Episode 1

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Video Transcript

Welcome back. So in our very first module, we looked into what luxury is and why luxury is changing in a way that the experiences and the storytelling become more important.

Understanding Luxury and Value

We also learned in the first module that we have to ask ourselves three critical questions The first was what do we really sell?

The second was which emotion do we want to evoke? And the third one was what can our customers do differently?

So in this second model, we want to do a deeper dive and look closer into the concept of luxury.

And I typically like to use the term extreme value creation to explain what luxury really is. Because fundamentally in luxury, we are creating extreme value for one specific person.

What means value to this person can mean something completely different than if we ask another person.

I always like to use the example like If someone does not play golf, this person most likely will never buy golf equipment, whether luxury or not.

So in order to create extreme value for this person, it’s maybe a different product category.

And maybe for one person, it’s one brand and another person, it’s another brand. So each of us may choose a different category or may choose a different brand or a different product or service.

But fundamentally, when we think about luxury, rather in the terms of extreme value creation rather than in terms of expensive or status or all these kind of preconceived notions then we are already in a much, much better shape than most others who observe the category. So luxury is extreme value creation.

The Importance of Customer Experience

And let’s basically have a quick reflection what this really means.

So a friend of mine recently went to a jewelry store.

I’m not disclosing the brand. It doesn’t really matter, but went to a jewelry store of let’s say one of the most relevant jewelry brands in the world.

He wanted to buy a necklace for his wife.

So he went there and he had a quite considerable budget for that purchase. This was for a very important event, that they wanted to celebrate and a very important gift for him personally.

So he walks now into that jewelry brand store and tries to find a sales associate.

The first thing that happens to him was that there was like a security guard that almost gave him, like, a feeling of intimidation.

He didn’t feel very good walking into the store.

Then he finally found a store personal who did not know him because it was the first time that he went into this specific jewelry store.

So now when he spoke with the sales associate and he was explaining what he wanted to do, the associate looked at her watch and said, you know, it’s very busy today. I can maximally give you five minutes.

Imagine.

What did we just say? We said luxury is extreme value creation.

This was a person that wanted to do a very important purchase a gift to his wife for a very special moment.

I think you can all imagine how he felt when the store person was telling him that she only had five minutes.

And probably she told him that she he should have made an appointment, blah blah blah, all of these nice things. In this moment, it didn’t matter to my friend.

He came with the with the aim to do the special purchase.

And then he felt let down.

As a consequence, what did he do?

He left the store.

He went to a competitor in the same area and bought the necklace from the different brand.

And he told me that since that time He never set foot in any store of the first brand that he was trying to buy the necklace from.

And even worse, he probably in the meantime told the story to twenty, thirty, or maybe even more of his friends and is kind of trying to convince all of them not to buy there anymore.

This is a very important lesson.

Because it shows that luxury is so much more than just the brand.

It’s so much more than just the image of the brand.

It’s the entirety, the totality of all experiences that are connected to a brand. And this is what so many brands neglect.

They invest an incredible amount of money in awareness in beautiful stores.

And hopefully to some extent into the training of the sales ambassadors.

But what they often don’t do is to map the customer journey in a way to make sure that things like what happened to my friend never happens.

That you’re always treated in the best possible way according to the emotionality that the brand has as a target emotion. Remember, in our first episode, I told you, you know, what emotion do you want to evoke?

So if someone walks in the store and the very first interaction is I have five minutes. Please be fast.

First of all, you basically I can guarantee you you’re not evoking any positive emotion, a, And b, for sure, there is no consistency in the experience.

And in the end, what happened was a classic breakup with a brand.

He was enough with the brand. This is why he went there to buy.

He gave the brand his attention and he was willing to give the brand money for a very important purchase that was very emotional not for him.

And what did the brand do?

Five minutes.

I don’t have more time.

And unfortunately, this is not necessarily the exception.

We do a lot of research about brand breakups, and I can tell you we see this again and again and again. And is typically not at the primary place where the value is created.

It is somewhere in the store. Sometimes at the servers. It is somewhere where no one watches or sometimes when just two humans interact and they cannot establish an emotional bond and an emotional response.

And then this happens. There’s a breakup.

And your customer may never come back. So we have to to think when we think about luxury not only about certain expressions.

We have to think how does someone make you feel.

The Power of Brand Storytelling

In the first module, we looked into luxury hospitality as an example.

And then our countless examples where I went to a hotel and be sure you have stories like these two. I go to the hotel.

Everything is perfect. Let’s say the room is nice and so on.

And then you go to have breakfast.

And then let’s say the coffee takes forever to be delivered.

One touch point can be enough to ruin the entire experience.

One single touch point.

Yeah. Or another example, also very typical of hospitality.

You pay hundreds if not sometimes thousands of dollars for the hotel room And then you wake up in the middle of the night and get thirsty and then you look around your room and then you see a bottle of water that you know in retail costs not more than a dollar and the hotel sells it for you for fifteen or eighteen dollars for one bottle.

And then we feel that is not shared.

So we have to think end to end in how can we create an experience that creates extreme value for the client? The client has to be in the center of everything we do. This has very much to do with what I told you in the first module.

Where I told you that we have a generation with gen z, but also the old other generation, the older generations are are imitating that behavior more and more. We have a generation that expresses themself on social media.

This means it’s a generation that become master brand builders of their own personal brand.

And this means that we have clients that are very aware of who they are and how they want their image to be projected.

And this then also means that again we are looking for experiences that are are basically supporting that value proposition.

So luxury brands have to think much, much more nowadays.

About the experience they create in a holistic way than just the transactional and selling products.

And although when I do master classes with brands, I can testify that intellectually everyone gets it.

I had never had a disagreement on this with any manager of any luxury brand.

However, As we say, the devil is in the details, how to bring this to life is very, very difficult.

And this is why in many cases even if there is the intention to create the end to end customer experience, very often, it’s not there. So we have to really be aware what is happening and also fundamentally what is happening in the brain of a customer or let’s call it even a person that doesn’t have to be a customer. What is happening when they are interacting with a brand that is positioned in a luxury space, and they are fascinating results.

But before we go into this one important data point, that is important or critical when we think about a customer experience today.

We already saw on the first module that we spend more and more time on digital devices that our life is shifting more and more from the physical world into the virtual world. And there are no indication that this is going back. This also means that the time that we have now in the physical world. And the time we have to interact with brands gets incredibly valuable.

Customers don’t give us time anymore. So I always like to say we are in a situation where no customer waits where there is very little patience. So we have to be very, very quick and very precise when we deliver our service and also when we try to bring our brand story across.

The access to customers and the ability to convince customers in a very noisy world in a world that is more and more crowded where there’s more and more brands every day.

In this world, the access to customers and the idea or the the the ability to influence them become the critical success vectors.

I sometimes say a post on social media is what was fifth avenue in New York or plus von doom in Paris a few years ago. They are still critical and important.

But if we are not convincing the customer during the customer journey and especially before they even embark on the journey, Then we can have all those fancy boutiques and places, but no one is going to come. So customer access becomes important. And in the world in which we are in, it’s not just enough to sell a service.

We have to excel in creating extreme value.

This is the name of the game. So Why is this the case?

Why is the brand storytelling so important?

I told you in the first module, that the typical story for hospitality brands is paradise, indulgent paradise, experience paradise, being near paradise. And then there is a typical story, for example, in fashion and leather goods. You will all hear about craftsmanship, about qualities, about artisans.

They all tell you something very similar.

So we have to break out of this because if we say This is paradise or if I tell you I create the best possible quality, what am I doing?

I’m talking about myself.

I’m talking with myself. I’m not talking to you.

The art of brand storytelling is to flip the script script and make it personal for you.

In other words, I have to be able to articulate how the quality, the craftsmanship, the artisanship and maybe my heritage how all of this together impact your life.

Which emotion do these create? And if I cannot articulate this, then the story is useless.

Then it’s just an internal story, but not a customer centric story.

A great story has to solve a problem for a client. We are in the business of problem solving.

So we have to be inside driven. And then our answers have to be relevant.

They have to be authentic.

And they have to provide meaning. Think about what we said in the first module about creating cultural capital.

I told you we have to provide meaning.

So meaning is the name of the game in an authentic way. So now it’s very important to remind ourselves what these words means because I always like to say every word counts. So when you think about authenticity, authenticity to me means that you’re true to the core values of your brand. That is authenticity.

And being true to the core values means that you cannot be like five percent off or ten percent off. Because if you look at a person and says, say, you know, this person is like ninety five percent authentic.

It means that fundamentally the person is not authentic. So authenticity is binary. It’s either there or it’s not there.

And meaning means that we have to give someone something of importance to them.

This is why it’s so critical when we build a brand story that it’s about them, not about us.

And relevant means that in the moment that the person is looking for something that we can offer them some solution some service, some product that fits what they’re looking for in that particular moment. So if we can create the three, meaning authenticity and relevance and ideally solve a problem for a client, then we create extreme value.

And I think now it becomes clear why paradise a, paradise b, paradise c is irrelevant.

Unless we can translate it into a problem solution situation. So why is this so critical?

Why is this where in my conviction the value of a brand is created?

So in order to explain, luxury.

I created a model as part as my doctoral thesis.

Which I called at that time decoding luxury. It was actually the first time that we tried to suck the concept of luxury into its different parts and pieces and try to figure out what is actually what creates value.

And the results are fascinating.

When we take a normal brand or a premium brand, so I call them normal to premium brands. We typically find two value components.

And you can see this on the graph on the bottom side. We have functional value. You see this on the left, and we have emotional value that you see on the right. So every normal to premium product typically is comprised of these two value components. And I want to use a prop to show you what I mean.

So if you look at this water bottle that I have in my hand, This water bottle is made of glass so you can maybe hear this. It’s a glass bottle and there is a bit of a rubber, around it that protects the glass.

So this bottle I can fill with water And then I can drink the water. I can refill it and so on. So a typical water bottle.

So a bottle like these this would typically cost somewhere between five dollars and let’s say ten, fifteen dollars. Something in this range. This is not a thermos, bottle that would maybe be like thirty dollars or so. But I would say between five and fifteen dollars would be probably a price that most people would be willing to pay for a glass reusable water bottle.

And why is it that we would say that is because a we have seen bottles like this before.

So we have a certain familiarity with this. In pricing theory, we call this anchoring. So we are anchored within the category.

And then the other thing is, you know, its glass has a certain size. So we have a functional value, and then we can probably argue that, you know, the wide sleeve, and maybe the shape of this that is slightly rounded here, give it a specific emotional value. So and this translates then in our brains to something like ten to fifteen dollars just because of the familiarity we have. So this is how knowledge to premium categories work.

And If we now want to create luxury, a third value component shows up.

And before we did a really groundbreaking research as part of the doctoral thesis that was able for the very first time to show the impact of luxury on the perception of a person. We didn’t really know why these enormous price points, let’s say, fifty thousand dollars for the MS birkin bag or five, six million dollars for a bugatti.

Why people would pay these price points? We could not really explain the magnitude of And so in order to approach this, I created a third value component exclusive to luxury brands that I called added luxury value. This is the component you see on the slide above and that connects with the emotion of the functional value and really takes that to a completely different level. If the added luxury value is not present, so for normal to premium products, you can maybe get away with a slight five percent, ten percent, fifteen percent premium to the category average. Again, our anchors preventers for going beyond.

But sometimes there are brands that can break out significantly.

So if I take this water bottle again, if we know nothing more about this bottle, than what I just told you. As I said, we did a couple of studies about this. Most people would be willing to pay between five and fifteen dollars.

But now I will introduce a change to this bottle. I will turn the bottle around And then you can hopefully see that this is one of the limited edition chanel number five bottles.

That Channel launched to, commemorate hundred years of the Chanel number five perfume.

So now this seems to be a completely different proposition because now there’s a story It was a limited edition. It was part of a limited edition series, and this water bottle was literally sold out, I think, within a few days worldwide.

We were only able to get it on a platform that sold resold products for a price point around three hundred dollars. Chanel, retailed it for about eighty to ninety dollars.

So three hundred dollars on a secondhand platform instead of five to ten dollars if there is no story.

So no story five dollars.

I add a story. It becomes three hundred dollars.

This is what added luxury does.

The Impact of Added Luxury Value

Edit luxury value does. It does not explain yet what it is. I will come to this in a moment but you can see the enormous effect five three hundred five three hundred.

And we can see now that the value can be dramatically higher and is typically dramatically higher when up added luxury value is present.

So let’s try to find out what added luxury value really is. And it’s actually fascinating. So in order to measure is What I did was I took a picture of a woman in a normal car. Let’s say in the case of the study, it was a false one.

And we made sure when we took the photograph that you could have a clear visual on the woman.

And then we photoshopped the same woman into a luxury car. In this case, a bentley.

So you have exactly the same photograph of the woman in two different settings.

Setting a, she is in the normal car, setting b, she is in the luxury car. Nothing else changed. We kept the background even the same in which the car is parked. We just exchanged the car and the woman stayed the same.

So now fascinating things happened. We did a study in five countries in Japan, in China, US, France, and Germany. We wanted to make sure that we cover some of the most relevant geographies in the world for luxury purchases.

We also wanted to make sure that the participants in the study don’t know about the other situation. So when you participated in the study, you either saw the woman in the Volkswagen And then we ask question about that woman, or you saw the woman in the band play and the participants who were different would get the same set of questions.

So completely controlled environment, people had no idea that we were talking about we mask this as a psychological study. And then we ask about sixty questions.

And each question was designed to try to see if there is an underlying dimension that could be unlocked.

Life-Changing Results

And the results literally changed my life. I would not be here today and do this exercise with you and do this module with you. I would not be the luxury expert that I became to be, and I would not work in the industry today without these results. They literally changed my life. And we also didn’t only do this with a woman in a car. We did this also this man. We did it with different categories, with watches, with fashion, you name it.

So what were the results? And you can see them here on the slide.

So the inner curve that you see is the woman or the results of the woman that is sitting in the normal car.

The outer curve in dark blue is the woman that is sitting in the Bentley.

As I told you, it’s the same person. We just changed the context.

Dimensions of Perception Shift

Now what you can see at first glance because further out means better And if there’s a sig, it means significantly better that in practically all dimensions the perception of the woman in the luxury setting was significantly more positive than the perception of the woman in the normal car.

And this now goes far beyond status because you see even things like more attractive We could show for the first time that luxury significantly enhances the perception of attractiveness.

Significantly.

And if I’m, you know, not politically correct, you can say in one setup, the person didn’t look so nice. And in the other setup, and there was a specific question of it, people said, wow, the person is a head turner.

And as I told you, the same result for men and for women, the same result whether we put watch on the wrist of a person or if we basically put a handbag to the person or some dresses.

Didn’t matter.

The luxury set setting was always the significantly more positive setting. But then the other things look at on the right side, attribute expertise.

Isn’t this interesting?

You just change the context of the person and you put them from a normal setting in the luxury setting and the attributed expertise increases significantly.

We now believe that the person comes from a good family, maybe can play the piano and went to a great school.

So there’s a much stronger attribution of expertise.

Then there is a dimension. You can see this on the left side inspires new experiences.

This means that people now feel almost inspired to do things they have never been done before.

They imagine a world where you can do more things.

Which means that fundamentally you develop an openness to live a richer life in terms of experiences.

Also, there is look at the bottom left side, a one of a kind behavior signal. We believe that these people somehow are exceptional different than others have more interesting things that they that they see and do every day. And then there’s a very interesting dimension of perceived protection, which is one of my favorite dimension so to speak because it is completely new. And because it’s a dimension that We never really understood or could dissect before about luxury.

Perception of Protection

So what is this dimension?

We ask, for example, questions whether the person would be allowed or could allow himself or herself to misbehave in some certain situations.

And what I mean with this is let’s say you’re in the restaurant and, you know, for whatever reason, your life and fork fall down and make some noise.

So in a luxury setting, you will feel seemingly much more comfortable to get out of such a situation.

Or if I use a restaurant example, Most likely if you come with the nicer car or if you’re better dressed or have a nicer watch.

And so on and so forth, the chances that you will get a table without having a reservation in a place that is typically sold out all the time are much higher.

And I can tell you as an anecdote, when I discussed these results with the CEO of one of the two or three most expensive and luxurious hotel groups in the world.

What he told me immediately when I asked him, if he ever send someone back without a reserve that had no reservation that came in a Rolls Royce. He was laughing. It was saying Daniel, If this person comes with a rolls royce, we actually maybe even find another table and add the table to our restaurant.

So this is just an anecdote, but the data supports this in perceived protection. So if you think about now all these dimensions, We see that the perception of a person shifts towards feeling more attractive towards feeling more of an expert towards having more inspiration for experiences.

And also, fundamentally, towards having a life where the person can be much more spontaneous because maybe I don’t need a reservation in a restaurant.

All of these are dimensions that explain why people pay the premiums.

So when we buy a luxury product or service fundamentally we buy the anticipation of a perception shift And because it’s so important, I would say this again.

We are not buying predominantly a product in luxury or a service.

We buy the anticipation of a perception shift.

I use this prop again This is a water bottle without a story, and this is a water bottle with a story.

Two completely different value propositions.

Because the water bottle with the story now provides me the perception shift.

If it’s just a random white water bottle and I don’t know anything else about it, it’s all about the product. And when it’s all about the product, the maximum well value I’m willing to attribute to it meaning the maximum price I’m going to be willing to pay is very limited.

But if I add a story that now gives me the the thought or the anticipation, the hope.

That my personal perception will shift significantly.

Then I’m willing to pay significant premiums.

The Role of Story in Luxury

Because now it’s not anymore about the product isolated, but it’s about the product combined with myself.

And this combination of product and myself enhances me as a person. So we have a significant shift in perception and a significant shift in value creation. And as you could see from the example, it’s driven by the story of the brand. So the brand’s story creates extreme value.

And this ladies and gentlemen, is a departure from what we typically think.

Typically, we think in quality, quality, quality, quality. We think in design.

We think in in, you know, craftsmanship, artisanship.

And I’m not saying that all of these things are not important.

But remember, they are not the story.

They are part of a bigger story. And the bigger story ideally has to be about the client, about the person.

So our storytelling should never be we do the best craftsmanship. We have the best quality because every brand on the planet says the same thing.

And I can guarantee you the brands that have the worst quality are those who shout loudest that they have the best quality. So let your clients be the judge. They will anyway do it, especially if they’re gen z’s. They will do their homework. So you don’t have to tell them better quality, better craftsmanship. They will anyway not believe you.

But they will be resonating if you make your story their story. If you make it about them, not about you.

This explains why in luxury, the story is not negotiable.

It is the carrier of value.

So if you want to be able to price the product ten x more hundred x more or thousand x more or even more than the category average you can only do this by creating a narrative that makes the product about the person and that integrates the person into the product story that makes it unique.

Crafting a Compelling Brand Story

So your story has to be inside driven Remember what I said before about the relevance. It has to be differentiating Because if your story is like any other story, think about our first module, then forget it has to be authentic and we have to be able to tell it in less than five seconds.

Why?

Because gen z has an attention span between six and eight seconds.

And this is not because this is a generation that doesn’t get it. No.

It’s the opposite because this is a generation as I told you in the first module, the first social media generation.

It’s a generation that had to be able to process from the first days onwards.

Thousands, if not ten thousand of data points every day.

This is the generation that was exposed to the highest amount of data any new generation was ever exposed to. So naturally, in order to process the data, gen z had to reduce their attention span. They are faster and faster in decision making. So our stories have to be more precise concise and they have to fit within a five to six seven time frame.

Otherwise, they will not get it.

So this is how you tell a story.

And I come back to what I ask you in the first module to do that because it’s very difficult to tell a story in five seconds.

In high precision.

You have to have clarity on who you are. So the three questions come back that I gave you as a homework in the first module. What do you sell? Which emotion do you evoke? And what can your customers do differently?

Examples of Successful Brand Stories

These are critical elements of the story table.

I give you an example of a great story.

It’s not necessarily a brand in the high luxury field but I think it will make the story very clear. And this is Nike.

You know, some people say Nike is a manufacturer of exercise equipment.

But I would frame it differently.

Because Nike has two elements of their brand story and they’re equally important.

The first element is a rational element.

And this is that everybody is an athlete.

This is a very important statement that Nike has been giving us for more than four decades. Everybody is an athlete.

This represents the core values, the core belief.

And I think this is something that you will agree with that is very inspiring because if Nike tells me and everyone else that we are all athletes, then it feels empowering and inspiring.

So it’s a very inspirational message.

And then Nike also has an emotional core. Because you have to combine the rational with the emotional.

And the emotional core is just do it. It’s a call to action. So it’s not just about everybody’s an athlete, then we may say, yeah. So what?

But to combine it, with the emotional call with the call to action of just do it. Everybody is an athlete. Just do it.

This is a complete description of the brand world of Nike, and you can describe it in less than five seconds to a way that is easy to memorize.

So these are very important criteria.

If you tell your grand story in five six seven sentences, it becomes a paragraph. In some cases, even two or three or four, it’s simply too much. No one is going to memorize it.

It has to be very simple, less than five seconds.

Think about Rolex.

Rolex is a brand that celebrates superlative achievements.

It’s all about people who go the extraordinary mile to achieve things.

And consequently, every watch of Rolex is a celebration of an extraordinary achievement.

Think about the daytona that celebrates successes in race, in motor car racing.

Think about the GMT Master that fundamentally is a celebration of the breakthrough when planes could cross the Atlantic Ocean for the first time and cross time zones.

And then it became one of the most relevant pilot watches.

So each of their watch is a celebration of extraordinary achievements and then consequently every brand ambassador of Roleix is a personality that in his or her field has achieved extraordinary thing.

So fundamentally, it’s a brand that celebrates people who are sharing the mindset of extraordinary achievements of striving for the extraordinary.

Yeah. This is what makes this brand stand out to many other brands.

Of course, they do wonderful watches and have incredible quality, but this is not the main selling point.

The main selling point is the story behind the brand, and the execution is done in a way that over decades has never changed. Has always been on point very precise. It’s one of the very few brands in the world that achieves that. What do we really sell? Which emotion do we involve in Evoque what can our customers do differently?

The Essence of Luxury Branding

And I think when you look at the research that I just showed you, it becomes so crystal clear why we pay the premiums.

We don’t pay the premiums because the bag is nice.

We don’t pay the premiums just because the quality is great. Other brands also have great quality.

We pay the premium because we resonate with the story of a specific brand for the way it’s told.

And then we we then within their portfolio resonate for sure with a specific product or product category.

And then we anticipate that this product of that brand story will help us to shift our perception.

And because it’s about us, we are willing to pay a premium.

Conclusion and Next Steps

This concludes module two and I’m very delighted to welcome you to our next module once you have the time.

Okay. This was a bad ending. Keep it on.

This concludes model two, and I can’t wait to see you again for the next module. Thank you for your attention.

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