Original Article

Is CRM for luxury brands?

Received (in revised form): 11th September 2008

Hugues Cailleux
holds an MBA from HEC Paris. His master’s thesis focused on the specificity of CRM in the context of the luxury
business. He is now a consultant at Accenture specialising in CRM.

Charles Mignot
holds an MBA from HEC Paris. His master’s thesis focused on the specificity of CRM in the context of the luxury
business. He has now established himself as a freelance consultant.

Jean-Noël Kapferer
is Professor at HEC Paris, Europe’s Luxury research centre. He holds the Pernod Ricard Chair on Luxury brand
management and regularly gives seminars on luxury in the United States, China, Japan, Korea and India. He has just
published The Luxury Strategy: Breaking the Rules of Marketing to Build Luxury Brands ( Kogan Page ed.) with V. Bastien.

ABSTRACT Luxury brands have so far been reluctant to adopt any of the classical
tools of mass marketing. One of these is customer relationship management (CRM).
Prestigious brands are, however, now starting to examine the benefits of the ‘lifelong
customer value’ approach, beyond building the social prestige of their names. This
paper develops ‘why’ luxury brands need to apply CRM systems and ‘what’ they
could achieve by doing so, and addresses ‘how’ this could be applied with the necessary
adaptations if these brands wish to keep their luxury status intact.
Journal of Brand Management (2009) 16, 406–412. doi:10.1057/bm.2008.50

Keywords: luxury; CRM; loyalty; retention; customer equity; brand

INTRODUCTION their price premium on the attractiveness

Correspondence:
Hugues Cailleux
Pernod-Ricard Chair on
Management of Prestige Brands,
HEC Paris, 1 Rue de la
Liberation, Jouy en Josas 78350,
Paris, France
Marketing has for long undertaken its
Copernican Revolution, moving from a
transactional (sales-driven) scheme to a rela-
tional (bonding) scheme. It is worth noting
that the buzz-words in all marketing litera-
ture today are ‘customer equity’, ‘lifelong
customer value’ and ‘being customer-driven’.
Brands with databases have been the first to
move to this new paradigm: banks, insurance
companies, rental companies, credit cards,
services and so on – be it in consumer mar-
kets or in business-to-business.
The last brands to make a step in this
direction have been brands that used to base
and fame of their own names, that is, on
their brand equity. Thus, L’Oréal Paris started
a customer relationship programme only in
2005, with the creation of a database and
with the associated customer relationship
management (CRM) that goes alongside.
Last but not least, luxury brands are
now starting to examine the benefits of the
‘lifelong customer value’ approach, beyond
building the social prestige of their names.
Lancôme started its ‘My Lancôme’ customer
relationship programme in Argentina in
2004; it is remarkable that this programme
was first applied in a remote country, far

© 2009 Palgrave Macmillan 1350-23IX Brand Management Vol. 16, 5/6, 406–412

www.palgrave-journals.com/bm/

from France, at the time of the economic
collapse of that country. How could luxury
brands retain their customers, who were
also remaining price-sensitive and willing
to have better control over the volume of
their expenditures on high price items? Cus-
tomers were becoming scarce; the priority
was to retain them through better relation-
ships. The consulting company Bain1 con-
ducted a survey of the growing practices
among luxury brands. They quote Coach
as investing 3 million dollars in customer
surveys and sales data mining to better know
their customers. Bain recommends new rules
for luxury, among which that all luxury brands
should try to uncover their clients’ shopping
patterns through CRM. As a forerunner, chanel
developed a CRM approach in Japan too.
Luxury brands have a great and unique
asset with which they can build customer rela-
tionships: they have their own distribution
outlets. Why then, beyond the services that
go with this outlet experience, do luxury
brands need to think of building a CRM
policy? How should they do it: do they
have to reinvent the CRM wheel just
because they have a luxury customer, or
simply engage in the necessary steps in
building any CRM, such as mapping the
clients’ multiple touchpoints, creating a
strategic client segmentation, personalising
relationships by segments or establishing a
calendar of actions for each major client or
segment?2,3
In brief, what then is luxury CRM?
Should brands borrow techniques that have
proved successful for classic consumer
goods, at the risk of making the frontiers
between luxury and mass-prestige even
more blurry? In fact, to promote CRM
techniques, Bain uses such benchmarks as
Coach. Is Coach a luxury brand or a mass
prestige brand, though? Can CRM respect
the specificity of luxury management and
its exacting implications if these brands
want to grow while remaining luxury
brands?4
© 2009 Palgrave Macmillan 1350-23IX Brand Management Vol. 16, 5/6, 406–412
Is CRM for luxury brands?
WHY LUXURY BRANDS ARE
MORE AND MORE INTERESTED
IN CUSTOMER RELATIONSHIP
MANAGEMENT
Luxury companies, such as Rolex, Cartier,
Louis Vuitton or Chanel, have achieved out-
standing and durable worldwide growth
over time, thanks to their heritage, to the
prestige of their names and above all to their
taste for quality and their constant flow of
creations. Still, these brands now have to
face many challenges:
— Competition has got stronger and more
complex. Premium brands have worked
on their products and image, and have
given birth to ‘new luxury’ – which
now threatens traditional luxury’s image
and legitimacy, or at least blurs its
boundaries.
— Classic luxury brands have grown a lot
themselves. They are now selling ever-
growing product arrays on a worldwide
scale, and brands can have a tough time
controlling their image, or even their
distribution. Heavy licensing leading
to less control over their distribution
channels can damage their image in the
long run.
— Last but not least, customers have
changed. The development of ‘new
money’ as well as new buying habits
(for example, ‘trading-up’) makes it
more difficult for brands to address new,
chameleon-like customers. Even the
customers who love luxury now split
their expenses between a growing
number of brands, which can be luxury
and non-luxury brands, or even mass-
market brands such as Zara, Mango and
so on.
Endowed with a very high brand equity,5
luxury brands cannot just wait for cus-
tomers to visit their shops or websites: they
have to compete for their share of wallet
even among well-off women who do not
407
 Cailleux et al
hesitate to mix and match luxury, new
luxury, mass-prestige and mass-market
products. Retention has become the key-
word to deal with these excursionist new
customers, especially with the heavy buyers
of luxury. Image is not enough: luxury
brands need to weave tighter relationships
with customers. These brands now have to
find a way to show their difference and
legitimacy: they all want to offer customers
something exceptional. CRM then appears
as a capital weapon in this battle for market
share (or for customers’ share of wallet); in
fact, surveys show that most companies in
the luxury world are now willing to develop
ambitious, result-oriented CRM policies.
They are all asking the same question,
however: how can we do it and maintain
our prestige?
Classic CRM methods can be used as a
source of inspiration for luxury companies,
but these companies must never forget that
customer knowledge and interaction has
always been their raison d’être. Luxury is
intimately tied to direct relationships with
customers within the shops. CRM pro-
cesses should be adapted not only to the
brands’ sector (for instance, qualitative cus-
tomer information will always remain the
property of Chanel salespeople), but also to
their respective identity and culture. Let us
now analyse how CRM could be adapted
to luxury.
LUXURY CUSTOMER
RELATIONSHIP MANAGEMENT
MUST FOLLOW THE
‘SHOPKEEPER’S BENCHMARK’
Most luxury brands started as a single shop,
managed by a creator of exceptional pro-
ducts. In this situation, relationships with
customers were only natural. What we call
the ‘shopkeeper’s benchmark’ is a real guide-
line for luxury CRM. This scheme is that
of a shopkeeper in the 1950s, who has a
restricted clientele, and who knows his cus-
tomers by name, remembers their tastes and
408 © 2009 Palgrave Macmillan 1350-23IX Brand Management Vol. 16, 5/6, 406–412
preferences and addresses them in a perso-
nalised way.
The shopkeeper does not only offer a
very qualitative product: he also initiates
a long-term relationship that can go beyond
traditional, commercial interaction. Cus-
tomers become more loyal: they give par-
ticular value to signs of recognition and
gratitude (both words can be translated
into French as ‘reconnaissance’). This ‘shop-
keeper’s benchmark’ implies three distinct
challenges:
— The first challenge is to identify cus-
tomers. Welcoming every customer
with extreme politeness, calling loyal
customers by their name, will show the
brand’s good disposition to start a sin-
cere, bilateral relationship with its cus-
tomers. In luxury hotels, proofs of
attention represent the main part of the
experience.
— The second challenge is to understand
the customer’s desires and expectations.
Companies must actively listen to their
customers: they cannot impose any-
thing, and should only offer relevant
answers to complex customer expecta-
tions. All this can reach its acme with
product customisation – which is the
root of prestigious companies like Louis
Vuitton or Aubercy.
— The last challenge is to show the brand’s
gratitude. This will be a perfect way to
feed the relationship in the long run – cus-
tomers all have a variable ‘lifetime value’.
Such an attitude will meet both the cus-
tomer’s desire for a sincere, distinctive rela-
tionship, and the company’s expectation of
long-term, profitable relationships with its
customers.
Small luxury companies understand this
spontaneously, and concentrate on the art
of behaving like a shopkeeper. Blancpain
(the prestigious watchmaker), for instance,
takes advantage of a limited clientele, of its

strong corporate culture and of its skilled
salesforce to offer a strong, distinctive rela-
tionship. The challenge of luxury brands is
to maintain this benchmark, even when
their volumes skyrocket, along with their
clientele.
GROWING VOLUMES REQUIRE A
MORE STRUCTURED APPROACH
Growing and becoming international must
not be a problem for luxury brands. The
‘shopkeeper’s benchmark’ can be adapted to
large companies such as Tiffany’s or Armani,
which can use it to offer a qualitative, easy-
to-handle relationship with their customers.
Offer a basic yet very personalised
relationship to every single customer
The brand’s boutique must be the epicentre
of customer experience. Paying particular
attention to the buying process is very
important for luxury companies that wish
to share their codes and values with cus-
tomers. Salesmen must not only take advan-
tage of their privileged, direct contact with
customers to understand their needs and
desires, but also to gather precious, qualita-
tive information that can be used again to
feed the relationship.
The first step of successful CRM is to
define the brand’s ‘basic contract’. Luxury
brands must determine their own, non-
negotiable visions of quality, innovation,
service and attention. Every single (poten-
tial or actual) customer must benefit from
this basic contract as soon as he or she
enters the boutique. Why? First, this is the
basic issue of etiquette. Second, no one can
predict a customer’s profile, expectations
and lifelong value. The ‘basic contract’ will
show customers that they are already part
of the family – even before they buy.
Develop dynamic segmentation to
feed the relationship in the long run
Not all consumers are alike. They differ in
their lifelong customer value. Brands need
© 2009 Palgrave Macmillan 1350-23IX Brand Management Vol. 16, 5/6, 406–412
Is CRM for luxury brands?
to adapt their CRM to this important
factor. A strong, distinctive relationship
cannot be developed with all customers –
such a policy would be difficult and expen-
sive to conduct, and potentially inappropriate.
Some customers show little concern for the
brand and/or do not spend much on it:
they are already satisfied by the ‘basic con-
tract’ and in fact do not expect more.
Segmentation can only be conducted
afterwards: sales record analysis (according
to classic criteria such as Recency, Fre-
quency and Monetary Value) as well as
salespeople’s experience and intuition
should allow luxury brands to identify key
customers who will be worth the money
and effort. Classic databases can also be used
as ‘reminders’, but only intuition will allow
brands to establish relevant customer seg-
mentation – for instance, a real brand
enthusiast from the ‘low’ segment will then
be treated the same way as ‘middle’ or ‘high’
customers. In the long run, this segmenta-
tion will allow the distinguishment of two
types of customers:
— The ‘high and elite’ segment must be
cherished. Its main interlocutors must
be the brand’s salesforce – who know
them best, and who can determine
what should be done for which cus-
tomer, and when. This segment should
always be addressed through direct,
lively means, such as personalised phone
calls, handwritten mailings, invitations
to VIP events and so on.
— In contrast, the ‘low to middle’ segment
will be addressed, in the long run,
through more automated means: classic
mailing, brand magazines, newsletters
and invitations can be sent through the
brand’s database. Still, high perceived
quality should absolutely be maintained
in these communications.
But what if the number of customers keeps
increasing? When volumes increase so much
409
 Cailleux et al
that managing only two large segments
becomes inadequate, one way to maintain
emotion and a close relationship is to over-
segment. Growing volumes allow new
homogeneous customer sub-groups to
emerge: brands can then find new ways of
interacting with each sub-segment in a
more relevant way. Over-segmentation
implies two things:
— It is mainly applicable to the ‘high’ and
‘elite’ segments, for which human con-
tact and intuitive interaction are deci-
sive. For instance, instead of inviting
200 ‘elite’ customers to one big event,
one can divide them according to the
models or product types they own
(for example, the engine or bodywork
type for automotive brands) and offer
smaller, more specific events. ‘Low’ and
‘medium’ segments will be managed
in a more automated way, regardless of
their size.
— A good understanding of these sub-
groups’ profiles and expectations will
allow brands to find relevant themes
and occasions for these specific CRM
approaches. Exclusivity and specificity
is what will make customers’ relation-
ship with the brand even stronger. For
instance, Porsche, in addition to its club
(which gathers all Porsche owners),
offers Classic Porsche owners the
opportunity to be part of a specific
club, with distinctive events and gathe-
rings (for example, Classic Rallies).
LUXURY CUSTOMER
RELATIONSHIP MANAGEMENT IS
MADE OF CLASSIC AND SPECIFIC
TECHNIQUES
Luxury brands are often accused of copying/
pasting classic, mass-market techniques for
their own CRM. Certainly, luxury brands
do get inspired by the principles and
methods of classic CRM. They mark their
410 © 2009 Palgrave Macmillan 1350-23IX Brand Management Vol. 16, 5/6, 406–412
distinction by the talent and art of their
execution, however. Also, fortunately, some
CRM managers have a deep understanding
of the specificity of their brand and of
the universe of luxury, and can take advan-
tage of this to develop efficient, distinctive
techniques.
Classic direct marketing tools such as
mailings, e-mailings, brochures or brand
magazines can be used. These tools can be
easily adapted to each customer segment,
and they remain the best (and least expen-
sive) way to contact and retain the ‘low’ and
‘middle’ segments, or to conduct customer
canvassing. Particular attention must be paid
to their tangible quality, and to their con-
tent: this attention must be sincere (that is,
be neither haughty nor obsequious), and
must stick to the brand’s identity.
The internet must remain an informa-
tion channel. Indeed, it facilitates the sharing
of qualitative, targeted information. Luxury
brands should not open e-stores if these
stores do not allow them to respect their
‘basic contract’:4 the relationship should not
become purely commercial, and the brand’s
identity and culture should be used as a
decisive tool to understand the product or
even justify its high price.
High-potential customers can benefit
from a stronger and deeper relationship
thanks to more specific techniques. Presti-
gious services such as Clubs (for Jaguar XK
owners), concierge services (for American
Express’s Centurion card holders) or even
golf trophies (for BMW’s customers) will
show the brand’s good understanding of
customers’ tastes and desires, and of their
willingness to engage in an interesting,
long-term, close-to-non-commercial rela-
tionship.
Sharp intuition from the brand’s sales
teams and appropriate CRM budgets are
the two key success factors for the creation
of a distinctive customer experience that
can be used as a guiding thread to retain
and give value to customers.

LUXURY CUSTOMER
RELATIONSHIP MANAGEMENT
MUST BE MONITORED IN A VERY
SPECIFIC WAY
Luxury CRM at its acme is made of expen-
sive, time-consuming strategic moves.
Hosting a golf tournament (BMW), inviting
customers to come and visit one’s workshop
(Aubercy’s tailor-made shoes) or organising
a vintage car rally during a full weekend
(Porsche) must lead to measurable improve-
ments for the brand’s sales, image or cus-
tomer retention.
Some brands think CRM is part of their
communication budget. It is seen as some-
thing necessary that will boost or maintain
the brand’s prestige – its return on invest-
ment cannot be measured. On the contrary,
other brands think CRM is a commercial
tool, and evaluate its performance in the
light of sales increases.
Both approaches neglect the diversity of
goals that should be assigned to CRM.
Luxury CRM is also a crucial tool for the
construction of brand identity and equity.
Furthermore, CRM policies are run
over long periods of time. Specific indica-
tors, which will combine classic financial
indicators with customers’ satisfaction and
opinion towards the brand (for example,
Net Promoter Score), must now be used
by luxury brands to measure their CRM’s
efficiency.
AN ESSENTIAL FIRST STEP:
CREATING A ZERO-DEFAULT
DATABASE
The essence of luxury is privileged one-to-
one relationships.4 The proper database is a
prerequisite for such relationships. How
then to create a really perfect database? This
is a painstaking task, which must be under-
taken at a worldwide level. In luxury, a cli-
ent’s name should never be misspelled. The
implications are that the database system
should be able to read many alphabets
(Cyrillic, Japanese, Chinese, Arabic and
© 2009 Palgrave Macmillan 1350-23IX Brand Management Vol. 16, 5/6, 406–412
Is CRM for luxury brands?
so on). There is a need to check for each
first name, in the home country, whether
it is male or female. For instance, Andrea
can be either one, depending on the country
of origin.
Of course, the database should also be
very sensitive and reactive.
— It should give qualitative information
about the person. Such information
can be inferred from the most recent
purchases, or from the attendance at a
PR event.
— It must be updated to match the
client’s latest changes in location or in
lifestyle.
AS A CONCLUSION: LUXURY
CUSTOMER RELATIONSHIP
MANAGEMENT IS A QUESTION OF
STRUCTURE AND INTUITION
Classic CRM is about defining ways to col-
lect, share and exploit customer data. These
methods only constitute the final stage (and
one of the smallest concerns) of a luxury
CRM policy. Beforehand, luxury brands
must define their own ‘basic contract’, that
is, define what type and what level of quality,
service and innovation they will offer to
initiate a sincere, original relationship with
every single customer. Customer experi-
ence then becomes the cornerstone of
luxury CRM.
First, an exceptional experience of the
brand’s universe must be offered (with no
restrictions or discrimination among cus-
tomers) in the brand’s boutiques – following
the example of Blancpain. Ideally, these
boutiques will be the only distribution
channel, as well as the privileged source of
information and interaction for ‘high’ and
‘elite’ customers. The relationship with
other customer segments can be managed
thanks to classic CRM methods.
Then, dynamic segmentation should
help brands to define a restricted set of key
411
 Cailleux et al
customers, according to recency, frequency
and monetary value (RFM) criteria as well
as sales teams’ intuition. These customers
will be offered prestigious, close-to-non-
commercial interactions (for example,
special invitations, exceptional level of
service and so on). For instance, Jaguar’s
‘elite’ customers are part of a special club.
Brands must communicate more on this
stronger side of the relationship, as proof of
their identity and care for their customers.
All in all, specific CRM can allow luxury
brands to address the capital issue of cus-
tomer retention. But it can also have col-
lateral, positive effects such as new customer
recruitment. Luxury brands that have suc-
ceeded in making their customers feel
like they are part of a family (or at least
of a selective club) are able to turn them
into ambassadors or even into recruiters.
Indeed, word of mouth and co-optation
have always been important drivers of
customer canvassing for luxury brands.
Organising special events and allowing
‘high’ and ‘elite’ customers to invite friends
412 © 2009 Palgrave Macmillan 1350-23IX Brand Management Vol. 16, 5/6, 406–412
and relatives can be a good way to trigger
co-optation. For instance, Mont Blanc cre-
ated its ‘Circle of Muses’ in 2005, thanks to
which its current female customers can
invite their female friends to come to spe-
cial evenings where they can learn more
about jewellery in general, or at least expe-
rience the brand and its universe for the
first time.
In the end, real and sincere customer-
centricity seems to be the perfect way to
take up the initial challenge of developing
one’s business while maintaining, or even
reinforcing, one’s brand identity.
REFERENCES
(1) Bain & Co. (2005) The new rules of luxury. Finan-
cial Times, 18 May.
(2) Buttle, F. (2003) Customer Relationship Management.
New York: Butterworth-Heinemann.
(3) Kumar, V. and Reinartz, W. (2005) Customer Relation-
ship Management. London: Wiley.
(4) Kapferer, J. N. and Bastien, V. (2009) The Luxury
Strategy: Break the Rules of Marketing to Build Luxury
Brands. London: Kogan-Page.
(5) Kapferer, J. N. (2008) The New Strategic Brand Man-
agement. London: Kogan-Page.