Overall, in terms of provenance, Europe still seems trumps the rest when it comes to luxury – eight of the Top 10 most valuable luxury brands in the rankings call Europe home – including Louis Vuitton, Hermès, Gucci, Chanel, Rolex, Cartier, Prada, and Burberry. The US weighed in with Michael Kors and Tiffany.
Louis Vuitton’s undisputed win as most valuable luxury brand this year, in particular, was a coup – more so, given that the total brand value of the luxury category declined by -6% (by $7.1 billion) to $104.6bn, and that it was one of only two of the BrandZ Top 10 Luxury Brands which showed growth (Chanel moved up 15% to nearly $9 billion).
The clincher though, is that it has managed to hold its ground as number one brand in the luxury category for 10 years.
But even the most valuable brands always have room to improve, and – as the saying goes – slow and steady wins the race.
Biting on Louis Vuitton’s heels this year in terms of growth was Chanel, which grew its brand value by 15%, according to the BrandZ study.
However, a closer examination shows that, in terms of a sustainable and steady rise over time, only one luxury brand made Millward Brown’s ‘10-year Top Ten Risers List’, along with Apple, AT&T; and Google among others.
That brand, was Hermès, which has increased its brand value by a phenomenal 292% from 2006 to 2015.
According to the study, the importance of the brand value increases for these 10-Year Top 10 Risers is not simply that the brand value increased, but that it increased in a sustainable way, rising over time despite the year-to-year ups and downs.
Sadly, this is more than can be said for the luxury category as a whole this year, which was the only category in the BrandZ rankings to experience a decline this year from last year (-6%).
The report states that disruptive forces, including changing consumer attitudes, the economic slowdown of developing markets and geopolitical factors influenced the varying rates of brand value growth, but one more so than in the luxury sector.
Luxury categories declined in value in the 2015 Global 100 report, after rising 15% and 16%, respectively, in the 2014 report, with much of that decline attributed in the BrandZ findings to struggles with “difficult forces of change, including evolving consumer attitudes”.
Competitive, societal and geopolitical forces caused disruption across every category.
Geoff Beattie Head of Global Strategic Consulting at communications agency Cohn & Wolfe identified two main sources: The inherent instability of the world’s financial and economic systems at the macro level, and the furious, positive dynamism of entrepreneurs at the micro.
Following a strong recovery from the global financial crisis, the pace of sales in luxury, particularly, flattened for several reasons, including the economic slowdown in China, Brazil and Russia. In addition, China’s anti-corruption regulations trimmed luxury gift giving in that country.
However, changing millennial tastes is arguably the biggest manageable disruption for brands going forward. The report identifies that millenials, particularly, “viewed luxury products as expensive indulgences inconsistent with their desire to live in a modest and sustainable way”.
The BrandZ report goes further by stating that “future brand success in each of the 13 categories analyzed in this report depends to a great extent on addressing the concerns of these millennial consumers and those who share their views”. (*See below for more information on ‘What Millenials Want.)
Luxury brands in particular were also especially impacted by slower economic growth in China.
“The slowdown of the Chinese economy especially impacted Prada. With one-third of its sales coming from the Asia-Pacific region, Prada’s annual profits and brand value dropped. Both Louis Vuitton and Gucci, which expanded rapidly in China, were impacted by the economic slowdown and the anti-corruption regulations that dampened official gift giving.”
This factor signals a red flag for brands who are stakeholders in the country and wish engage its consumers and foster brand loyalty, but more in-depth research on Chinese consumers extracted from the report provides some insight into the changing local mind-set.
With greater choice, more knowledge about brands and greater self-confidence, Chinese consumers have become increasingly more selective. The report suggests that this means brands need to “stand for more than fame and status”.
“In a competitive Chinese market with sophisticated consumers, brand becomes more important, especially when reaching the millennial generation, which is individualistic. Among anticipated trends and developments:
• Chinese consumers will be much less driven by status;
• The provenance of a brand, whether it’s local or foreign, will matter less than its efficacy and ability to emotionally connect with consumers;
• Certain categories, like technology, will lead growth;
• Healthiness and well-being, trends that are impacting entire categories in the West, will continue to be important in China.”
However, BrandZ offers that despite all these changes and the greater sophistication of Chinese consumers, interaction with brands is still relatively recent. Consequently, Chinese consumers will try new things (an opportunity); but they’ll be less loyal (a threat) – so brands working in this space still need to up their game.
However, despite these emerging challenges mentioned above, BrandZ identified that a select few – listed in the report as ‘The Brand Contribution Top 15’ succeeded despite category pressures.
Five of the Top 15 came from luxury: Gucci, Hermès, Chanel, Burberry, and Louis Vuitton.
These luxury leaders have identified what it means to be a strong brand and the priceless value it holds.
Brand power has proved crucial during the past 10 years. The decade has been divided in the BrandZ report roughly into two halves, before and after the global financial crisis. No category was spared as consumers spent more cautiously and consciously.
However, high brand power helped brands survive and even flourish during this turmoil – and the two key components of brand power have been identified as – salience and meaningful difference .
In the digital era, particularly, brands need to be more meaningfully different to engage with consumers and achieve higher brand power.
When it comes to raising brand awareness, strengthening the brand and keeping consumers engaged, it comes as no surprise that digital will continue to be key for brands across the spectrum.
The report indicates that spending on digital advertising for one, is expected to comprise more than half of total advertising expenditure in the UK this year, an indicator of the significant shift happening in many media markets, including the US, the world’s largest.
Mobile in particular, is predicted to inevitably become the control center for all connected systems of communications, and the starting point for brands in terms of both understanding and engaging consumers.
The mobile-centric web will be visual and bitesized (e.g. Instagram) and video will continue to be the predominant media format, albeit, delivered via a diverse system of platforms and content types – each with its own design specifications.
Social media therein, as an avenue for communication and audience engagement, will also define the level of ‘brand love’ and loyalty brands are able to extract from the changing and, increasingly fickle consumer base.
In this arena, this year, the spotlight again goes to Louis Vuitton, which – despite its 161-years – also managed to beat out fellow luxury brands in the SocialZ Ranking, which measures the overall social vitality of a brand in social media. Gucci came in a far second, trailed by L’Oreal and, finally, Hermès.
From new media to old traditions, the BrandZ study identified that while it’s cool to be hip, young and innovative, age-old experience and a legacy to stand by goes a long way in the eyes of consumers.
Results prove heritage remains important; the average age of a BrandZ™ Luxury Top 10 brand is 129.
But, as millennial consumers become increasingly demanding and saturated with choice, a balance between tradition and innovation also rises in prevalence, and “to cultivate the next generation of luxury customers, brands need to present the brand experience – if not the products – more accessibly”.
According to the study, the need for purpose is closely related to the need for meaningful difference. This fundamental requirement for brand success will become even more important as brands excel in functionality and consumers choose a brand more because the brand helps them express who they are or aspire to be.
People have always relied on brands to express how they see themselves or want to be seen. The difference for the future is that we’ll select a brand not only for the status it signals, but also because it mirrors and even validates our personal values.
This is where sustainability and corporate responsibility come in.
On this issue, Ola Mobolade, Managing Director at Firefly Millward Brown says: “There’s no mistaking the swelling tide of attention to, and interest in, corporate sustainability – both from the perspective of businesses seeking to operationalize and communicate their commitment to ethical environmental and social issues, and from consumers looking to do the right thing without sacrificing quality or affordability in their brand and product choices.”
Moreover, consumers also choose a brand because of how it makes us feel because of the experience of the brand, or its design and style, or its unmatched convenience. So, some quality, or combination of qualities, will distinguish a successful brand from its competitors.
Whatever the focus, the need to be meaningfully different applies to both brands in developed and also developing markets such as China, where members of the rapidly expanding middle class are becoming much more sophisticated consumers. In fact, the report states that “in developing markets, the need to establish meaningful difference is more urgent as more competitors, often imitators, enter the market and expand choice”.
Nigel Hollis, Executive Vice President and Chief Global Analyst at Millward Brown has identified four key action points for building meaningful brand difference.
As identified earlier, millenials are a different breed and adapting to their changing tastes in particular will be vital for any and all brands who want to win in this tumultuous market.
Technology will continue to lower barriers to entry for new competitors, and – influenced by millennials – consumer expectations will rise around issues such as healthiness, authenticity, personalization, and sustainability.
For luxury brands, there are three main areas which are most relevant in terms of changing mind-sets that need to be addressed:
LUXURY: Millennials like the fundamental idea of luxury – craft and authenticity – but not the way it’s traditionally expressed, with logos that speak more loudly than the product. That said, millennial luxury can be a mobile device decorated with a stylized apple missing a bite.
APPAREL: For those luxury brands which overlap with apparel, millennials expect selection, style, and price. They want it all. They want it now. And conditions along the supply chain matter to them.
RETAIL: In retail overall – millennials know what they like. They mix and match from a fixed repertoire of brands. Shopping either in physical stores or online is fine, but the experience needs to be fast and friendly.
Rob Alexander, Global Planning Director of marketing communications brand J. Walter Thompson offers this parting piece of advice: “We see change, and we see it massively with millennials empowered by technology. Historically, you had a product and you sprinkled some brand magic around it. You painted on some values and emotion. The brand values might have been synthetic 10 years ago. Now – and in the future – brand values need to be genuine and authentic.”
To further investigate brand value on Luxury Society, we invite your to explore the related materials as follows: