Elegance and luxury, it’s always a matter of balance. This rule applies both to those who adopt this lifestyle and to those who “produce” it and dictate its economic dynamics. We asked Emanuela Prandelli, Director of the MAFED - Master in Fashion, Experience & Design Management, to tell us about the complex and delicate mechanisms that regulate these markets, about their differences, and their constant need to balance brand identity and innovation.
Is management in fashion companies different from that of other industries? If so, how?
Companies that operate in this field have an undeniable peculiarity: they are highly creative. They need specific managerial skills because particular professional figures—for example designers—require a particular organizational system to facilitate their work, albeit without falling into the trap of relaxed management processes. If anything, these companies require an even more rigorous management style due to the remarkable complexity of their operations: I’m thinking about fashion, where the quantity of collections to be presented to the market requires a considerable organizational effort from the point of view of product management, supply chain, distribution and marketing.
Because of this the different functions must be able to talk among each other, combining an awareness of their role’s boundaries with being able to speak a common language that allows for understanding. If I’m a manager or a CEO of one of these companies of course I have to be data-driven as in any other company, meaning I have to be able to interpret the market figures, use an Excel spreadsheet, pinpoint key information to make strategic decisions. But I must also find a way to communicate with the creative roles efficiently, with reciprocal respect and recognizing their strategic value. Otherwise I run the risk of a “cultural” clash within the company, with all the damage this can do.
Does this also apply to innovation processes, do they follow a different track in these companies?
The topic of innovation is particularly delicate in the fashion industry. As I was saying before, we used to have a limited number of collections per year – spring-summer and fall-winter, plus a so-called “cruise collection” – but now that number has increased and innovation has become a continuum.
Alongside this complexity there is also the issue of the cultural component, which is especially relevant in the luxury world. Here the concept of innovation could almost seem to be an oxymoron, since luxury almost always has its roots in a distant heritage, in the value of traditions. The issue is more delicate as we have to project the roots of a tradition into the future, according to the codex of contemporary language, preserving it so as not to dilute the identity of the brand.
Another topic that often comes up in the world of luxury is that of authenticity: the most valuable brands are those with a product that is not only good, but also “authentic”, for example with its roots in quality craftsmanship. This is another point that could seem a contradiction to innovation, which is often looking for efficiency and improvement of the manufacturing processes. On top of that, innovation is usually associated with an idea of speed, while luxury is timeless. Thus the brand must ask itself which way it wants to go: whether to bet on the typically innovative product, but starting a process of continuous substitution, or on an archetypical product, which perpetuates the iconic value of the brand. However even in this latter situation it is necessary to have evolution, to renew its significance. It’s not by chance that a group such as LVMH has a statement that synthesizes the two concepts: “The Future of Tradition”. This is perhaps the most important challenge in the world of luxury goods: understand where the right point of equilibrium is, between the past and the future.
When talking about innovation we automatically think of digital strategies. This relationship between tradition and innovation perhaps comes to play not only during the manufacturing stage, but mostly during communication and distribution.
That’s exactly how it is, especially for luxury goods companies, who for a long time have lagged behind in the digital world, convinced that going online could mean diluting their distinctiveness and unequivocal positioning. The web is by definition open, democratic, available to everyone; luxury is by definition exclusive, aristocratic, accessible by the few. Here as well it’s a matter of finding the right balance. The most recent research proves that we can’t stay out of the game, because our client is the same one that uses Amazon Prime to shop in the evening or Airbnb to find a holiday rental, and it’s unthinkable that they will completely change their way of thinking when it comes to making fashion and luxury goods purchases. If our customer lives in an increasingly accelerated context, we must adapt by finding the right positioning within the digital world as well.
Today the greatest challenge in configuring the digital environment for the fashion and luxury worlds is that of doing omni-channel marketing. We no longer have a customer that buys only in the brick-and-mortar shop and one that prefers to buy online, so it no longer makes sense to try and maximize the experience in the two environments separately. Today more than ever before, the consumer keeps moving from one channel to the other, we can’t have one strategy for online marketing and a different one for the offline world. It has become necessary to develop a sole strategy to be applied to the different channels from the get-go. Marketing and sales must indeed not be “multi-channel”, but “omni-channel”.
When online, the winner is not who’s better at choosing one platform or another, but who can create an integrated ecosystem. This means, for example, using YouTube to take the clients behind the scenes, Facebook to interact with them, Twitter to give them updated information, Snapchat to create a more experiential dimension. But the message is the same one. We thus need to integrate online and offline channels, the various social networks and different devices, to create a unique experience for the client.
What particular role do social networks have in these industries?
At this point I would say that not even luxury brands can afford not to use them. In the fashion world the social aspect has become dominant. Think about the phenomenon of fashion bloggers and influencers. We’re moving closer and closer to a content-driven platform logic, which is changing the logic of e-commerce itself: platforms don’t simply offer products anymore, but content as well, created in the appropriate language. This implies having to review the skills that companies traditionally had in-house, and this is where the role of training becomes strategic: there is an increasing need to find new profiles tied to these new types of experiences.
Another key issue is customer engagement. How does this apply within the fashion and luxury goods world, which have a particular audience and communicative style?
This is exactly the area on which I concentrated my most recent academic research. The push towards customer engagement is becoming predominant in many industries, starting with food and fast-moving consumer goods. What we are saying to the client is basically this: let’s build together the product you would like. We tried to understand how much we can extend this logic to the worlds of fashion and luxury goods. It is certainly easier to think of models with direct customer engagement in fashion. A well-know case is that of Threadless, an American company that produces t-shirts and ended up on the cover of Inc. Magazine as the most innovative small company in the country. The whole creative and marketing process is in the hands of the clients, who design the products, vote for their favorites, and engage each other virally to buy them. The company limits itself to handling manufacturing and logistics, printing the most voted designs on t-shirts and distributing them. This way they reach a sales volume of 30 million dollars a year with a 30% margin!
Our studies revealed that engaging the client in the development of the product has a significant weight on their willingness to pay: by offering the same t-shirts to different client groups, some of them directly engaged in the creation of the product and others not so, the former measured a higher purchasing willingness by over 50%. And those who where not directly engaged but were aware of a community that had decision-making power still had a higher willingness to pay than others. The variable that comes into play is called “psychological ownership”: if I participate, I have a stronger feeling that the product is mine, and thus I’m more willing to buy it. Such a strategy not only has a direct impact on the economic results of a company, but also on its image, perceived as more market-oriented, and on the brand in general.
We tried to replicate the same experiment on luxury goods, where the results apparently tend towards the opposite direction. The simple client engagement could be a disadvantage, because the clients are willing to pay a premium price exactly because they want the product to remain an object of aspiration: if they are too involved in its creation, the product gets too close to them and this provokes a sort of reverse U-shape effect. On the other hand we found that engagement works very well for luxury goods if clients are involved not in the development of the product, but in “peripheral” activities, such as the product display at the point of sale, communication campaigns, and so on. During our research we involved clients of brands such as Prada, Gucci, YSL or Fendi in the development of products that were more or less status-relevant – for example an elegant high-heel shoe as opposed to a sneaker, a leather bag or a messenger one, a button-down shirt or a t-shirt – and we found that in the first category the customer engagement doesn’t work, while customer engagement has more interesting results for products of the same brand but perceived as having a lower status.
Another way to find balance in customer engagement without losing the brand’s DNA is customization, meaning the ability to modify only certain features that are pre-selected by the company. Here the dynamics are interesting as well: the complete lack of customization gives a “limited” perception of the brand; a little customization of the product improves perception and the attitude of the customer; too much personalization inverts the trend and becomes counterproductive. We thus need to balance the “brand’s essence” with the “self essence”, the client’s personality: zero customization means only brand essence, total customization means only self essence. The right mix is what gives the best sales results.
Talking about the educational aspect, what are the characteristics of a fashion or luxury goods manager?
As I mentioned before, in these companies it is important for the manager to have solid administrative instruments, even though they have a creative motivation. The objective of a program such as the MAFED is exactly that of creating the right and solid mix of knowledge of the classical managerial processes and their contextualization within a field that has particular rules. It is the principle that must inspire and guide a training program that wants to create managers for these industries.
At the MAFED in particular we have decided to work on four main axes, which we will strengthen significantly in this upcoming year: retailing and buying, meaning everything that has to do with the sales and purchasing process, which is particularly important in this industry; merchandising, with the topic of innovation and the peculiarity of the collections that characterize the industry; marketing and especially customer relationship management: handling and extracting value from the increasingly more conspicuous mass of information generated today, the so-called big data; and finally the digital dimension, which we have already talked about. These four areas today represent an interesting absorbent potential in the industry and we want to develop them with dedicated courses and also with field projects the students have to work on for more than three months, allowing them to apply the knowledge they acquired to real cases.
The Italian card has always been a winning hand in the worlds of fashion and design. Is it still so?
The importance of the country of provenance is very high in this industry, especially in the luxury world, which is based on authenticity and heritage. This gives the “Made in Italy” a potential that continues to get a huge competitive advantage. Of course, in fashion, and especially in fast-fashion, price is a dominating factor, so externalization is necessary so as to remain competitive. Within the luxury goods sector, on the other hand, the Italian brand has remained a guarantee of quality: once again, if the product must be something to aspire to and to represent status, the fact that it is produced by craftsmen with centuries of history behind them is still an ace up our sleeve, even when we enter a group that doesn’t necessarily fly an Italian flag.
The importance of the Made in Italy, after all, is clearly shown by the Italian Excellence platform created by SDA Bocconi, which puts together Fashion & Design, Food & Beverage and Art, all contexts in which the Italian component still makes a difference.
SDA Bocconi School of Management