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Is Apple Still A Luxury Brand?

iGem?
iGem?
Jean-Noël Kapferer and Vincent Bastien

PARIS - So Yves Saint Laurent"s CEO has been named vice president at Apple. We don't know much yet about what Paul Deneve's role will be beyond the company's mention of "special projects" and his reporting to Apple chief Tim Cook, but let's try to analyze the move from the perspective of luxury strategy.

We all know that luxury brands in particular prefer managers who have worked in the mass consumption arena. But they also have to unlearn some of their strategies to avoid killing the luxury brand. Indeed, luxury marketing is ruled by a set of "anti rules," diktats that are completely different from traditional consumer marketing guidelines.

In Apple's case, the strategy is different: The company is clearly and unapologetically recruiting a luxury expert. And not just any luxury expert: someone from an iconic and exclusive global fashion brand. The hire came as a surprise to most Apple watchers even though, since Steve Jobs' return to the company in 1997, Apple has committed to the sort of strategy directly inspired by the most famous French luxury brands.

This kind of blueprint is rarely executed outside the traditional luxury area. But Apple's success turned out to be as enormous as the challenge itself.

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Swimming in the iPool - Photo: JD Hancock

Consider the fact that not all luxury brands actually adopt a corresponding luxury strategy. Actually, only the best brands do. The others are managed as fashion brands, or premium brands, without explicitly communicating that to consumers -- ostensibly to retain their "luxury" prestige. If luxury is a subjective concept, the luxury strategy is a very specific and extremely profitable business model. Key elements include:

- a founding myth, a kind of utopia forming the brand's dream;

- a creator that embodies the myth;

- a social status dimension that transcends pure function;

- a brand rich in art and design that imposes certain standards;

- no marketing: the brand is not chasing consumers, but the consumers desire the brand;

- the possibility for consumers to customize the products through accessories;

- the will to control 100% of distribution;

- and finally, a sale price well north of the factory price.

Steve Jobs' Apple had all these elements. Although this strategy can be very effective, it is difficult to maintain when sales increase too much. So limiting sales -- as Hermès and Rolex do -- is the natural solution. But to keep growing, the luxury strategy must ultimately be abandoned in favor of a premium strategy (like the one Mercedes adopted) or a fashion strategy (in the case of Louis Vuitton a few years ago). The major risks of the latter two strategies are precipitous declines in demand and profitability.

Since Steve Jobs' death, it's fair to wonder whether Apple is at risk. Jobs embodied Apple's dream, introducing the revolutionary iPod, iPhone and iPad. But then a series of events have led some to question whether we're witnessing the end of an era, the end of a myth: the all-but-innovative launch of the iPhone 5, the decision to allow Google Maps back into the Apple universe, the public discussions about the brand's strategies for tax optimization, and the drop of the Apple stock price, to name the biggest ones. If Apple doesn't want to continue the luxury strategy anymore and doesn't think it can adopt the premium strategy because of competitor Samsung's leading position, choosing a third option makes sense. A fashion strategy is logical, and so is the recruitment of an Yves Saint Laurent director.

Retreating from the luxury strategy will cost Apple significantly. One of the beauties of this approach is the freedom to set its own prices. Apple is losing that advantage, and the impact on both profitability and the value of the brand will become obvious quickly.

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