Bernard Arnault became the richest man in the world all because he understood one thing…

Brand.

Arnault owns luxury brands like DIOR, Fendi, Louis Vuitton, and Bulgari.

These brands are so high value, they perform better in recessions.

So how did these brands become so powerful?

Great question. Let’s break it down.

Arnault’s brands serve only 1% of the market.

The rich.

Here’s why:

This is pretty straightforward. If you want to charge high prices you need customers who won’t cry at the price tag.

So the real question is HOW do you market to customers with money?

Advertise where high-income customers give their attention.

Take a look at how Ferrari does this.

A few years back Ferrari made headlines when they said they spent $0 for TV marketing. Why?

That’s not where their target audience is. Most people watching TV cannot afford a Ferrari.

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In the 2008 recession, there was a 74% increase in business bankruptcies in the US.

Yet, both Burberry and Louis Vuitton increased their total revenue by 13%.

In the same year, Tiffany & Co saw a 9% overall share increase.

Most would think that luxury brands would be the first to lose sales in a recession.

Yet, the opposite happens.

Why?

In recessions, the lower and middle classes suffer. Not the upper class.

For example, during Covid the number of U.S. billionaires increased by 16%.

AKA luxury’s target audience.

There’s a key factor to luxury brands that I haven’t mentioned yet…

Status.

Last week we talked about how De Beers uses symbolic marketing to sell diamonds. (If you missed that article, you can check it out here)

This means attaching a higher meaning to your product so that customers pay for what it represents. Not just the product itself.

For De Beers, it’s love.

For luxury goods, it’s reputation.

Wearing a 35K Rolex watch says you’ve got money, style, and authority.

Take a look at this Rolex ad:

Rolex is not selling the watch. They’re selling the status of the watch.

Same thing goes for Ferrari, Louis Vuitton, and every other luxury brand.