Brand equity and class warfare (10 January 2007)

Sometimes your money really isn't good enough. Here's something to remember the next time you hear an argument that extols how purchasing power is emboldening democracy: Today's WSJ has an article about Tiffany's strategy to alienate existing customers -- trend jumpers, teenagers, aspirational lower-class folk; the wrong sort of customers, apparently -- and the huge profits they brought the company and shareholders in order to make the brand as a whole seem more exclusive. The company believes its image is ultimately more valuable in the long run than whatever profits it surrenders by pricing its once popular line of silver jewelry out of the reach of the little people: " 'The large number of silver customers did represent a fundamental threat -- not just to the business but to the core franchise of our brand,' says Tiffany CEO Michael Kowalski." The company was frustrated that its initial price raises couldn't scare away enough consumers, so it boosted prices again and again until demand was finally quelled.

Tiffany is declaring essentially that it's more important to make slim profits by selling to rich people than to make big profits selling to everyone. "Like a growing number of publicly traded luxury-goods makers, Tiffany is attempting to walk a razor-thin line: broadening offerings to the upper-middle-classes while pitching privilege to the truly rich. The dilemma is particularly common these days, as investors clamor for sales growth on one side and fickle luxury buyers demand exclusivity on the other." This is pitched as a reasonable long-term strategy, but what Tiffany is trying to preserve is not profitability but a class structure that it has positioned itself to police. In our democracy, the state has forsworn much of its traditional role of conserving privilege to the people who already have it. This opens up the field to capitalists. In the absence of a repressive state enforcing castes, companies like Tiffany spring up like rent-a-cops to do the necessary policing of class boundaries, controlling supplies of positional goods and keeping the lid on aristocratic social capital. Jealously guarding its supply of exclusivity -- which is valuable less in monetary terms than in its priceless, near timeless, significance to class antagonisms that predate the cash economy -- Tiffany will do what it can to make sure that its fine, upstanding name is not used to give the hoi polloi any dignity. Apparently, preserving that class gulf is more valuable than any cash profits could ever be.