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How luxury brands are adapting to the recession.

How luxury brands are adapting to the recession

For 10 days in early June, anyone buying a second-hand BMW from one of the luxury-carmaker's main dealers in the UK benefited from a two-year unlimited-mileage warranty, breakdown and MOT cover.

Of course, the main BMW marketing surrounding the event did not use the word 'breakdown', the term 'second hand' or even the neologism 'pre-owned'. The vehicles involved were 'approved used cars' and they were covered by 'roadside assistance'.

Essentially, though, the company's intention was clear. By reconditioning its better second-hand vehicles and applying an extended warranty to them, it was adapting its offering to more straitened times. Aspirational consumers could still enjoy the luxury of owning a BMW, even if they didn't have the money for a brand-new one.

The BMW strategy is one example of how luxury brands are adjusting to the end of an era when top-end consumers automatically assumed that the higher the price, the better the product. In Volume 45, Issue 10 of Admap, published in April 2010, Brethenoux points out how, in the current state of economic turbulence, even the seriously wealthy are reassessing the value they can get and seeking to maximize it. And below them, significant numbers of quality-conscious middle-class consumers are purchasing with thoughtfulness and even a little up-front pain, in the expectation that their chosen product will last longer and need repairing less.

In Admap, Volume 45, Issue 4, published in April 2010, Wyatt highlights a similar development at UK supermarket chain Waitrose. The company's upmarket image means that it has always been more readily associated with premium treats than everyday staples, though when times were good its customers would still buy their more routine grocery products from the store for the sake of convenience. With the arrival of recession, Waitrose needed to ensure that it would not lose this trade, while ideally reaching out to new customers as well. Its solution was to launch an 'Essentials' range of 1,400 staples, including food and household cleaning products, all at reasonable prices.

Wyatt argues that, by positioning its new range as 'essentials' and not 'value' or 'basics', Waitrose has successfully broadened its appeal while ensuring that existing customers will feel at ease with the new approach. The author concludes that this development may have increased Waitrose's brand 'warmth' and 'affinity' with shoppers, while at the same time helping the company to thrive in a harsh economic climate.

'Targeted luxury' - in the shape of members-only loyalty clubs that offer VIP treatment in return for greater customer engagement - is another strategy that luxury brands are increasingly using during the recession. In Volume 33, Issue 17 of Marketing Week, published in April 2010, Roberts looks at three examples - Hotel Chocolat's Tasting Club, HMV's PureHMV and Nestlé's Nespresso Club.

The 100,000 members of Hotel Chocolat's Tasting Club pay around £10 for a monthly tasting box, designed to help them to become chocolate experts and to open up a feedback channel to the company. In return, they receive special offers and treats such as the opportunity to cut the white ribbon when a new Hotel Chocolat store opens in their neighbourhood.

HMV customers who pay £3 to join PureHMV receive special offers geared to their tastes. Members can take advantage of bonuses such as back-stage passes and access to pop stars if they build up loyalty points by buying HMV products.

Customers buying Nespresso-enabled coffee machines become instant Nespresso Club members, and so join the 'community of coffee connoisseurs'. Membership gives them access to an online ordering system and 24-hour telephone-information line and ordering system. There is also an annual programme where the brand talks to customers about two limited-edition coffees.

In all three cases, the companies involved nurture their relationship with club members to keep them loyal. The brands also benefit from the exclusive association people feel when they become a member of a club - even one, like Nespresso, with seven million members worldwide.