Juha Christensen's Mobile Experiences

Business of Luxury Part 14: Multibrand Management Insights from Gucci CEO Robert Polet

Robert Polet, Gucci's CEO spoke at the FT Business of Luxury Summit, a speech that lacked the passion and drama of the Gucci of yesterday, but was in tune with today's stronger focus on the business side. 

Gucci has, since Maurizio Gucci persuaded Investcorp to take over the 50% of the shares he didn't own in 1988, slowly but steadily become a fine tuned fashion machine. Maurizio hired Dawn Mello in 1989, and Mello hired Tom Ford. After some initial disappointment, the ship started to turn, though Maurizio didn't scale with the company. His brash management style and his inability to systematize the business, as well as think in terms of effective supply chain management, affected product quality and brand, so Investcorp engineered a takeover of Maurizio's shares in 1993. Shortly thereafter Mello left the company.

With Maurizio gone, Domenico de Sole, a former lawyer for Maurizio, took the helm at Gucci, and took a bet on a bold direction suggested by the then unproven designer Tom Ford. The rest is history. Gucci took over Sergio Rossi, Yves Saint Laurent and YSL Beaute in 1999, Boucheron and Bedat & Co in 2000, Bottega Veneta, Balenciaga as well as the Stella McCartney and Alexander McQueen brands in 2001. Gucci had in the meantime become a publicly traded company.

Today Gucci is a EURO 1.8B company with 5,600 employees. Robert Polet, who came to Gucci in 2004, formerly managed Unilever's Frozen Food and Ice Cream Division. In his speech at the Business of Luxury Summit he shared his take on the fundamental thinking that drives Gucci's business. He explained that increasingly, consumers are driven by:

- Desire & Emotion
- Consumer Segmentation
- Consumers Trading Up & Down
- Consumers performing Mix & Match
- Ultra Exclusivity

Polet explained that Gucci and its brands need to posess the "I Need It Factor" and that Gucci internally manages this is through:

- Managing brands tightly
- Leading and coaching people
- Providing an environment for creativity to flourish

Gucci's brands must, according to Polet, be perceived by consumers to be their friend. They must be inspirational and help keep the consumers' dreams alive. They way Gucci achieves this is a narrow focus on a virtuous circle that starts with Consumer Insight, feeding Creativity, in term connecting with the firm's Operational Capabilities, in turn again enabling Consumer Insight.

Gucci finished 2005 with EURO 485 million in operating income, so something tells me the model is working.

Trolltech IPO - Up 10% During First Day of Trading

Trolltech ended it's first day of trading up 10% during a day where the overall stock market lost ground. Reuters wrote about it here.

Trolltech IPO - First Day of Trading

Trolltech starts trading today at a stock price of NOK 16 on Oslo Stock Exchange (where Opera is also traded). The stock will trade under the symbol TROLL.

It's been an exciting journey, from the early planning through the beauty parade with the Investment Bankers up until the finale deliberations on pricing a couple of days ago.  I have been thoroughly impressed by the Management Team during this process. They have grown with the task, been diligent at every step and really shown that they are of world class caliber. Few people can keep running the business and driving for results while at the same time taking the company public.

Trolltech will issue 7.5 million new shares and this raise approx. NOK 120 million. More coverage here. If you want to follow the development in the stock click here.

Business of Luxury Part 13: Brand Extension Boundaries

Sony just announced a series of PlayStation branded luxury goods. The collection includes items like a watch, a leather wallet, wine glasses, a corkscrew and a picture frame. The watch, for example, retails for about $650. Not exactly high end pricing, but certainly micro segmented enough to give customers a feeling of buying something rare, unique and personal (to their tastes).

Many would argue that there is little correlation between gamers and people who enjoy wine, but in fact a fairly high proportion of gamers are middle class adult males who fall into the same demographic as higher middle range wine buyers.

Canon CoolVue 2020 with Google SmartLook

A friend sent me this hirarious picture, depicting a contact lens with built-in WiFi, Location Sensor, 16 Megapixel Camera and of course featuring a toolbar from Google with Google SmartLook. Google would of course, even in the year 2020, have to pay for reach as they did in the agreement with Adobe last week. Yes, reach deals and the race for good old fashioned eyeballs is back 1999 style. I suppose the picture below indicates that the likes of MSN, Yahoo and Google will still pay for eyeballs in 2020.

Web 2.0 - It's 1999 all over again

I participated in the first Web 2.0 conference as a speaker, and went again for the second time this past autumn. It's hard to believe that Web 2.0 only really got wind in it's sails 2 1/2 years ago, but if anyone has any doubt that the hype has reached hysteric proportions Baris at ComVentures has published a list of Web 2.0 companies here.

Hype or no hype, the Web 2.0 Conference has  become the place to discuss the next evolution of the web and, more importantly, the business model, usability and technical architecture ramifications of the changing landscape.

Business of Luxury Part 12: Licensing Your Luxury Brand

While the luxury brands micro segment their customer bases and become more relevant, meanwhile extending the experience to an immersive retail experience augmented by online media, they are increasingly looking to licensing that brand to companies with narrow domain expertise in a certain product segment. The best case in the industry today is the almost total domination by two firms within eyewear: Luxottica and Safilo. Similar examples exist within fragrances. Dior sunglasses, for example, will be manufactured by Luxottica and sold through a number of Luxottica controlled outlets and distribution channels, as well as though Dior's own stores.

The reason fashion brands don’t manufacture or simply outsource certain product categories is that that playing in the market either is associated with high technical barriers to entry, has distribution channels that are somewhat locked up or has economies of scale around manufacturing or raw materials or access to craftsmen.

Pambianconews of Italy is probably the best source for tracking the luxury licensing world. The company is the leading strategy consultancy in the space. Carlo Pambianco was at the FT Business of Luxury Summit and liberally shared his experiences within the licensing space.

Carlo Pambianco seems to believe in brand extension, and expressed the view that the luxury players are far from maximizing the opportunities their brand reach affords them. Most could safely extend their brand into products that are consistent with their audience’ needs and desires, but chose to play it extremely safe after the Pierre Cardin disaster, where a brand was essentially ruined though poor licensing control and declining quality.

One brand that has mastered broad brand extension is Ferrari.

The perceived value of their cars, and the myth around them, only seems to have been strengthened by the broad availability of branded goods. I just passed though Munich airport and within 2 minutes walk saw both Ferrari branded trainers and a Ferrari branded fragrance. Last week in Las Vegas I saw Ferrari Branded pens, key chains, a laptop computer and even children's go-carts.

I do believe even super exclusive brands like Bottega Veneta could safely, though cautiosly, extend into a number of adjacent products and successful merchandize them in their stores, extending the monetization of the brand.

I think we will increasingly see what people today would deem as unexpected product categories, even services, under the brand umbrellas. Why not a Giucci branded travel alarm clock, a Ducati branded motorcycle vacation, or an Armani branded high-end cruise? If Rosie O’Donnell can do it so can Giorgio.

Microsoft and Teleca Sign Multi Million Dollar Deal to Blend Obigo Suite and Windows Mobile

Teleca and Microsoft Corp. has agreed to expand its three-year relationship with the company by commissioning Teleca to integrate most of the components of its Obigo mobile phone software with Windows Mobile to meet the requirements from a top mobile operator. The order value is in the multi-million dollar range.
 
Teleca will be selling products (Obigo) and services in parallel with Microsoft to the mobile phone manufacturers developing and selling Windows Mobile 5.0-based phones.

Business of Luxury Part 11: The Power of Retail

I have always been fascinated by retail and its ability to make or break a product. I had the fortune of spending a fair deal of time planning and executing retail concepts at both Psion and while running the Windows Mobile activities, and witnessed some good successes, namely around Psion Series 3 and Series 5 and with Pocket PC and Smartphone. I also learned that the old saying that “retail is detail” holds true. All parameters have to work out, the Four P’s have to be pumping in unison and the supply chain has to be smooth, both the downstream and reverse supply chain. When backed up by strong demand generation, retail can work wonders for a brand, as we saw with Pocket PC, where we went above 50% global market share within four years, starting from a market position where our biggest competitor had 89% market share.

A large portion of the luxury industry is in the middle of a major shift from being a distribution business. Traditionally most goods were mainly being sold through distributors or to retailers. Now the shift is towards a model where the brand owners also own, or tightly franchise, their own monobrand stores. The brands can, through owning the total retail concept, control the experience tightly. The retail store is the most immersive branding opportunity for the brand owner. Only here can they own both context and content, and immerse the consumer in the brand. Furthermore, shopping is increasingly becoming Experience Space filler. Consequently, full end-to-end ownership of retail is crucial.

In some cases, luxury goods manufacturers chose to own their own retail concept to bring a number of brands through them. In the licensing space the best example is probably Italian eyewear manufacturer Luxottica, who under license manufacture eyewear under brands like Bulgari, Chanel, D&G, DKNY, Miu Miu, Moschino, Prada and Versace. Luxottica owns Lenscrafters, Sunglass Hut and a number of other retail outlets. Though that they control choice, selection, margin and end-to-end experience for eyewear customers. In addition, Luxottica is good at working with the brand owners’ old retail operations. Lately, Luxottica has sought to capitalize on the growing luxury market by creating a high-end spin-off called Lenscrafters Optique, high-end merchandized stores with more exclusive SKUs, more personal service and in more premium locations than Lenscrafters can normally be found.

So retail is strong, but where is online going? Well, judging on the current roadmap for the fashion companies I spoke to at the FT Business of Luxury Summit, most of them are simply putting their products up on the web, without the same care for merchandizing and experience management as that applied to retail. Maybe it is the case of “one thing at a time” meaning "they will get to it" or maybe we will see the emergence of micro segmented fashion brands coming up from below exploiting the Internet to compete effectively against the high cost incumbent luxury players.

Business of Luxury Part 10: The Coming Servicization of Luxury Products

We will see some interesting new trends in services that help luxury customers fill in their Experience Space. The “servicization” of non-service products like haute couture could create new opportunities for the luxury industry.

Today, the industry assumes that possession is an elementary part of a customer’s relationship with their product and brand, but I believe that a growing segment would rate variation and breadth considerably over possession.

The fashion industry is quick to dismiss this possibility. Gucci’s CEO Robert Polet, who BusinessWeek reported took over as CEO of Gucci after being head of ice-cream sales for Unilever, attended FT’s Business of Luxury Summit in Las Vegas.

If they could subscribe to an Internet service that enabled them to continuously get access to new fashion items, essentially on a time share basis, they would achieve their goal of not being seen in the same dress twice and of having a large wardrobe, albeit it is a virtual wardrobe.. When posed with the question if he could imagine an Internet business model where customers “rent” the clothing, dismissed this categorically as unrealistic and implausible. In fact, I didn’t meet a single fashion CEO at the summit other than Hublot’s mercurial CEO Jean-Claude Biver, who is seeking to be on the leading edge with Internet services. Hublot, which sells watches in the $5,000 - $35,000 range, launched their Internet based Hublot TV at the Business of Luxury Summit. In fact, Jean-Claude's talk at the Summit can be seen here (scroll down to "Summit of Luxury link).

Note: Does anyone have a better suggestion that can replace the awkward word Servicization? Comment on this thread if you do.

Business of Luxury Part 9: Filling out the Available Experience Space

As people increasingly seek out unique services based experiences to fill out their Experience Space, which types of services will we see?

We will of course see the obvious services like travel, transportation, restaurant visits, lounges/bars and hotel stays increasingly move away from the “one size fits all” model and move towards being micro segmented. Increasingly, however, we will also see online and mobile services become micro segmented and take up more and more importance, and share-of-time, in consumers’ Experience Space.

Services like ASmallWorld have positioned their online social network service towards a narrow, exclusive audience, keeping itself micro segmented by having a country club style sign-up approach; only a certain number of invites from existing members can secure a new member access. ASmallWorld’s micro segment is essentially socio-economically self-segmented network focused on people who travel between the major cities of the world and enjoy fine dining, travel and clubbing, yachting and so on.

Mobile services holds perhaps the most interesting and promising prospect for a micro segmented service that can help consumers fill out their Experience Space, or rather, assist them in filling in the space. The mobile phone is with you all the time, it’s very form factor makes it personal and the fact that it comes with a subscription provides unprecedented opportunities for micro segmenting all aspects of the mobile experience, from the point where you purchase the phone and the subscription, through to how the service adapts to your needs over the lifetime of the subscription.

We will also see shopping become a lot more experiences driven. At the FT Business of Luxury Summit the CEO of Simon Property Group, David Simon, spoke about the increase in destination shopping. His firm, which is one of the largest owners of retail real estate in the world, appears to have understood the importance of segmenting shopping experiences. It has in its 200 million square feet portfolio targeted properties ranging from in one end The Forum Shops in

Las Vegas

to in the other end Outlet Malls across the world. David Simon also spoke about the economic effects of aiming shopping experiences at micro segments. At targeted malls sales per square feet consistently outperform the one-size-fits all experiences of most malls and shopping centers around the world.

Activities like gambling, gaming, cinema experiences, theatre and opera will increasingly be themed and segmented to difference audiences to further deepen the interest. San Francisco Opera’s Bravo Club, whose events I go to, presents themselves as “a group of young adults dedicated to building a new audience for San Francisco Opera.”

Business of Luxury Part 8: Services as Luxury Products

If you think of the 24 hours in the day as an “Experience Space” that is made up by a number of discrete experiences, large and small, you start getting a feel for why luxury customers increasingly will turn to services as a way to fill more of their day with luxurious experiences.

You can almost define products like watches, fashion, handbags, mobile phones and jewelry as background or environmental experiences. They help define the person but beyond the “Personal Positioning” they don’t fill out the Experience Space. The environment within which a person exists helps provide a context for the Experience Space, but the things a person does fills up the space.

Consequently, if my thesis holds that luxury customers want to increasingly immerse themselves in luxury experiences during the day, services is the next luxury growth segment. Now remember that I think of luxury as a micro segmented experience, not necessarily as something that has to do with the amount of money spent consuming the luxury good or service. Luxury has to do with Personal Positioning, and the drivers here are uniqueness, rarity, a person’s dreams and self image rather than simply flashing wealth or class.

So how will people fill in their 24-hours-a-day Experience Space and increase the quality of this time? I believe tomorrow’s marketer needs to analyze not only the demographics but increasingly the psychographics of their customers. Primarily they need to map out the lives of their increasingly micro segmented audience and really understand how the Experience Space of the audience can be enhanced.

Business of Luxury Part 7: Brand Ambassadors

I was going to write about Brand Ambassadors in this blog, but my dear New York based Sonopia colleague Thomas Aabo beat me to it in his blog here. The meeting Thomas refers to was at Sonopia's Menlo Park, California offices.

The Brand Ambassador is an interesting concept. I can explain it like this: We all have three kind of friends:

1. Hubs: The kind who always arrange things (parties, gaterings, getting people together)
2. Trackers: People who track the Hubs and generally take their lead and track them with some level of enthusiasm.
3. Followers: The type who is somewhat independent from, and indifferent towards, the Hubs and the Trackers, they tend to plot their own course but don't have a need to follow the Hubs.

The first 2 comprise of the majority of the population. The Hubs are prime Brand Ambassador candidates and other Hubs as well as Trackers are their audience, who have a trust relationship with them. They have an easier time suspending disbelief than if the message came from the brand itself (e.g. "I saw this Broadway show, you MUST go see it" is a better endorsment than if you see a poster from the producers of the show).

The fashion and luxury industry has made very strong use of Brand Ambassadors, though focusing on a few emblemic celebrities rather than trying to democratize the concept. I belive the democratization of the Brand Ambassador, along with Micro Segmentation, is one of the largest economic opportunities for product and services companies over the next decade: It's the holy grail of marketing.

Creating Brand Ambassadors is complex, especially if you want to do it on a grander scale. This probably enters too much into proprietary Sonopia terriroty for me to get into more detail at this stage. I will cover this in a lot more depth during the next months.

Business of Luxury Part 6: Pressure from Mass Market Players

One of the interesting topics I had an opportunity to explore at the FT’s Business of Luxury Summit was around potential competition from the mass market.  

Will the likes of mass market players like H&M, Topshop and Gap (with their GAP, Banana Republic and Old Navy properties) be able to encroach on the high-margin market occupied by the leading luxury industry players. As I see it there are two risks here; the one everyone is talking about and the one I’d be really worried about if I was a high margin player. The former has to do with the risk of the players with well oiled supply chain machinery, high volume/low cost buying and massive retail power moving up-market with sub-brands. The latter risk (the real tricky one) is that the mass market players may become so sophisticated at micro segmenting the market that they are able to bring mass market products/services with mass market prizing out to hundreds of small, narrowly targeted customer segments, who each will perceive their offering to be so well targeted that they perceive it to have the same value as a luxury product: exclusive and personal. It is worth noting here that luxury customers don’t equate luxury with “expensive” but rather with “personal, targeted, unique and exclusive”.

Interestingly, my bottom line take-away impression from the FT Business of Luxury Summit was that luxury goods companies don’t consider this type of competition a real risk.   is now, according to a recent study, the most exclusive brand that exclusive brand in the US. Their CEO Patrizio di Marco believes that the mere fact that mass market products have mass market audiences render them unable to compete with the very definition luxury brands use to define themselves: Rarity and Exclusivity.

I think this underestimates the potential risk from the bottom. While I believe the mass market players will never fully close the gap between them and the luxury players, I believe they can put pressure on the luxury companies' margins through intelligent use of sub-brands that leverage their buying power and supply chain prowess.

Business of Luxury Part 5: Micro Segmentation

I had hoped to speak a lot to people about Micro Segmentation at the FT Business of Luxury Summit but found early on that the industry isn't as sopisticated as I had expected in terms of deploying segmentation tools and creating highly segmented offers, channels and customer conversion programs.

Using modern micro segmentation tools, offer management and campaign programs, luxury goods companies could help fragment their audience into hundreds of small but highly lucrative segments, each of which they could target more precisely with more targetet and relevant propositions, pricing and even branding. Any marketer knows that a more narrowly focused marketing effort generates better penetration wihtin a given segment, but it is daunting to suddenly depart from a "one-size-fits-all" approach to one where you deliberately market differently to hundreds of segments.

Making micro segmentation work requires complicated back office technology, offer management processes, product (or service) production systems, logistics procedures and (where retail is involved) an agile approach to managing merchandizing and retail staff training and motivation.

Most of all, it requires a mindset that embraces and welcomes the massive fragmentation of a company's brand constituents, a view that "the smaller the segment, the better" as opposed to "the more people I can market this product to, the easier it is for me".

Successful micro segmentation results in more optimal pricing, better market penetration and, most importantly, more loyal customers who become more loyal to your brand because you just became more relevant and engaged in a more direct dialog with them.

One of the interesting tools I've experienced comes from a firm in France that I have been speaking to for about a year. Style-Vision have created a new approach to micro segmentation using classic Jungian theory around the Four Achetypes (they actually operate with four subsets within each of the archetypes).

Style-Vision has created an interesting online tool that helps pinpoint segments: Style-Vision Mood Check which you can find here. Let me know what you thought about the result of doing the test.