The Luxury Brand Effect: Should BMW Sell Ketchup?

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    Top Brands in Trouble

    Luxury brands the world over are continuing to struggle. Coach, a luxury leader in the leather handbag market, has experienced quarterly profit slumps exceeding 30%; Saks’ same-store sales down in excess of 23%; BMW’s U.S. sales taking a 28% nosedive; Well, you get it.

    And consulting firm Bain & Company predicts that the 10% or greater drop in the overall luxury market won’t recover until 2012. Time magazine give us insightful new ideas:

    Diversify – The Promise of Pleasure

    “What can these brands do to battle this malaise? Maybe BMW should try selling ketchup or mayonnaise. It’s not as ridiculous as it sounds: according to a study in the Journal of Consumer Psychology, recession-wracked shoppers are 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.

    Expand Luxury Brand Portfolios

    “The message for luxury brand sellers is to expand their brand portfolios to small extravagances. The availability of Coach keychains or Gucci flip-flops allows consumers who are cutting back to re-experience the pleasure of consuming luxury without paying a fortune. 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).

    Don’t Overdo Luxury Brand Extensions

    “There’s a danger in overdoing it, though. Pierre Cardin is the poster child for bad brand extension, according to the Harvard Business Review. “By 1988, it had granted more than 800 licenses in 94 countries, generating a $1 billion annual revenue stream — and profits plummeted,” the authors wrote in a 2005 article called “How Not To Extend Your Luxury Brand.”

    Thanks to Time Magazine for the original article.

    Time.com in partnership with CNN; By Sean Gregory, Aug 05, 2009

    For this article in its entirety, see Luxury Brand.

    What diversification opportunities do smaller brands have in this economy?

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    ABOUT Lisa M. Chapman: With offices in Nashville Tennessee, but working virtually with international clients, Lisa M. Chapman serves her clients as a business and marketing coach, business planning consultant and social media consultant. As a Founder of iBrand Masters, a social media consulting firm, Lisa Chapman helps clients to establish and enhance their online brand, attract their target market, engage them in meaningful social media conversations, and convert online traffic into revenues. Email: Lisa @ LisaChapman.com