Reposted from DLA Piper’s Law à la Mode Edition 4 – Winter 2011

By:  Michael K. Barron, Sarah Phillips and Nadea Taylor (Boston and London)
“AdWords,” the paid, subscription-based Google referencing service which allows users to advertise their companies alongside Google search results, has recently been the subject of much legal scrutiny.  In late September, the European Court of Justice (ECJ) gave a preliminary ruling on questions referred to it by the English High Court in the case between Interflora and Marks & Spencer (“M&S”), regarding the purchase by M&S of the Google AdWord “Interflora” and other similar AdWords. 
In answering the questions referred to it, the ECJ repeated much of the recent jurisprudence in this area, in particular from the Google France case.  Previous cases established that purchasing a third parties’ trademark as an AdWord would only amount to trademark infringement if such use would have an adverse effect on one of the functions of the trademark.  
The ECJ gave the following guidance on how national courts should assess whether the use by a third party of a sign identical with a trademark in relation to identical goods or services has an adverse affect on one of the functions of the trademark:

By: Ann K. Ford, Kiran N. Gore, and Debbie Rosenbaum (New York and Washington DC)

Fashion is an integral part of how consumers construct their personal identities and choose to portray themselves in their everyday lives.  From a societal perspective, we correlate luxury fashion brands with success and exclusiveness.  We notice individuals with red-soled stilettos or LV patterned brown leather purses because we know that while these individuals could have chosen from a variety of options, they chose to identify themselves with expensive emblems of status.  This aura of exclusiveness is the value that luxury brands provide to their consumers: few can have it; the others merely aspire to it.

Social media stands in stark contrast to this image.  Social media platforms are inherently noisy, crowded and easily accessible from a variety of platforms.  This dichotomy begs the question: will using social media tarnish the value of luxury brands by making them too accessible by the masses?

Why Risk It

The reasons for fashion brands to have a social media presence are compelling.  In the U.S. alone, eighty percent of people with an income over $250,000 are social media users according to Unity Marketing research.  Another study by L.E.K. Consulting showed that individuals earning more than $150,000 is the only segment increasing spending during the current recession.  These statistics are evidence enough for luxury brands to open their marketing doors to new media platforms.  The challenge, however, remains engaging without jeopardizing or “degrading” the brand.

Using Social Media to Connect with Existing Customers

The luxury brands that are using social media effectively have found the right “voice” for their brand.  First, translating a luxury brand into a social media space requires not just implementing an isolated social media strategy.  Rather, luxury fashion brands must remain cognizant of the marketing strategy that has worked to create this exclusiveness, and subsequently integrate social media platforms, as appropriate, into their overall communications and marketing strategy. 

For luxury fashion brands that pride themselves on elitism and inaccessibility, carefully translating this character to social media is key.  While communication on Facebook, Google+ and Twitter is inherently casual, these platforms can also be used effectively to make personal connections with consumers and expand the in-store experience.  For example, one luxury clothing brand encourages fans to submit photos and videos of themselves on Facebook modeling their products.  Another well-known luxury wedding dress designer has her own iPhone wedding planning application for brides.  A high-end shoe designer has a “treasure hunt” on Foursquare, a popular geo-location social media platform in the U.S.

What distinguishes brands that are successful with social media from those who merely set up an unmoderated Facebook fan page and attempt to acquire as many “likes” as possible is that the successful companies encourage their customers to engage with the brand in meaningful ways.  This interaction, combined with effective conversations between consumers and the brand, reinforce brand loyalty and engage the consumer post-purchase.

However, luxury brands’ investment in social media is not just about the customer; it also provides an unprecedented feedback loop of research back to the company.  Social media allows communications and marketing departments to evaluate perceptions of the brand instantaneously as it is expressed in social media in order to fine tune the brand’s message and product development.  Social media reveals what consumers really think about the brand— whether it is good, bad or indifferent.  The goal is to do more than simply track website traffic, but to develop true insight by listening to the spontaneous conversations expressed throughout social media and using that information to determine how it impacts the brand.  This can reveal current and potential groups of customers, popular online retailers, product preferences, online influencers and lead users.

Using Social Media to Create with Future Customers

Every brand is faced with the difficult balancing act of maintaining their well-cultivated image, dialoguing with existing consumers, and grooming a connection with the newest generation of customers.  For luxury brands, this is particularly difficult since the next generation, on average, lacks the financial capital necessary to consume.  The challenge has been making the brand accessible at affordable prices in order to engender early loyalty while not tarnishing the brand’s aspirational status.  Social media platforms provide unprecedented communications vehicles to achieve this bimodal goal: not only does evidence suggest that their existing customers are using social media, but it goes without saying that their future customers are the digitally entrenched millennial generation.

Social media, and in particular, the growing concept of social buying, has given luxury brands a unique opportunity to make their products accessible to a younger generation.  Websites like gilt.com and renttherunway.com have made luxury goods accessible to a younger generation with moderate price points on limited products.  Sites like Australia’s Fashionising.com and Canada’s FashionMash.com have become online hubs communities sharing fashion trends and styles.  This media platform allows “aspirational” consumers to begin to develop their loyalties with luxury products that were previously unavailable.  By offering a limited selection on an off-site location, luxury brands are introducing new customers to their products without diluting the exclusiveness associated with the main brand. 

Shift from Risky to Essential

For luxury brands, participating in social media has shifted from being risky to essential.  Not only have these channels become part of their existing customers’ dialogue, but it has created unprecedented opportunities to foster future consumers.  The challenge, however, is that while any brand can have a social media presence, luxury brands must engage in more calculated, thoughtful approaches.  They must recreate the brand experience and foster genuine dialogue using these channels.  Above all, high-end fashion and luxury brands must have a social media presence that complements and reflects their reputations, or they risk losing their competitive advantage.