This luxury company doesn’t need a complicated advertising strategy to market its brands. Find out why here! [Monday: Marketing Marvels]
What do these brands have in common?
One, they all manufacture and sell various high-quality luxury products to the market. Two, these brands belong to the world’s first and largest luxury group.
The name of this group?
LVMH is a French multinational corporation specializing in luxury goods. The company was formed in 1987 through the merger of fashion house Louis Vuitton and champagne and cognac producer Moët Hennessy.
At present, LVMH controls around 60 subsidiaries that each manage different prestigious brands. These are:
- Christian Dior
- Marc Jacobs
- Stella McCartney
- Loro Piana
- Princess Yachts
… and more.
How does LVMH continue to expand and strengthen its presence in different sectors like fashionable clothing, wines and spirits, perfumes and cosmetics, and watches and jewelry?
Through the Luxury Strategy!
In 2018, LVMH adopted a unique selling proposition that focuses on building a heritage of top-notch products and an influence on culture and customers.
These are some of the components of the company’s Luxury Strategy:
- Craftsmanship and Talent Factory
The first key success factor of LVMH is its human capital: Craftsmen who are passionate about their jobs and have unmatched know-how in using exceptional raw materials in their respective fields.
These employees have been trained over the years to unleash their creativity, skills, and talent in producing new collections for LVMH’s brands.
- Innovation Efforts in All Sectors where LVMH Operates
LVMH is on a quest for excellence that combines tradition, craftsmanship, and innovation. Each year, LVMH’s brands launch new products to increase customer loyalty and expansion.
Let’s take a look at two outstanding examples of the company’s innovation efforts in 2018…
In the fashion and leather industry, Louis Vuitton’s artistic director for menswear collection, Virgil Abloh, launched his fiber optic color-changing LV bags and sneakers.
Meanwhile, in the perfumes and cosmetics sector, makeup company Guerlain launched a personalized lipstick case…
… and the first-ever digital radio that allows perfume lovers to share and record up to 9 minutes of audio stories about memories of their favorite scents: The Olfaplay!
These innovation efforts helped the company attract the attention of its target market and gain more customers for its brands!
- Promoting Handmade Quality
A special part of LVMH’s strategy is personalizing the design of custom goods, thereby satisfying even the most demanding client with exactly what they want.
… but that’s not the only quality that makes LVMH famous around the world. Another characteristic that sets the company apart from the competition is the value of workmanship in an era of cheap mass production.
These characteristics build a positive reputation for a company that is devoted to quality!
That is why whenever people talk about high-quality fashion brands, LVMH is almost always part of the topic. This word-of-mouth tends to stay long in consumers’ minds.
- Using Exclusivity
Exclusivity is another factor of LVMH’s marketing strategy. When consumers realize a certain series, product, or collection is limited, they hurry to buy those items while available.
This is a psychological phenomenon called FOMO (fear of missing out), which makes people act fast to not miss out on a good deal.
Another reason why exclusivity works to LVMH’s advantage is because consumers know that when an item is marked exclusive, that means it’s not a mass-produced item that any other person can easily have.
This appeal to stand out from the crowd is what compels some customers to spend thousands of dollars on a LVMH item that is only available for a limited time.
- Working with the Best Talents
One of LVMH’s successful marketing secrets is its products are designed and promoted by some of the best talents in the world. Some of the leading names in the fashion industry such as:
- Helmut Lang
- Vivienne Westwood
- Azzedine Alaïa
- Stephen Sprouse
- Manolo Blahnik
- Isaac Mizrahi
- Romeo Gigli
… and others have worked with LVMH.
Here’s the thing: LVMH can have the perfect product and still fall flat without good promotion. So, how does the company promote its luxury products?
This is where LVMH’s advertising strategy comes in!
Most of the company’s marketing campaigns star top celebrities and models such as Angelina Jolie, Mikhail Gorbachev, Sean Connery, Pharrell Williams, Jennifer Lopez, Uma Thurman, Kanye West, Emma Rappe, Ming Xi, and Xavier Dolan.
Through these influencers, LVMH captures a lot of consumers’ attention and compels them to visit the company’s website, check out its offerings, and even buy one of its luxury items.
Thanks to its Luxury Strategy, LVMH strengthens its reputation as a leading company in the luxury industry!
In the past five years, LVMH has recorded revenues of:
- EUR 37.6 billion in 2016
- EUR 42.6 billion in 2017
- EUR 46.8 billion in 2018
- EUR 53.7 billion in 2019
- EUR 44.7 billion in 2020
Clearly, the Luxury Strategy has had positive contributions to the company as it recorded a higher revenue in 2018 compared to 2017.
LVMH’s Earning Power: Valens Research vs. As-reported numbers
LVMH (MC:FRA) makes for a great case study that we come back to regularly. One great reason?
The company has proven itself to be a better earning power generator than investors might think.
So, how well has LVMH been growing its business in the past years?
The research doesn’t lie—nor do the results. Earning power (the blue bars) continues to show results higher on average than what traditional databases show.
The blue bars in the chart above represent LVMH’s earning power (Uniform return on assets). Historically, LVMH has seen generally robust profitability. Its Uniform ROA ranged from 11% to 15% in the past sixteen years, or an average of 13%. Uniform ROA is at 11% in 2020.
The global ROA is just 6%.
The orange bars are the company’s as-reported financial information. If you relied on these numbers, you will see a company with understated profitability. As-reported ROA (return on assets, a measure of earning power) only ranged from 5% to 9% in the past sixteen years. Its as-reported ROA in 2020 was only at 5%, which is 2 times lower than its Uniform ROA in 2020.
That’s what you’ll see in Yahoo Finance, Google Finance, and most other databases.
The company’s stock price also performed better than the rest of the stock market over the decade, which we can see in the blue line in the chart below. Its returns have been well above the market.
The numbers show that LVMH has been doing well and making a profit.
According to CEO Bernard Arnault, LVMH is not just another bag, shirt, or apparel company. It is also a “lifestyle that is ever-changing with the world.”
One of the good things about the company’s marketing strategy?
It doesn’t need a complicated advertising technique to stay in the consumers’ minds. With a good Luxury Strategy that focuses on:
- Craftsmanship and talent factory
- Promotion of handmade quality
- Collaboration with some of the best talents in the fashion industry
… and good relationships with customers, LVMH is well-positioned to achieve a lasting and positive brand recall and a good word-of-mouth strategy.
Aren’t these some of the best marketing strategies out there?
About The Dynamic Marketing Communiqué’s
“Monday Marketing Marvels”
Too often, industry experts and the marketing press sing the praises of some company’s marketing strategy.
…Only for the audience to later find out that their product was a flop, or worse, that the company went bankrupt.
The true ROI in marketing can’t be separated from the business as a whole.
What good is a marketing case study if one can’t prove that the company’s efforts actually paid off?
At the end of the day, either the entire business is successful or it isn’t. And the role of marketing is always paramount to that success.
Every Monday, we publish a case study that highlights the world’s greatest marketing strategies.
However, the difference between our case studies and the numerous ones out there, is that we will always make certain that the firm really did generate and demonstrate earning power worthy of study in the first place (compliments of Valens Research’s finance group).
By looking at the true earnings of a company, we can now rely on those successful businesses to get tips and insights on what they did right.
We’ll also study the greatest marketing fails and analyze what they did wrong, or what they needed to improve on. We all make our mistakes, but better we learn from others’ mistakes—and earlier, rather than later.
Hope you found this week’s marketing marvel interesting and helpful.
Stay tuned for next week’s Monday Marketing Marvels!
Head of Marketing
Valens Dynamic Marketing Capabilities
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