Burning Answers

Doc Searls hung out here last week: we laughed a lot, did tech and swapped stories. He attended the Burning Questions conference presented by the Harvard Business Review and organized by Halley. She and a bunch of other bloggers were at Katz’ Deli Thursday night.

(To answer the most burning question at the conference, I confirmed that Halley did stop by a Fifth Avenue boutique for some sexy underwear for her NYC survival kit. That’s the kind of undercover work this blog will undertake to bring you the back story you deserve to know.)

It was an interesting week. Doc signed up to work with me and my co-consultant, Transition Networks, to develop a massively luxurious web application. “Massively luxurious” is what happens when a luxury brand successfully sells into the “mass market” of people who are almost invisibly prosperous, living simply but insisting on top quality for some purchases. Noted recently,

“We don’t want to haggle over commodities but we’re experts in prestige and the tools of our trade and we want the good life at great prices. You’ll find us over at CostCo, loading paper towels into our Mercedes. Next we’ll stop at CompUSA, grooving to our iPod while stocking up on commodity CD blanks to Rip Mix Burn on our tricked-out iMac. Back home, we’ll order cut-rate printer cartridges from inks4art.com since CostCo and CompUSA only stock the Epson parts.”

Whether it’s a Mont Blanc pen in your pocket, Steuben crystal on your mantle or a Rolex on your wrist, you probably indulge in a luxury item once in a while. When you do, while you may wish you could pay less, price won’t keep you from the purchase. Price often justifies the purchase, a fact that supply-demand curves don’t explain very well.

Transitions. Networks. Luxury.

Transition Network‘s CEO Mary Olson and Creative Director Randal Hunting brought Steuben Glass into the web age with the kind of success story many have given up on. After two months developing an innovative web strategy with Steuben management, they implemented, rolled out and established a new web site over the next two years. Their deliberate work resulted in a site that generates 68% of Steuben’s new business, revenues up about a third and web activity up 90%. Not bad for an investment equivalent to a retail store, and requiring just 3 people to operate. Most importantly, it’s halted a decline in their customer census, attracting for the first time the children and grandchildren of their aging customer base.

Transition Networks has been similarly successful for other clients:

21 Club
Corning Museum of Glass
Oxygen Media
Luxury Marketing Council
Joseph Jurson
Saber Partners
Henry Welt
Steuben

These companies know better than any others that their customers are customers, not consumers. When you make that distinction, Doc is the guru you want on your team, and not just because his Google link count is 88,100 (Steuben’s at 14,100). He and Dave Weinberger nailed customers’ decline into consumer hell in Cluetrain:

“So the customers who once looked you in the eye while hefting your wares in the market were transformed into consumers. In the words of industry analyst Jerry Michalski, a consumer was no more than ‘a gullet whose only purpose in life is to gulp products and crap cash.’ Power swung so decisively to the supply side that “market” became a verb: something you do to customers.”

The Clue Trainers, of course, specified just how absurd that model is, and Googling “consumer customer” at searls.com supports the prediction that the web would reform the consumer poop collectors. But we’re still a long way from the kind of intimacy the web can enable–CRM done right, as Mary describes it. Since Xpertweb is really a reputation/intimacy protocol, I find this kind of work fabulous, dahling, as they say in the world of fashion.

The mass/luxe market is as boutique as you can get with a corporate web site. Rather than launch with a blitz attempting to capture as many eyeballs and clickthroughs as possible, the luxury site must reinforce the quality of the “brand” rather than dilute it. For example, Mary’s and my client is the irrepressible Michael George Florist, who is the florist of choice for New York’s fashion industry, media, celebs and notables. When Calvin Klein opened his store, Michael’s arrangement of 400 calla lilies stopped jaded New Yorkers in their tracks. People clustered at the door to gawk. Calvin, kibbutzing the activity with Michael, says, “Michael, people are coming in because of the lilies.” Michael was skeptical, but later realizes it’s true.

Convergence Marketing

Mary Olson and I have been noticing a kind of cosmic convergence around the mass/luxe meme, but today’s intersections are a little over-the-top. Maybe Doc’s message and this blog are channeling each other due to sleep deprivation. We got 2 hours sleep before his 4am wakeup (blog dinner gossip and Xpertweb musings while Doc forced his NYC photo album down the throat of his balky server).

It doesn’t stop there. Mary calls ten minutes later as I’m forwarding Doc’s email to her. Apparently the mass/luxe meme is getting some real traction, with documentation coming by courier. To understand the traction, we need to consider the market segmentation practices that have dominated marketing over the last 35 years or so. Just as computers morphed from mainframe to minis to PCs to phones, Marketing theory evolved from a single mass market through multiple demographic market segments and now, we’re certain, to sets of luxury preferences within individual demographics and often across them.

How’s that for a disturbing, self-parodying graphic? This is the image that Harcourt Brace uses to attract marketing students to its textbooks on market segmentation. The message seems to be to “carve up the people so we can serve them better.”

It echoes the 18-year-old Marine in Viet Nam who said “We had to level the hamlet in order to save it.” I guess it takes a child to raze a village.

Harcourt Brace cites traditional market segments like Mature Age Groups, Young Age Groups, Hispanics and Upscale Customers. The idea is that you should address each segment as a homogenous mass, which is only a slight refinement of the 1950s doctrine that you aim the same message at the entire market. Slight, because it’s probable that each of those segments now has a higher population than the reach of all television advertising in the mid 50s.

Mass/luxe web strategies, as practiced by Transition Networks, is surgical by comparison to the blunt instruments of conventional marketing. At Steuben, Mary mined executives’ personal contact lists to offer compelling opportunities to known humans in whom the executives had a continuing investment. The database was pristine so the approach to its members also had to be. It worked beyond all expectations. From this base, concentric circles of acquaintanceship and intimacy leveraged both the brand and the relationships, rather than simply diluting the brand. The relationships engage clients, really, beyond even customers, and far removed from mere consumers. Not only are they the
brand’s clients, they know they are its clients, a fact from which they draw tangible pleasure.

The relationship is communal, and in that sense it’s like the community that grows up around a school or church. Fund raisers for a private school will never fire a stakeholder, and neither will a luxury brand. The institution and its members draw mutual strength from each other where lesser brands contend with their customers in the lose-lose tension of value versus price. Such companies constantly abandon customers in the naive assumption they can recruit replacements at will. In truth, if a new depositor is worth a toaster to a bank, a long-term depositor is worth a microwave oven.

You are What you Drive

Years ago, a Car and Driver article summed up the mass/luxe model: “BMW drivers are bold and enthusiastic because BMWs are bold, enthusiastic cars.” It perfectly captures what we know instinctively: A luxury item helps define its owners, whom less subtle marketers would arbitrarily assign to a traditional “market segment.” The taste and special interests of these brands’ customers transcends arbitrary designations.

Customers are those for whom vendors must customize their products and, indeed, their behavior in the market. Everyone benefits from a luxury brand: high profit margins give the vendor the luxury of behaving generously; customers have the luxury of considering quality and not price; craftsmen enjoy the luxury of high-quality design and materials and the time for careful execution. A sales representative is often the client’s peer in taste, fashion sense, education and sophistication. Their sensibilities reinforce each other.

All have the luxury of behaving as most of us wish we could. The acquired good is merely a token of a deeper truth, a kind of Platonic ideal: The real luxury lies in the behaviors and attitudes afforded by the margins attached to luxury goods and services. In that special sense, luxury purchases are the most affordable of all.

The move of luxury brand owners onto the web suggests we may see the finest expression of the evolution from consumer to customer to client and beyond. That most human of conditions grows out of the special calculus of a luxury brand’s adoption of the web’s potential:

known quality + adequate margins + a community ethic = customer intimacy

That’s an intimacy that even the Cluetrain authors might not have thought possible.

6:19:48 PM