Taking flight – Opportunities and obstacles in democratising luxury

I don’t think democratic luxury exists. I don’t believe in something for everyone… How can we possibly put these products on the Web site without the tactile experience of luxury?”

- Brunello Cucinelli

The democratisation of fashion took a beating this past week as news reached Zeitgeist that Fashion’s Night Out was to be no more. Spearheaded by Anna Wintour at the height of the global recession, the idea was for a curated evening; a chance for stores to open their doors late, inviting a party atmosphere and focussing spend on a calendar event. The Wall Street Journal wrote that last year, “Michael Kors judged a karaoke competition at his store on Madison Avenue, rapper Azealia Banks performed at the MAC store in Soho and a game night was held at a Kate Spade store.” The evening festivities were replicated across New York, London and other cities.
Zeitgeist happened to be on Manahattan’s Spring Street last September when the most recent FNO was held, waiting patiently for a perenially-late friend who works next door to Mulberry. While waiting, it was absolutely fascinating to see the sheer of variety of people out on the street. While the crowds were mostly composed of women, the groups ranged from college-aged JAPs and the avant-garde to hipsters and stay-at-home mothers. Most gawped excitedly as they beheld the Mulberry boutique, enticed by the glimpses of free food and drink, as well the sultry bass tones of some cool track. One elegantly dressed fashionista strode hurriedly past Zeitgeist, lamenting to her cellphone “Oh God, it’s Fashion’s Night Out tonight”.
Ultimately perhaps it was such feelings among the fashion set that caused FNO to come to an abrupt end. But Zeitgeist got the sense that, while undeniably a celebration of fashion and an opportunity for brands to showcase their attractively experiential side – particularly to those who might usually be deterred by luxury brands and their perceived sense of formality – there weren’t a great deal of people actually buying things. It’s quite possible that the whole strategy of attracting a crowd who would not otherwise frequent such stores backfired; they turned up, sampled the free booze, felt what it must be like to shop at such-and-such a label, then moved on to the next faux-glitzy event with thumping music. This then was a failed attempt to bring luxury to the masses.

On a macro scale, the cause for democratisation is hardly helped by the global financial crisis. Although over four years old, the ramifications and scarring done to the economy are still sorely felt. This is illustrated in the unemployment figures around the world, tumultuous elections and anecdotal tales of hardship. More starkly, they are being backed up by solid quantitative research that proves we as a world are less connected now than we were in 2007. In December last year, The Economist reported on the DHL Global Connectedness Index, which concluded that connections between countries in 2012 were shallower (meaning less of the nation’s economy is internationalised) and narrower (meaning it connects with fewer countries) than before the recession. Meanwhile, just this past week, the McKinsey Global Institute published a report showing financial capital flows between countries were still 60% below their pre-recession high. This kind of business environment hardly fosters egalitarian conduct, and indeed such isolationist thinking was on show at Paris Fashion Week recently, where designers clung to their French heritage as a badge of honour. Exactly at the time when art needs to be leading the way in cultural integration, as emerging markets not only continue to make up a larger part of the customer base, but also develop their own powerful brands, it seemed that designers, like the financial markets, retreated to what they knew and found safe.

The world is less connected today than in 2007

Where the ideology of democratising fashion has seen more success is of course online. We’ve written before about how luxury is struggling with the extent to which they invest in e-commerce. One of the principle hurdles is that the nature of luxury – elite, arcane, exclusive – is more or less diametrically opposed to the nature of the Internet – open, borderless, democratic.
Yet the story of Yoox – the popular and, in online terms, long-lasting fashion ecommerce platform – and its founder is one of just such democratisation. (It is particularly stunning to read of the difficulties the founder, a Columbia MBA graduate, Lehman Brothers and Bain & Co. alum, had in attracting VC funding). It also, crucially, points to the importance of recognizing multiple audiences, and how they like to shop differently depending on context. John Seabrook, writing in The New Yorker, reports that when Federico Marchetti set up Yoox in 2000, the world of ecommerce for fashion was regarded as a not particularly salubrious environment. Rather, the magazine compares it to outlet stores like Woodbury Common, fifty miles north of New York. Luxury brands like Prada and Marni could be found there, offering deep discounts on their wares, and it was for that reason – and the lack of control over their own brand – that they didn’t like much to talk about such places. This, despite the fact that they attracted 12 million people in 2011, “almost twice the number of visitors to the Metropolitan Museum”. Yoox this way too, greeted with much trepidation by fashion retailers. The article quotes an analyst from Forrester Research:

“It was a matter of principle with luxury brands that only people who shop on eBay use the internet – and their only interest was in getting a low price.”

Marchetti’s only available source of designer clothing was from last season and beyond, as no brand would sell their current collection. He curried favour with some of them though by advertising the prices without noting the discount customers were getting. Other than that, luxury brands took little or no notice.

Online shopping though would prove to be “one of the largest disruptions of the luxury-goods industry since the birth of the department store”. There are three kinds of online store today; those that sell deep-discounted goods on end-of-season wear, those that sell in-season clothing, and those that have flash sales of small numbers of clothing or accessories. It turned out there was an audience for all of these types of website. Bridget Foley, executive editor of WWD is quoted in the article saying “[T]here has been a sea change in attitude… I think [it] surprised the fashion industry… Just because you love clothes doesn’t mean you love shopping“. This struck Zeitgeist as one of the more important insights in the lengthy article. Though retailers often harp on about the importance of the retail environment, the need to touch the product, to be in an atmosphere where everything has been curated down to the finest detail, online neutralises all of that. This idea threatens those in the luxury sector, as the thinking goes that any such premium on products may seem less justifiable away from a Peter Marino-designed armchair and a nice glass of champagne. Such ideas are being challenged though. Not only is the nature of the store changing – from robotic sales staff to customers as models on the catwalk – but so is the view of the luxury customer as a homogenous, static group, devoid of context. Zeitgeist was at a Future of Media summit at the Broadcast Video Expo last week, where, as behavioural economics suggest, MD of Commercial, Online and Interactive for ITV Fru Hazlitt insisted that consumers had to be targeted in ways that were pertinent to them, not only as demographic groups, but in ways that recognised the context of how approachable they were likely to be at the time, given the programming they were watching. Fru admitted that in years past, broadcasters like ITV had seen advertising as “space to rent out”. Now they were thinking deeply about how and when is the right moment to reach their target consumer. It is the same in fashion. There is not one single way to reach the consumer; buyers of luxury goods do not want to be solely restricted to being able to buy your wares in a physical store.

Chanel are one of the few remaining luxury brands to resist fully integrating online

Behavioural economics played a role in Marchetti’s initial framing of the audience for the website as well. He hired pedigreed fashion writes, as well as artists, architects and designers to make special projects that lent the website an air of curation, of something more special and rarefied that what one might find – or more importantly the way one might feel – at an outlet mall. Marchetti wanted the customers “to see themselves as connoisseurs, even if they were really just hunting for bargains”. The New Yorker article goes into some anecdotal detail about the way people shop on Yoox, which crucially differs not only from the way they would shop in-store, but also from other e-tailers. For online shopping in general, the experience is one where you can purchase ten items, and return nine of them with very little hassle, with credit for multiple rather than a single brand, and certainly no raised eyebrow from a pretentious shop assistant. Regarding specific sites, Yoox, unlike Net a Porter, for example, does not try to force a set of looks onto the user. Behavioural economics tell us that people irrationally value something more when they’ve been made to work a bit to get it. Such is the case now shopping for luxury items, which makes clothing not in-season (i.e. not currently in every shop window), both cooler and cheaper. It’s an act not to be discouraged. A Saks representative says customers who shop online as well as in store buy four times as much merchandise as customers who shop only in the store. What will worry retailers though is that the convenience of the online store outweighs the experience of the physical boutique. The New Yorker quotes a shopper: “I’ll never buy a dress at the Prada boutique again after getting these really amazing ones on Yoox.”

As well as setting up the Yoox website, Marchetti’s company now also powers the online stores of more than thirty fashion houses, including Armani and Jil Sander. Last summer, PPR joined in too, after conceding that their in-house expertise was not up to snuff. The latest development is making designs available to any customer as soon as it hits the runway. Burberry, as well as separate sites like Moda Operandi, have spearheaded this innovative change, which is effecting editorial as well as buying methods previously seen as unshakeable. The demand for this type of instant purchasing seems to be fueled by a niche – albeit a sizable one – that is not representative of the majority of luxury shoppers. The accessibility of a brand and its products is a tricky one to tread, one which Zeitgeist has written about several times before. Tom Ford performed a volte-face this year, after debuting his womenswear collection with no press and VIPs only, relented this year at London Fashion Week by letting bloggers write about the show. Chanel still steadfastly refuses to fully engage with online shopping. The tension is keenly felt in the New Yorker article, where Amazon’s new entry into the world of fashion is referenced. The CEO of Valentino is unconvinced: “Valentino is high luxury… People going to Amazon are not going to Valentino“. This smacks a little of pride and ignorance, for they most assuredly are, though perhaps not with luxury purchases in mind… yet.

It comes back to the idea that there are myriad types of luxury consumer. The industry has not fully acknowledged as of yet that the buying behaviour of a descendant of the ancien regime in Paris is unlikely to buy in the same way as a newly-minted businessman in Shenzhen. They may know that these types of buyers exist, and they may even create different products for each. Importantly though, they are not recognising that these people may go about purchasing in a different way. It’s not just a purchase journey that has changed massively in recent years, as McKinsey’s consumer decision journey illustrates above. It’s also, as ITV’s Fru Hazlitt insists, about recognising that different people shop in different ways, wholly dependent on context. Though Fashion’s Night Out may be on permanent hiatus, and though the global economy may be sputtering along in second gear, the opportunities to leverage deep insights into consumer purchase preferences are there for the taking. Yoox, along with a deeply complicated algorithm, are trying to tap into just this. But the process must start with realising that yes, actually, someone might want to pick up that Valentino dress while surfing on Amazon.

The state of retail

The love of the bargain is what drives them… Click for CNBC’s coverage

It’s a common fallacy to think of a time before a change in status quo as somehow being magically problem-free. A Panglossian world where all was well and nothing needed to change, and wasn’t it a shame that it had to. Similarly, we cannot blithely consign the retail industry of the past to some glorious era when everything was perfect; far from it. The industry has been under continual evolution, with no absence of controversy on the way. It was therefore a timely reminder, as well as being a fascinating article in its own right, when the New York Times provided readers recently with a potted history and a gaze into the future of Manhattan department store stalwart, Barneys. Not only is their past one in which the original proprietor sought to undercut his own suit suppliers, creating a bootlegging economy by literally ripping out their labels and replacing them with his own, but it was also one where department stores served a very different purpose to what they do today. They had less direct competition, not least unforeseen competition in the form of shops without a physical presence. Moreover, today they are run in an extremely different way, with an arguably much healthier emphasis on revenue (though some might say this comes at the expense of a feeling of luxury, in a lobby now brimming with handbags and little breathing room). The problems and opportunities for Barneys could serve as an analogy for the industry of which it is a part.

Despite brief reprieves such as Black Friday (click on headline image for CNBC’s coverage), as well as the expected post-Christmas shopping frenzy, can one of the main problems affecting retail at the moment simply be that it is undergoing an industry-wide bout of creative destruction? Zeitgeist has written about the nature of creative destruction before, and whether or not that is to blame for retail’s woes, the sector is certainly in the doldrums. In the UK, retailers are expecting a “challenging” year ahead. Recent research from Deloitte shows 194 retailers fell into administration in 2012, compared with 183 in 2011 and 165 in 2010. So, unlike the general economy, which broadly can be said to be enjoying a sclerotic recovery of sorts, the state of retail is one of continuing decline. How did this happen, and what steps can be taken to address this?

Zeitgeist would argue that bricks and mortar stores are suffering in essence due to a greater amount of competition. By which, we do not just mean more retailers, on different platforms. Whether it be from other activities (e.g. gaming, whether MMOs like World of Warcraft or simpler social gaming like Angry Birds), or other avenues of shopping (i.e. e-commerce, which Morgan Stanley recently predicted would be a $1 trillion dollar market by 2016), there is less time to shop and more ways to do it. The idea of going to shop in a mall now – once a staple of American past-time – is a much rarer thing today. It would be naive to ignore global pressures from other suppliers and brands around the world as putting a competitive strain on domestic retailers too. Critically, and mostly due to social media, there are now so many more ways and places to reach a consumer that it is difficult for the actual sell to reach the consumer’s ears. This is in part because companies have had to extend their brand activity to such peripheries that the lifestyle angle (e.g. Nike Plus) supercedes the call-to-action, i.e. the ‘BUY ME’. The above video from McKinsey nicely illustrates all the ways that CMOs have to think about winning consumers over, which now extend far beyond the store.

If we look at the in-store experience for a moment without considering externalities, there is certainly opportunity that exists for the innovative retailer. Near the end of last year, the Financial Times published a very interesting case study on polo supplier La Martina. The company’s origins are in making quality polo equipment, from mallets to helmets and everything in between, for professional players. As they expanded – a couple of years ago becoming the principle sponsor of that melange of chic and chav, the Cartier tournament at Guards Polo Club – there came a point where the company had to decide whether it was going to be a mass-fashion brand, or remain something more select and exclusive. As the article in the FT quite rightly points out, “Moving further towards the fashion mainstream risked diluting the brand and exposing it to volatile consumer tastes.” The decision was made to seek what was known as ‘quality volume’. The company has ensured the number of distributors remains low. Zeitgeist would venture to say this doesn’t stop the clothing design itself straying from its somewhat more refined roots, with large logos and status-seeking colours and insignia. Financially though, sales are “growing more than 20% a year in Europe and Latin America”, which is perhaps what counts most currently.

Louis Vuitton’s ‘L’ecriture est un voyage‘ is a good example of experimental thinking and missed opportunities

In the higher world of luxury retail, Louis Vuitton is often at the forefront (not least because of its sustained and engaging digital work). While we’re focusing purely on retail environments though, it was interesting to note that the company recently set up shop (literally) on the left bank of Paris; a pop-up literary salon, to be precise. Such strokes of inspiration and innovation are not uncommon at Vuitton. They help show the brand in a new light, and, crucially, help leverage its provenance and differentiate it from its competition. Sadly, when Zeitgeist went to visit, there was a distinct feeling of disappointment that much more could have been done with the space, which, while nicely curated (see above), did little to sell the brand, particularly as literally nothing was for sale. The stand-out piece, an illustrated edition of Kerouac’s On the Road, by Ed Ruscha, Zeitgeist had seen around two years ago when it was on show at the Gagosian in London. Not every new idea works, but it is important that Louis Vuitton is always there at the forefront, trying and mostly succeeding.

So what ways are there that retailers should be innovating, perhaps beyond the store? One of the more infuriating things Zeitgeist hears constructed as a polemic is that of retail versus the smartphone. This is a very literal allusion, which NBC news were guilty of toward the end of last year. “Retail execs say they’re winning the battle versus smartphones”, the headline blared. What a more nuanced analysis of the situation would realise is that it is less a case of one versus the other, than one helping the other. The store and the phone are both trying to achieve the same things, namely, help the consumer and drive revenue for the company. Any retail strategy should avoid at all costs seeing these two as warring platforms, if only because it is mobile inevitably that will win. With much more sound thinking, eConsultancy recently published an article on the merits of providing in-store WiFi. At first this seems a risky proposition, especially if we are to follow NBC’s knee-jerk way of thinking, i.e. that mobile poses a distinct threat to a retailer’s revenue. The act of browsing in-store, then purchasing a product on a phone is known as showrooming, and, no doubt aided by the catchy name, its supposed threat has quickly made many a store manager nervous. However, as the eConsultancy article readily concedes, this trend is unavoidable, and it can either be ignored or embraced. Deloitte estimated in November that smartphones and tablets will yield almost $1bn in M-commerce revenues over the Christmas period in the UK, and influence in-store sales with a considerably larger value. That same month in the US, Bain & Co. estimated that “digital will influence more than 50% of all holiday retail sales, or about $400 billion”. Those retailers who are going to succeed are the ones who will embrace mobile, digital and their opportunities. eConsultancy offer,

“For example, they could prompt customers to visit web pages with reviews of the products they are considering in store. This could be a powerful driver of sales… WiFi in store also provides a way to capture customer details and target them with offers. In fact, many customers would be willing to receive some offers in return for the convenience of accessing a decent wi-fi network. Tesco recently introduced this in its larger stores… 74% of respondents would be happy for a retailer to send a text or email with promotions while they’re using in-store WiFi.”

These kind of features all speak more broadly to improving and simplifying the in-store experience. They also illustrate a trend in the blending between the virtual and physical retail spaces. Major retailers, not just in luxury, are leading the way in this. Walmart hopes to generate $9bn in digital sales by the end of its next fiscal year. CEO Mike Duke told Fast Company, “The way our customers shop in an increasingly interconnected world is changing”. This interconnectedness is not new, but it is accelerating, and the mainstream arrival of 4G will only help spur it on further. The company is soon to launch a food subscription service, pairing registrants with gourmet, organic, ethnic foods, spear-headed by @WalmartLabs, which is also launching a Facebook gifting service. At the same time, it must be said the company is hedging its bets, continuing with the questionable strategy of building more ‘Supercenters’, the first of which, at the time a revolutionary concept, they opened in 1988.

One interesting development has been the arrival of stores previously restricted to being online into the high street, something which Zeitgeist noted last year. This trend has continued, with eBay recently opening a pop-up store in London’s Covent Garden. These examples are little more than gimmicks though, serving only to remind consumers of the brands’ online presence. Amazon are considering a much bolder move, that of creating permanent physical retail locations, if, as CEO Jeff Bezos says, they can come up with a “truly differentiated idea”. That idea and plan would be anathema to those at Walmart, Target et al., who see Amazon as enough of a competitor as it is, especially with their recent purchase of diapers.com and zappos.com. It serves to illustrate why Walmart’s digital strategies are being taken so seriously internally and invested in so heavily. Amazon though has its own reasons for concern. Earlier in the article we referenced the influence of global pressures on retailers. Amazon is by no means immune to this. Chinese online retailer Tmall will overtake Amazon in sales to become the world’s largest internet retailer by 2016, when Tmall’s sales are projected to hit $100 billion that year, compared to $94 billion for Amazon. The linked article illustrates a divide in the purpose of retail platforms. While Amazon is easy-to-use, engaging and aesthetically pleasing, a Chinese alternative like Taobao is much more bare-bones. As the person interviewed for the article says, “It’s more about pricing – it’s much cheaper. It’s not about how great the experience is. Amazon has a much better experience I guess – but the prices are better on Taobao.”

So how can we make for a more flexible shopping experience? One which perhaps recognises the need in some users to be demanding a sumptuous retail experience, and in others the need for a quick, frugal bargain? Some permutations are beginning to be analysed, and offered. Some of these permutations are being met with caution by media and shoppers. This month, the Wall Street Journal reported that retailer Staples has developed a complex pricing strategy online. Specifically, the WSJ found, it raises prices more than 86% of the time when it finds the online shopper has a physical Staples store nearby. Similar such permutations in other areas are now eminently possible, thanks in no small part to the rise of so-called Big Data. Though the Staples price fluctuations were treated with controversy at the WSJ, they do point to a more realistic supply-and-demand infrastructure, which could really fall under the umbrella of consumer ‘fairness’, that mythical goal for which retailers strive. Furthemore, being able to access CRM data and attune communications programmes to people in specific geographical areas might enable better and more efficient targeting. Digital also allows for a far more immersive experience on the consumer side. ASOS illustrate this particularly well with their click-to-buy videos.

As the Boston Consulting Group point out in a recent report, with the understated title ‘Digital’s Disruption of Consumer Goods and Retail’,  “the first few waves of the digital revolution have upended the retail industry. The coming changes promise even more turmoil”. This turmoil also presents problems and opportunities for the marketing of retail services, which must be subject to just as much change. If we look at the print industry,  also comparatively shaken by digital disruption, it is interesting to note the way in which the very nature of it has had to change, as well as the way its benefits are communicated. It is essential that retailers not see the havoc being waged on their businesses as an opportunity to ‘stick to what they do best’ and bury their head in the sand. This is the time for them to drive innovation, yes at the risk of an unambitious quarterly statement, and embrace digital and specifically M-commerce. What makes this easy for those companies that have so far resisted the call is that there is ample evidence of retailers big and small, value-oriented to luxury-minded, who have already embraced these new ideas and platforms. Their successes and failures serve as great templates for future executions. And who knows, the state of retail might not be such a bad one to live in after all. Until the next revolution…

Can great creative work save the finance sector?

“Marketing has always combined facts and judgement: after all, there’s no analytic approach than can single-handedly tell you when you have a great piece of creative work.”

- McKinsey & Co., Measuring Marketing’s Worth

Capitalism has come in for a bit of a knocking of late. Recently, the Futures Company found that 86% thought “big business” maximised profits at the expense of customers and communities (not helped by another recent poll stating 51% of top financial services executives think businesses should just be about making money). The antipathy is not a recent phenomenon and hardly one confined to the fringe. John Maynard Keynes, whose ideas framed modern macroeconomics, said capitalism is “not virtuous [and] doesn’t deliver the goods”. And while there was a short period when such sentiment was only to be found in places like Pyongyang, these feeling are now more pervasive, particularly against the driving force of capitalism, the finance sector. Can marketing help shift perceptions?

From the outside looking in, it would be difficult to say that some of the wounds are not self-inflicted. Multiple fiascos have led to much head-shaking and hand-wringing within the industry. The furore has ceased to abate as politicians score cheap points for fingering the blame on bankers, and lionised institutions like Goldman Sachs suffer massive public relations disasters (including a part ownership stake in a prostitution ring). The manipulation of the LIBOR scheme and subsequent reforms reveal no quick end in sight to a period of immense negative exposure that began with the global recession four years ago.

So the image of finance is indisputably tarnished right now. Marketers are trying to change this, in different ways. Many Western financial institutions have been around for a while; the symbolism of such longevity can serve as a valuable asset for brands. Coincidentally, this year sees Citigroup – while dealing with its turbulent present – celebrate its 200^th anniversary. They’ve had a broad above-the-line campaign celebrating their place in history, putting their relative achievements – helping fund the building of the Panama Canal – alongside other important moments in time. Citi also have their eye on the future too, making a concerted push in areas of sustainability, recently managing to become the first bank to achieve LEED (Leadership in Energy and Environmental Design) certification for 200 projects from the U.S. Green Building Council. The question is whether leveraging history and sustainability – both of which arguably convey a sense of trusted consistency, rather than reckless risk-taking – with advertising can help address a serious deficit in consumer affinity for the finance sector. Does it even matter? If we assume banker-bashing is an irrational emotion, and the whole sector is tarnished with the same brush, how much sway does it have over the rational part of our brain that must decide where and how to invest our money?

Several banking brands rely on the prestige of their historical affiliations, and have found themselves no safer from customer ire. It can be hard to seek engaging differentiation in a commoditised industry where the power of switching costs can a play a strong role. A PwC report from July summarises, “Many consumers remain loyal due simply to the absence of a negative because it is often easier to put up with something that is less than perfect than go to the trouble, and potential expense, of switching”. So what else can be done to wake potential customers from this inertia?

It’s interesting to see Morgan Stanley take a decidedly more personal tack, with a new campaign, “What If?”. Shifting focus away from the company as a faceless monolith, the WSJ said the aim is to make the company seem “like your neighborly [sic] stock picker”. The creative itself is beautiful, showcasing professional types with aspects of business and social responsibility framing their translucent faces. It attempts to convey a personalised and considerate attitude that includes but also goes beyond profit-making. It broadly taps into themes in a new book. “Positive Linking”, by Paul Ormerod, sets out to dismiss the outdated notion that people are driven by personal, “rational utility maximisation” and instead claims they are more interested in aiding the network to which they belong, realising this will help them too. This in essence is a slightly less selfish form of capitalism.

“I owe the public nothing”, J.P. Morgan was once quoted as saying. Have times changed much since? The problems with the world of finance are too numerous for this article. The crisis of confidence has begun to have an effect on recruiting, as MBA graduates turn their learned eyes to more reputable sectors. Although it may not seem like it now, customer perceptions of brands within this sector are malleable. Any one that can position itself as an outlier in what is currently seen as a pernicious industry will have much to gain. The tail cannot wag the dog though. If these businesses are to change, they must back up their ambitions with operational changes that reduce risk and ensure profits sit alongside dedication to the broader lifestyle their advertising evinces.

The New Yorker in a digital state of mind

Part of Zeitgeist is currently working on the strategy for an acquisition and retention scheme for a major international newspaper. Monetising the digital side of the paper’s efforts is a source of great intrigue and interest. Earlier this week, Enders Analysis published findings showing The New York Times “generated $243 million from its digital services in the four quarters since the launch of its new subscription strategy, representing about 15%” of the Group’s total revenues, an impressive stat. We’ve talked previously about how newspapers are dealing with the Internet, from the introduction of paywalls in the UK, to sponsored takedowns at the Wall Street Journal. Magazines are having a slightly easier time of it, reported The Economist last week. The New Yorker, one of the most stimulating publications out there, itself featured a long essay on the future of the news, back in 2010.

WSJ’s example represents a real opportunity for publishers, and it is surprising this tactic has not been employed since (that we know of). And while some might deem it opportunisitic, we love the thinking The New Yorker had recently, when science-fiction author Ray Bradbury passed away. Rather than simply chiming in on Facebook with a paltry “RIP”, they made the most of their association with the man, and offered a token bit of generosity at the same time (see above image). A nice way to satisfy your fans, boost the brand, and pay respect to an influential writer. This is no standalone piece of activity either, but seemingly part of a broader digital strategy. The New Yorker has been investing heavily in its website of late, reports Mashable, with traffic up around 50% YOY. But, says newyorker.com editor Nicholas Thompson, more than traffic,

“Success is when someone says, ‘I just feel great about coming to the website, I’m going to find things I love,’ or, ‘I haven’t read the magazine before, that’s interesting, let me subscribe.’”

On Mobile Loyalty

A little over a week ago, consultancy Analysys Mason hosted a webinar entitled ‘Mobile loyalty schemes: best practice examples and key learnings’. Zeitgeist listened in…

Speaking in the webinar were Tom Rebbeck and Helen Kapapandzic. One of the key messages in the webinar was the distinction between customer retention and true loyalty campaigns. Retention can be achieved through short-term measures (e.g. discounts), loyalty is about longer-term investment. Keeping a customer loyal can benefit both the business and also the end user. According to a recent article in the Wall Street Journal referenced by the consultancy, there are myriad benefits to longevity at work, in marriage and by staying with the same providers and businesses. Loyalty it was noted, however, can only support other elements of a service that must already be in place.

For telcos, the key is in reconciling operator wants with customer needs. In the telecoms market in the Western world, where seemingly everyone has a mobile handset of one sort or another, the strategy has moved from winning new customers to keeping current ones. The market is saturated with a flat if not slightly falling rate of growth.

Churn is likely to increase this year over last year in the UK, but not in France. When Zeitgeist asked the reason for this disparity, he was told the reason was that telcos in the French market had focused a significant amount of marketing specifically on decreasing churn. In the UK, the increase is due to the beginning of the expiration of 24-month contracts (such as those affiliated with iPhones), which conversely made churn decline in 2010.

The webinar continued with a roundup of some selected case studies currently being employed by telcos around the world. These took the form of either financial or social-based schemes, and sometimes both. Aircel, for example, was an invitation-only service, offering special invitations to events, exclusive offers, and worked on a points-based system. Proximus seemed to be the most fun offer mentioned, focused as it was on younger customers, who would always be incentivised as there was always a prize guaranteed.

Vodafone’s loyalty scheme, with sponsorship of Formula 1 racing and the London Fashion Weekend, is deservedly well-known. With a simple thank you, and no requirements to join, it serves as an attractive loyalty tool. The loyalty scheme from Starhub seemed to be one of the most innovative and well-developed, a Quintessentially-esque programme, replete with triple play offers.

While it is tempting to think of customer loyalty schemes for telcos as similar in construction to those of supermarkets, the reality is in fact very different, as the consultancy pointed out. Tesco’s enormously popular Clubcard, as recently written about in The Economist, is there for the business to get as much information as possible on customer buying habits, to the extent that it could effect your insurance policy. Telcos already have a significant amount of data that illustrates user behaviour based on a much smaller range of products (SMS, data).

Those schemes that didn’t work, which the team at Analsys Mason came across, were ones involving points-based schemes that were extremely complicated, and might involve getting out an Excel spreadsheet. This kind of thing can be too time-consuming, and ultimately appeal to customers who are already loyal. As a trend, some operators were discontinuing points in preference of social, or simply overlaying it to create social engagement. Of course, as we all know, the key to a successful B2C campaign is often about personalisation. The difficulty though lies in the fact that it is usually easier to measure top-up schemes than emotional ones. This, however, does not alter the importance of personalisation. Rewards to drive tenure, celebrate anniversary of contracts or personal birthdays are all small touches which could be much more widely employed, said those at Analysys Mason.

In all it was an engrossing and stimulating lecture on consumer preferences, technological development and trends in communication. Zeitgeist looks forward to the next one.

Fashion’s digital moves

Both parts of Zeitgeist may be out of the office at the moment, but that doesn’t mean we haven’t kept our nose to the grindstone, our ear to the ground, our eye on the ball, our finger on the pulse and our foot wedged in the door.

Last week, Zeitgeist was fortunate enough to attend the International Herald Tribune’s Heritage Luxury conference at the InterCon on London’s Park Lane. While the Missoni clan waxed lyrical on the importance of keeping it in the family, after such luminaries as Paul Smith and Alber Elbaz had already spoken, the real highlight was seeing the legend that is Karl Lagerfeld, designer for Fendi and Chanel, as well as his own eponymous collection. Karl spoke on a variety of subjects. He even offered his take on the LVMH / Hermes debacle, which Zeitgeist wrote about recently, suggesting that Hermes keep their earnings private, as Chanel does, so as not to encourage hungry buyers by “putting the milk out”.

Host Suzy Menkes asked Karl to talk about Coco herself, which he did with no subjectivity, criticising her knee-jerk dislike of blue jeans and miniskirts, and failing to adapt. It is this same failure to adapt that is causing many businesses – or even entire industries, such as books and music – to suffer massive losses, with Chanel itself a “dowdy dowager”, as the Wall Street Journal once described it. Indeed, when the managing director of the reputable Brown’s stores asked Karl what how important he thought the digital world was for luxury brands, Karl was unequivocal, saying Chanel the brand ignoring digital would be like Chanel the lady ignoring miniskirts and blue jeans. He was also talked about the increasing binary pull of fashion, where inexpensive and expensive rule, with no middle ground. Businesses in that middle ground – think FCUK – will not fare well in the future he intimated. If one thinks of this from a branding perspective, it is perfectly understandable. Selling your product as the best you can get, or, conversely the best you can get at the cheapest price, is a robust selling point. Anything between becomes undefinable and wishy-washy; at exactly what point has quality been sacrificed for expediancy in x product? Chanel have done a fair job so far of embracing the digital world, with an engaging iPhone app as well as an e-commerce section on their site.

Of course, some brands – especially luxury ones – revel in their heritage, and so it was on Tuesday night when Zeitgeist attended the evening preview of Dior Illustrated at Somerset House. Illustrator Rene Gruau was still drawing adverts and couture dresses for the company long after other labels had switched to photography. Of course, it is when one can combine the worlds of heritage and keep the brand contemporary that is most impressive. So it was with Ralph Lauren’s 4D presentation, also last week, shown in New York and London, recorded by a friend of Zeitgeist’s. Enjoy.

Out (of pocket) for a byte to eat

“One cannot think well, love well, sleep well, if one has not dined well”, wrote Virginia Woolf. A friend of Zeitgeist’s is coming to town on Friday for what will surely be a sybaritic weekend. For the first time, Zeitgeist found themselves on Toptable booking dinner at a very nice restaurant nestled in London’s Mayfair district. The reservation came with an offer of 50% off the usual a la carte menu price. What had Zeitgeist done to deserve this? Nothing. So what is in it for the restaurant? See previous answer, perhaps. As any Toptable devotee knows, offers like this are plentiful, and reflect the state of the restaurant industry as a whole, particularly in the premium sector.

Zeitgeist was walking in Notting Hill about eighteen months ago with, as it happens, this same friend. We happened to pass Nicole Farhi’s restaurant, which sits next to a Daylesford Organic. Both were teeming with people literally overflowing into the streets enjoying their expensive brunches. “Credit crunch, what credit crunch?” my observant friend quipped at the time. It was hard to disagree. The numerous plates of food and cups of coffee being consumed by these Chloé- and Zegna-wearing denizens were totally out of sync with the times. Perhaps what these people had been doing though is downtrading. Instead of going out somewhere special for a dinner, they had instead chosen to go somewhere more informal for brunch. Or perhaps instead of going away on holiday for a weekend break, they had decided to stay at home and enjoy the fruits of London. This is an anecdotal example but the argument is supported by the reams of analysis conducted by those boffins at places like Forrester and Datamonitor; JWT’s AnxietyIndex wrote in May “Ostentation is out, practicality is in.” Witness brands like Starbucks and Louis Vuitton.

It’s this lack of ostentation and sense of frugality (which, for the most part, still pervades) that perhaps explains why, writes The Economist, “Visits to posh restaurants in America declined by 15% between May 2008 and May this year… Fast-food restaurants, on the other hand, saw traffic decline only 2%.”. It would be nice to know how a “posh” restaurant is defined, but otherwise it makes for an interesting statement. The decline at both ends of the dining spectrum lends credence to the notion that there is a “cocooning” going on where people are quite happy to order in or to cook their own meals, surrounded by their HDTVs and microwaves. Clearly though it is the high end that is fairing particularly poorly.

The article notes that Restaurant Week – held during the dog days of summer in Manhattan, when the city fills with tourists and any sensible residents have escaped northward – lasts for six weeks this year, and notes that the 21 Club “usually sees its business increase by around 25-40%” during the Week. So, similar to Taste of London, the event must attract those who would not usually consider dining at such a place (for such a price). Are these the customers the restaurant wants though? No mention is made in the article as to retention rates. As pointed out in the Wall Street Journal, (which contains details of several interesting promotions),

“‘Having dollar menus and value menus has become unsustainable, from an operating profit standpoint, so restaurants need to be able to establish consumer continuity with loyalty programs. Instead of getting customers in three or four times per year for special events, they need to get them in two to three times per month,’ says Burt P. Flickinger III, managing director of Strategic Resource Group, a consumer consulting firm.”

The industry has had to adapt though as the Internet plays an increasingly dominant role in people’s lives, not only exposing the consumer and restaurant to every bad review detailing every morsel of undercooked food and every supercilious waiter, but also forcing the establishments to adapt to people’s psychology when shopping online, which mostly falls under the category of ‘bargain hunter’. A similar thing has happened with high-end fashion. Members-only sites offering significant discounts on luxury brands have sprung up everywhere. The Economist reports that two of these, Gilt and Rue La La, have begun offering restaurant discounts as well:

“Gilt, for example, recently sold a four-course meal at the Tribeca Grill, a restaurant owned by Robert De Niro, an actor, for $160 (36% off). Shopping sites like these attract image-conscious restaurants, because only the site’s members can see that the restaurant has started to offer leaner prices.”

The other lure for the restaurant in this case is knowing that those whom the offer will be seen by are likely to be a suitable target audience for your establishment; at the very least a more specific one than might be found on somewhere like Toptable. These restaurants are innovating (mostly because they have to). The prospect of drawing crowds is an attractive one. Sites like Groupon offer significant discounts on meals, but which only become active once enough people have signed up to the offer. Foursquare similarly relies on encouraging a group of people doing virtual battle in order to obtain a mayorship that grants them free coffee at Starbucks or free champagne and a great seat at Galvin’s Windows. In the long term, having offers that keep the customer loyal (and accustomed to a consistently-priced menu) will hopefully, for the sake of the restaurants, trump the savage discounting some have become imbroiled in. For Zeitgeist, value-add to the proposition is far more attractive than saving on a regular meal. Let’s hope others think the same.

A Close Shave with Tennis Greatness

Roger Federer, the world’s most successful tennis player with a staggering sixteen Grand Slams to his name, shows here why he is so great. This ad appeared on YouTube earlier this week from Gillette. It appears to be an unofficial edit from when Mr. Federer et al were breaking between shooting a commercial. The Wall Street Journal recently added to the mountain of editorial written over the past 18 months predicting Federer’s demise – Federer’s reaction was to win three more slams in that time, an achievement which most tennis players spend a career trying and failing to obtain – with coda that attempts an abrupt volte-face, perhaps having already learned from last year to never, ever count Federer out.

Your views on the authenticity of the shots in this ad are welcome. Is it a William Tell-like feat of extravagant excellence caught in a candid moment? Or a nice bit of CGI in a very constructed environment? Federer, according to Reuters, remains coy on the subject. Regardless, Zeitgeist is definitely playing tennis in a suit tonight…

UPDATE: The video has officially gone viral.

The Art of Behavioural Economics

Much proverbial ink has been spilled on the coinciding of two events on September 16th, 2008. This was the day that, as Lehman Brothers collapsed, artist Damien Hirst made off with a cool £111m, “the largest single artist sale ever held” for his show Beautiful in my Mind Forever, according to the Wall Street Journal.

On Monday evening this week, the auction house Sotheby’s held an Impressionist and Modern Art sale, after a large article in the FT that weekend, detailing how the pieces to go on sale, which included a self-portrait by Edouard Manet (above), were expected to fetch record prices. This following recent all-time record sales, first of a Giacometti sculpture for £65m in February, which was then eclipsed three months later by a Picasso that sold for £72m.

The sale, which ended in the Manet being sold for £22.4m – a record for the artist – was not deemed a success. This morning on BBC Radio 4′s ‘Today’ programme, Sotheby’s representatives were quick to reference “unsophisticated buyers” from the Middle East, Far East and Russia; there was also vague talk of buyers looking for something that looked “like a painting for the 21st century”.

Looking at the sale holisitcally, which we can do purely in financial terms, it was an unqualified success. The result was seen as disappointing only because expectations had been raised considerably, based on – what? There was nothing to suggest that this sale would break major records, only the knowledge that certain pieces of art had recently been sold at high prices.

The problem then, a term used in behavioural economics, is one of anchoring. Behavioural economists disagree with classical economists’ view that people act on a rational basis. The anchoring rubric is a question of framing. In this case, because expectations had been raised artificially by recent news of record auctions, the sale at Sotheby’s was viewed as a disappointment, when in fact, in purely financial terms (i.e. “did the objects on auction meet and surpass their reserve?”), it was a success. In much the same way, the Hirst / Lehman Brothers coincidence is used to illustrate the robustness of the art market, irrespective of global financial turmoil. This framing fallacy concept is of course by no means exclusive to the high-end art world. In fact it can be found everywhere in the natural world as a way of helping judge the relative value or worth of an object, by positioning it relative to its peers. It is done in the supermarket every day to help consumers make a choice between peer products. The different prices and attributes anchor the shopper, giving them a relative understanding of the value of each product. Without this, a shopper would have no idea how much a product or feature was “worth”, or how the product sat on a hierachy with it’s competitors.

Apple’s next iPhone revealed

Is this Apple’s new iPhone? It might well be. According to the good folks at Gizmodo, this prototype was lost in a café the other day. What does it tell us? Well, if it’s the genuine article, it illustrates how Apple does a good job with its product development by listening to what the more tech-savvy and vocal consumers gripe about in previous incarnations of a product, in this case having both a front and back-facing camera.

Rumours that the phone will be 4G-capable abound, and this news comes a few short weeks after the WSJ ran with a story about two iPhone models being released this summer.