perception values, as Gen Xers are more motivated to purchase in response to messages and cues of authenticity, trustworthiness and value. They have a high-expectation for quality and functionality and can be influenced by design, marketing and advertising. The challenge is to retain attracting both markets.
A BIT RICH
Brands are now adjusting the concept of luxury so that it is not only the super-rich who can experience luxury, but people at different levels of affluence. While there are still products that very few are able to afford, there are now versions of those goods and new products that have been developed. From a business standpoint, this bifurcation is a shrewd move – it fosters brand affinity with a market it hasn’t before reached, and grows the whole market opportunity.
Premiumisation can be readily observed in FMCG goods. This is the creation of luxury class goods – goods with quality and specialness – in categories like food, healthcare products, chocolate and spirits. During the recession, economic uncertainty, or the genuine lack of money, caused consumers to down-trade from their traditional brand levels to less expensive ones. Now, consumers are resuming their previous buying habits as well as being offered products in a luxury, premium category. One might be a familiar brand of chocolate, but now with a new level of cocoa content and presented in packaging featuring rich colours, embossed lettering and gold foil.
Where the most evident examples of premiumisation can be found is in the alcoholic beverages market. As consumers shift from austerity thinking they often want to treat themselves to something special and of greater quality. So, rather than the bottle of spirits they bought before the recession, they buy a new one that offers a validation of their improved spending power and attitude.
So, how does premiumisation work in developing markets? We can see it in regions where rising middle-classes are seeking products that are different to their familiar brands and embody messages of success and affluence. New “foreign” luxury products in the market are changing the established hierarchies.
Closely linked to this is the necessity of luxury brands to develop a real understanding of markets before launching in a new region. Marketers and packaging designers have to learn the imagery and rhetoric of the regions and generations to, first, attract consumers and, secondly, create the experience of luxury.
At Leo Luxe, we visit markets around the world to see what consumers expect from products, learn about the cultural and social values and determine how those factors impact their experience and expectations of luxury goods. This is crucial to a brand’s success. This knowledge informs what we call the ‘Visioneering’ process where we work with brands and designers to construct the brand’s narrative in the visual and linguistic vernacular and develop the look and feel of luxury packaging that will elicit the desired responses in target regions.
It will take great thought and creativity to meet these contrasting demands and major brands will need to be able to react nimbly before new brands recognise the opportunity.