Defending Luxury THE RITZ-CARLTON “ONE” CAMPAIGN
Losing Shine The Ritz-Carlton has always been held up as the epitome of a luxury brand. It shares a rare space with brands like Tiffany and Mont Blanc, brands with a history of defining what luxury means and how our culture thinks about it. In 2005, we created a campaign for The Ritz-Carlton that was designed to make the brand more relevant to younger affluent consumers, many of whom saw the brand as stodgy and out of touch. The campaign achieved a 33% increase in the percentage of Gen X and Gen Y customers coming to the brand and made The Ritz-Carlton more relevant to a new generation, all while showing no signs of losing effectiveness.
2008, however, was a rather surprising year. The world economy nearly collapsed, and the luxury market—typically considered recession-proof—took a nosedive. Chanel had to lay off 200 employees in December, and Tiffany’s holiday sales fell nearly 21% from 2007 levels. The Ritz-Carlton was hit especially hard, experiencing a 20% drop in occupancy during the last half of 2008.
Many luxury marketers initially expected this recession to be like all the others, when the luxury market didn’t suffer at all. That proved not to be the case. This recession turned luxury into a dirty word. The American public was seeing the effects of decades of excess and risky decisions by financial institutions, and they became hostile towards anything indulgent. A Tiffany bag became a mark of shame, a sign of insensitivity. AIG executives got skewered in the press for taking lavish retreats at luxury resorts. Luxury had become at best irrelevant, at worst ostracized.
For The Ritz-Carlton, this meant not just a drop in occupancy but also a loss of their biggest competitive advantage—the perception that they deliver rare, one-of-a-kind experiences. In a study done by the Harrison Group (in association with American Express), The Ritz-Carlton experienced a drop of 12% (from 76% to 64%) between Q3 and Q4 2008 in the number of affluent consumers who thought of the brand as delivering “unique experiences.” This drop told us that as luxury was losing its relevance, The Ritz-Carlton was also losing its status as the preeminent luxury hotel brand.
We knew that our current campaign had lost a large part of its effectiveness due to the changes in the luxury market. In crafting a new campaign, we wanted to focus our attention on those two important success metrics: 1. Have a significant impact on room nights booked to combat decreased occupancy. 2. Raise the “unique experience” metric back to pre-recession levels.
A Rapidly Changing Target The 2008 recession had brought about a fundamental shift in the way people thought about luxury. It used to be that luxury brands didn’t have to sell the idea of luxury; luxury consumers were already sold on the lifestyle. All luxury brands had to do was sell them on the particular style of luxury embodied by their brand. It was a given that consumers wanted to participate in the category.
After the recession began, however, luxury was no longer relevant or desirable, even to many consumers who could afford it. Luxury is, at its core, about pleasure and indulgence, and neither of those felt right in late 2008. In fact, it felt downright insensitive to indulge when so many were losing their jobs and their savings. Despite this backlash against luxury, however, many consumers indicated that they were still planning on spending money on the things that they truly felt were special and important to them. Very few were anticipating trading down on or eliminating travel. This told us that they still wanted to participate in luxury, but they wanted luxury to feel reassuring rather than indulgent. Their fundamental motivations for being in the category had shifted, and they needed luxury brands to acknowledge that shift and make them feel okay about being luxury consumers.
Our solution—tell them to travel less.
The Idea of “One” On the surface, it seems risky for a hotel to tell its customers to come and stay with them less often. In the context of the changing luxury category, however, we felt that this was just what luxury consumers needed to hear. They were feeling a significant amount of risk over their own financial security and guilt over their wealth relative to others. These two forces were paralyzing them; it was easier to circle the wagons and wait for things to settle down than to keep spending in the face of those feelings.
Many luxury brands were appealing to customers by discounting, and for many of them that strategy helped them reach their short-term sales goals. Historically, however, luxury brands that lower prices during a recession have a very difficult time pulling out of the cycle of discounting. It happened most notably to Cadillac in the 1970s, when they dropped their prices and were never able to regain their stature as a true luxury brand. We didn’t want the same thing to happen to The Ritz-Carlton, and so we chose to focus on their unique package offerings rather than being overtly price-driven.
By telling consumers to travel less, The Ritz-Carlton could alleviate some of those feelings of risk and guilt, driving occupancy while at the same time focusing on what made the brand truly special—things that were worth paying for regardless of price. Luxury consumers didn’t want to give up the things they felt were worth spending money on, but they needed a new way to justify those things. We predicted that it would be easier to justify one truly special vacation taken in pursuit of time well spent than a number of vacations taken simply because one could.
The Ritz-Carlton needed this campaign to do three specific things: 1. Produce Immediate Results – Our previous campaign had brought in younger customers over four years. This one had to get heads in beds in four months. 2. Establish Thought Leadership – Luxury brands were under attack. We had to address the times without seeming defensive. 3. Protect Brand Equity – We had to walk a fine line between offering tactical promotions designed to spur action and maintaining the brand’s luxury appeal.
We crafted work that spoke to the new affluent mindset: it minimized risk through strategic tactical offers and packages, it minimized guilt through messaging centered around time well spent, and it gave people permission to participate in luxury again through a belief in fewer, better things. We kept those ideas at the center of every ad we created. The ads presented a fresh point of view on luxury that spoke to the times without seeming reactionary or opportunistic.
The visual look of the campaign was designed to avoid the ordinary trappings of luxury. Consumers were ignoring ads that focused overtly on status or wealth, and we thus became more message-oriented. It gave the campaign a look that was serious without being sober, and it allowed our message to be the thing that captured both thought leadership in the category and the attention of luxury consumers.
Stopping the Bleeding As set out in the beginning of this case, above all else, we set out to drive two key metrics: 1. Have a significant impact on room nights booked in order to combat the drop in occupancy. 2. Raise the “unique experience” metric back to pre-recession levels.
The “One” campaign launched in early May of 2009, and initial results are very encouraging. From the launch of the campaign in May through July 6, the packages have resulted in a net gain of over 48,500 room nights. The email, search and online banner campaigns have brought in nearly $4 million in revenue. All of this has led May and June to be the first months of 2009 where The Ritz-Carlton gained domestic market share.
Additionally, the campaign has gotten significant traction on high-end travel blogs like Luxist.com and travel news sites like CNN Traveler and the Travel News Gazette. The campaign has been accompanied by a PR campaign that has included CEO Simon Cooper being on Twitter. The result has been a Ritz-Carlton brand that seems understanding of its guests’ needs.
Beyond room nights and good PR, our greatest measure of success was whether we had succeeded in raising the “unique experience” metric from the Harrison Group study to pre-recession levels. Based on brand new data from Q2 of 2009, this metric has shot up past pre-recession levels, to 78%. That’s a jump of 14% in the course of one quarter.
In a time when other luxury brands were discounting and eroding their equity, The Ritz-Carlton addressed the recession in a fundamentally different way, keeping luxury special no matter what the price. We told people to travel less, but to make that travel mean more. The campaign not only improved business but also projected a calmness and stability that was missing from luxury advertising, and as a result it truly broke through and made luxury relevant again.