EBC2003 - story 2

Europeans drink Champagne. Americans prefer cocktails. But is there more to the picture?

In two sessions devoted to American consumers at the European Business Conference on November 22, representatives of companies pitching everything from expensive watches to lowly lollipops shared the challenges they face penetrating the American market.

In the luxury goods panel moderated by HBS senior lecturer Sandra Sucher, participants pointed to a set of American quirks that keep their jobs exciting. While the perception of luxury—attention to detail and quality and hence the ability to extract a price premium—is universal, luxury products are received rather differently on either side of the Atlantic, they said. Purveyors of luxury goods see their customers as affluent and educated, and as people who express a desire for items that are exclusive, rare, and carry a high perceived-status value. Service and quality are fundamentals.

Yet many Americans tend to lack basic familiarity with luxury brands, unlike Europeans, observed Philippe Bonay, president of Officine Panerai North America. In Europe, business school grads clamor to work for such brands; there is not at all the same appeal in the U.S., he said.

Thuy Tranthi, president of Thomas Pink U.S., added that the most important differences that people should keep in mind are local market characteristics. Europeans do not shop in malls. They do not consider malls high-end. But in the U.S., a successful mall can be seemingly "in the middle of nowhere." American shoppers expect to be waited on; U.K. consumers might consider that kind of attention annoying. U.S. customers are also masters of multichannel shopping—at stores, online, or by mail order—so their experience needs to be seamless, she said. Unlike Europeans, Americans regularly mix price points by shopping one day at Costco, the next at a fancy boutique.

At the same time, panelists said, the main differences in buying habits between Americans and Europeans usually tend to disappear when prices hit the stratosphere. Such buyers are global sophisticates who are well educated in the best brands, and their taste for quality and distinction is the same whether their passport reads "United States" or "France." Forget the old stereotype that American hotel-goers prefer predictable uniformity when they travel while Europeans prefer distinction, said Glyn Aeppel, executive vice president of Méridien Hotels and Resorts. Both European and American customers like to stay in boutique hotels these days, she said. The perception that Americans never like surprises is changing.

Purveyors of luxury need to call on their company's heritage as a key part of their pitch, said Daniel Lalonde, president and CEO of LVMH Watch and Jewelry of the U.S.A. and Canada. And because the strongest brands make an emotional connection with their customers, it is important for such brands to adopt global positioning, rather than try to adapt to little, separate markets. "The local part is how you interpret that global positioning," he explained. For instance, Tag Heuer watch ads use Formula 1 drivers in Europe, but since the drivers are largely unknown in the U.S., golfer Tiger Woods has been signed for the American ads. Both ads convey the value of Tag Heuer, but resonate differently with their intended audience.

Even so, the luxury consumer mindset is more important than demographics, he added.

Kings of lollipops adapt
Meanwhile, demographics do come into strong play when products command a lower price, said panelists at the session "Understanding Consumers," moderated by HBS associate professor Luc R. Wathieu. Case in point: Chupa Chups candy, headquartered in Barcelona. Despite annual sales of four billion lollipops around the world, especially in Europe and the Far East, the company has had to demonstrate extreme flexibility in order to coax its North American market to life, according to Jordi Ferre, an Atlanta-based executive vice president for the company. In a small way, the Chupa Chups story offers a window on the challenges of selling to mainstream America.

Companies that purvey such products need to work harder to adapt to the consumers here, he said. For starters, "Seeming too European is not good for our type of product," he said. And while Chupa Chups has triumphed in the lollipop business elsewhere by building itself "one lollipop at a time"—appealing to mothers' impulse shopping—American moms are more likely to plan ahead and stock up on candy for their kids at Wal-Mart and Costco.

"In the U.S., people buy candy in bags. The seasonal phenomenon is amazing," marveled Ferre. "You have to sell the lollipops in bags. It is impossible to change the rules." European companies looking to sell products in the U.S. need to consider the fact that the U.S., though a young country relatively speaking, has created its own traditions. "This is a country in the making," he said.

Ayman Ismail, global director of Procter & Gamble, added that the U.S. may be a melting pot on many levels of business and society, but companies always make a big mistake when they try to force-fit a business model.

Even when you have a strong global brand, you must cater to differences, Ferre said. A big challenge in the U.S candy business not encountered elsewhere is Americans' interest in and knowledge of obesity—especially childhood obesity. When your market is mothers, where do you start, he asked.