Four Success Factors Of Limited Editions (Learnings From The America's Cup)
The America's Cup is not only the oldest trophy in International Sports, it is also a race of brands on and off the water. And it's a great example of what luxury is really about.
The most valuable luxury items in the world combine some common factors. They are rare, they are difficult to acquire or use and they are typically linked to a one-of-a-kind moment. The America's Cup has all of the above. It's a match between two sailing yachts, the current cup holder and a challenger. And if the challenger wins the match, as New Zealand did in the 2017 America's Cup in Bermuda, they become the steward of the cup. The prestige of the race is unmatched. Stakes are high and so are the investments in yachts, technology, material, time and crew. Each America's cup is a match between the technically most advanced boats with the best crews in the world. This defines part of its fascination and draws brands into it. So for anyone managing brands the America's Cup is a fantastic opportunity to get inspired.
It starts with the trophy itself, which has become the most prestigious trophy in sports and a brand on its own. It is so valuable that it is protected by a dedicated security team. When it travels to the America's cup race to be awarded to the winner, it has its own trunk. Not any trunk - but a custom made trunk by Louis Vuitton. And during this year's cup we could observe that the interest of participants for the trunk was at least as big as the interest for the cup. This is an amazing combination for a limited edition: combining the probably hardest-to-get sports trophy in the world with a one-piece-only-specially-crafted-handmade trunk by the world's most iconic trunk maker. Needless to say that the combination of those two limited-to-one items creates an incredible luxury value. If there was a price tag to it, it's not hard to assume that it would be probably thousands if not ten-thousands of times above the "material" or "production" value of the items. And this is what makes limited editions so special and powerful for luxury brands.
First, they create an incredible story, like the combination of America's Cup and Louis Vuitton. With the power to influence the entire brand and make it more valuable. Second, they offer an incredible profit opportunity for luxury brands if done well. As an example, Panerai launched five different (!) limited edition watches around the America's Cup, three as sponsors of Team Oracle USA, one as sponsor of the America's Cup and one as sponsor of Team SoftBank Japan. They come in different materials and price points and exploit the event for watch enthusiasts and collectors.
Moet & Chandon, as official champagne of the America's Cup, created special limited edition bottles, that were use throughout the event. For sure, drinking a champagne from a specially event-designed bottle is something special for participants of the event. And it's a great social media story and multiplier. The question is: does the limited edition need to end at the event or could it be played even much stronger outside of the event, e.g. by being marketed more actively at a (much) higher price point to those enthusiasts all over the world that are fans of the race? In that case, just a different label would not be enough and the number of limited items would need to be chosen wisely. The way Panerai creates limited editions, inspired by the event but sold to enthusiasts all over the world could be a blueprint for brands like Moët to create additional profits by maximizing the idea of a limited edition even more.
What makes a limited edition really appealing? We dissected four success factors brands should respect when they create a limited edition:
1) The story: a limited edition is only as good as the story behind. No one cares for a limitation of one, ten, hundred, etc. if there is no reason. A logo alone is not enough. But a great story, creating -- in the ideal case -- an absolutely unique item with high fascination, offers a tremendous opportunity to strengthen brand equity and profitability for luxury brands.
2) The limitation: it's the eternal question of limited editions - where to set the limit? It's a combination of market expertise, benchmarking and quantitavive tools. Panerai limited one of their America's Cup watches to 300. Is it the right amount? Should it be less? Should it be more?
3) The pricing: the true power of a limited edition is in what we at Équité call nonlinear pricing. It is to create price points that go far beyond the rather linear price-quality combinations most products are placed in a pricing matrix. If a limited edition can achieve premiums of 100%, 200%, 500% or more versus the "normal" edition, there is a dramatic profit potential to be realized. Just imagine the potential for your brand.
4) The obsession in execution: All the above factors are only as good as the execution of every detail. While many call it excellence in execution, we prefer obsession with every detail: which material, what makes it special, how can the story above be perfectly supported, how can the limited edition ensure a lasting excitement to the owner by features, design and the experience created?
Mastering these four success factors is the key to successfully launching a limited edition. The examples from the America's Cup illustrate some of the opportunities and highlighted questions luxury managers have to answer when planning a limited edition. At Équité, we believe that limited editions are a fantastic opportunity for luxury brands to grow revenues and profits disproportionately, strengthen brand equity and cachet.