business news in context, analysis with attitude

There is a fascinating piece in Time magazine about a new study that examines the ability of luxury brands – such as BMW – to expand into new and even unrelated categories, bringing their upscale cachet with them.

Unlike more functional brands, the article suggests, studies indicate that consumers are willing, even eager “to embrace luxury brand names over a wide range of product categories, including those with little logical connection to the brand's core item. The authors attribute this phenomenon to the ‘promise of pleasure’ - a brand like, say, Cartier evokes strong, positive emotional responses in consumers, and those good feelings can be easily transferred to stuff like furniture, cheese and even, yes, ketchup.

And the “promise of pleasure,” Time notes, is a lot more important during a recessionary time when so many people can’t afford the real thing: “During a downturn, it's easier to pay $10 for a nice bottle of ketchup than $60,000 for a sedan (although the ketchup doesn't handle as well).”

There are, however, two caveats. One is for such brand extensions to succeed, they have to be high-quality; one can only trade in on brand equity if it is consistent across the various categories. The second is that food may be the most difficult category into which a non-food luxury brand can expand, with Burt Flickinger III, managing director of Strategic Resources Group, pointing out that in the end, it is hard to carve out a luxury niche in what essentially is a commodity business.
KC's View:
This actually reinforces a point that we’ve been making for some months here on MNB…that while we may be in a recession, people have not lost the aspirations that they had while we seemed to be in prosperity. People may have adjusted their sights a bit, or moderated their approaches, and may even be better able or more willing to distinguish between “wants” and “needs” (which often seem like the same thing during boom times). But we all still aspire…and it is the retailers that can appeal to both aspirations and needs that, I believe, are best positioned to thrive in the long-term.