Five ways mass-appeal brands like McDonald's and Starbucks can borrow from luxury

Richard Ascott, managing director at Just So, outlines the five considerations brands need to make to tap into luxury growth.

The old "reassuringly expensive" slogan of Stella Artois has a natural counterpoint, "worryingly cheap." As Steven D. Levitt observed in Freakonomics, we always rate highest the wine we are told is the most expensive (even if it's not). But will a price hike and a face lift win you more business? 

Going premium has become something of a trend for mass market brands. Starbucks has launched a 'Premium Artisan Concept Store', Amazon continues its quest to compete with the likes of Net-a-Porter and Farfetch, and McDonald’s has taken advice from "Michelin chefs" to bring us its "thickest burger ever."

Humanity has evolved by striving for better; better genes and better jeans.  So given the choice of a ‘premium artisan’ cup of coffee not only will we go for it but we will think more highly of the brand that sold it to us

While it’s easy to dismiss this as a clever way of charging more for a burger or a coffee, it is a marketing play more than an accounting trick.  

It is one thing to increase prices, it is quite another to convince people to pay them.  In 1893, the eponymous founder of the luxury men’s fashion house, Alfred Dunhill said: "It is not enough to expect a man to pay for the best, you must also give him what he has paid for." 

Luxury brands are often accused of extortionate prices, exorbitant margins and revelling in extreme profits.

But a quick look at Britain’s most successful luxury brand, Burberry, shows a net margin of 13.9% for 2015, versus McDonald’s' 19.9%.  So what is going on here and where is Burberry’s margin being spent? We humans are an aspirational species. 

Humanity has evolved by striving for better; better genes and better jeans.  So given the choice of a ‘premium artisan’ cup of coffee not only will we go for it but we will think more highly of the brand that sold it to us, even when we return to the standard and comparatively drab motorway service station Starbucks. 

This ‘trick’ is used by true luxury brands all the time. French couturiers such as Dior and Chanel spend millions putting on shows for a clientele thought to be smaller than 2,000 and often lose money in the process. However, these losses are more than compensated for as millions of consumers buy a little piece of that brand magic in the form of Chanel No. 5 or J’Adore.

The real question here is not ‘can elevating your brand work?’ but how to do it successfully.  When the novelty of the 'Signature Collection' burger wears off, how can Maccy D’s lure back the customers Five Guys pinched? The answer is to learn from luxury and invest a little margin in the the whole experience and the things people care about. 

For a mass market brand that has learned from luxury there is no better example than Warby Parker (WP), the US eyewear brand famous for its $99 specs and spectacular business growth.

Brands who want to emulate Warby Parker’s success need to follow five key rules: 

  1. Focus on the quality of the product.
  2. Space: WP has sales per square foot second only to Apple and, like the tech/luxury giant, the overwhelming feeling in store is one of space.
  3. Packaging: WP provides a beautifully made cloth bag and hard case (better than most of their luxury competition with rrps of $500+).
  4. Service: the unsung hero of marketing - WP has an answer-after-one-ring policy for all their call centres.
  5. Communications: not every brand is a $3,000 suit but all should strive to be their Sunday best.  Just like your product, the creative ideas, films and images you create should not only resonate with your audience, they should show you at your finest - indeed, these are the foundations on which our agency is built.

And like Warby Parker, when you get all this right, you achieve that most holy of grails: the word of mouth recommendation. I’m doing it now …

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