Extending a luxury brand comes with dangers, writes Philip Delves Broughton
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ston Martin boasts of a “rich and prestigious heritage”. But like most car companies its past is as much one of oily rags and dodgy finances as plush leather and James Bond. In its 103 years of existence, it has sold 70,000 cars, had various owners and periods of extreme distress, all the while turning out cars capable of making grown men whimper.
This week the company unveiled a 37-foot powerboat at the Monaco Yacht Show, built in collaboration with Quintessence Yachts. It is a fine-looking craft, sleek and powerful, with a coffee maker and lavatory, and is capable of 50 knots. You can instantly imagine Daniel Craig, the present 007, at the wheel. It is part of Aston Martin’s attempt to become a full-blown luxury brand, the Hermès of cars.
One can only be sympathetic to the financial pressures that have led to this decision. For decades, profits at Aston Martin have been elusive. It has been a gorgeous, British mess of a company, producing cars called Volante, Virage, Vantage and Vanquish yet failing to conquer the boring details of the income statement.
Its major shareholders, two Kuwaiti investment firms and an Italian private equity company, have no desire to manage years more of gilt-edged losses.
It is a tough business making luxury cars that few can afford. The wealthiest Chinese, the raison d’être for many European luxury brands, have not fallen for them the way they have for handbags or first growth Bordeaux. So it is going to be Aston Martin boats, baby buggies, weekend bags and paperweights sold through a spruce new store in London’s Mayfair. Luxury apartments may follow.
I imagine the engineers at Aston Martin are learning of the margins to be made on T-shirts and wondering why they have spent years worrying about torque ratios. The extension of the Aston Martin brand is upon us.
Ferrari and Porsche have been doing this for a while. Not to mention all the great fashion labels of the past two or three decades, which have figured out that if you can sell dresses or shoes, you can probably sell watches, perfumes and handbags as well. The brand extension game is well developed and it is not clear that it is the right one for the company that made the DBS, the car in which Bond’s wife Tracy was shot and killed by Irma Bunt, Ernst Blofeld’s dastardly sidekick, in the film adaptation of On Her Majesty’s Secret Service. There are certain myths you do not tamper with.
Extending a luxury brand comes with dangers. The first is a loss of focus on the very thing you are known for. Aston Martin is a carmaker that has not yet figured out how to make a sustainable living selling cars.
That, you would think, would be the place to start. For all the sinewy lines and herringbone carbon fibre of the Vanquish Zagato Volante, for popular fascination it cannot begin to compete with the latest from Tesla. The hottest car news these days is not about the softness of a leather interior but about battery life, remote software updates and whether an electric car can keep up with a conventional engine from a standing start. (Answer: Yes it can.) Aston Martin is working on an electric car. But until it unveils one, it leads in style when all eyes are on technology.
The second danger is that you extend your brand to products that have nothing to do with your core. The simple logic of brand extensions is that you take a premium name which allows you to earn high margins and apply it to other products. Done right, with every new product brought under the umbrella of your brand, the entire brand’s value increases. Louis Vuitton and Cartier’s high gross margins have been squeezed out over time. But if you pick the wrong products, your credibility erodes.
Angela Ahrendts’ turnround of Burberry after she took over in 2006 is one of the great brand stories. She did it by turning the company’s focus back to the product it was best known for: the trenchcoat, as worn by British soldiers in the first world war and by Sir Ernest Shackleton in the Antarctic. She made the production and marketing of the coat consistent in every market. She developed a sales and advertising strategy around the heritage of the coat. And she persuaded salespeople that selling one coat was worth more in commission than 10 polo shirts.
She encouraged innovation around the coat, with different colours, cuts and linings. But the garment remained at the centre of everything.
Every marketing expert these days talks about the importance of authenticity, of customer affinity for products with an artisanal, bespoke quality, a feeling of hard-earned expertise. Aston Martin has all of that but seems eager to monkey with it.
Andy Palmer, the chief executive, has said that the key to the company’s strategy is a fictional rich, American woman in her late 30s called Charlotte. She is going to be the buyer of the future.
I am sure Mr Palmer has the strategy slide deck to back him up but to pursue this putative Charlotte when the whole world already knows you for Bond seems like an act of mad desperation