Earlier this year, Frédéric Arnault was announced as the new CEO of LVMH Watches. The 29 year old executive has been with the luxury watch brand, Tag Heuer, since 2017 and has been instrumental to positioning the Tag Heuer brand towards enthusiasts and the younger generation of watch collectors. Arnault struck the rare balance of keeping the brand fun and relevant while still honoring its prolific legacy. Now with the appointment to LVMH Watches, Arnault oversees three of LVMH’s most elite watch brands, Hublot, Tag Heuer, and Zenith, hoping to replicate some of that magic for LVMH’s larger brand portfolio. Arnault’s appointment as CEO signals a big shift in executive leadership for luxury brands. For a few decades, luxury CEOs have had a homogenous profile consisting of largely older male executives with a strong operational and management skillset agnostic to the luxury industry. The success of Arnault proves that the future of luxury CEOs are younger, more marketing-centric executives that are able to speak to a younger audience through storytelling and collaborations while tying those actions to sound business decisions.
The Emerging CMO to CEO Pipeline
CEOs come from a variety of backgrounds and all of them have a robust understanding of operations and management. Previously a core part of executive decision making, brands have had decades to strengthen their supply chains and operational foundations. Now, the new class of C-Suite will be challenged to constantly adapt to an evolving product strategy since consumer silos and purchasing habits have been irreversibly changed due to the speed at which we consume content globally. This market shift requires a heightened level of brand building agility and understanding of the consumer. The executives at the forefront of these changes are traditionally CMOs who lead and execute all thing brand related. Previously, CMOs lacked P&L responsibility which made them less desirable candidates for CEOs. Success for CMOs was previously measured incrementally through market share and corporate profit. Once difficult to tangibly measure, marketing is now more data-driven than ever and CMOs know the consumer better than anyone and can tie specific data points to measurable revenue. Outside of the luxury industry, marketing executives have proven success in CEO roles. Most notably, former McDonalds marketing executive Steve Easterbrook made the shift to CEO and his impact was directly seen through his brand building initiatives around advertising that have become a modern playbook for marketers. The automotive industry has similar cases with CEOs from Audi and Mercedes-Benz coming from marketing backgrounds. Mercedes-Benz CEO Stephen Cannon (former VP of Marketing) led the company to double digit growth and to the top of the list in customer satisfaction. As luxury brands fight for relevance with younger generations, no one is better positioned to lead this paradigm shift than marketers.
Agencies as a competitive advantage
Marketing initiatives are consistently one of the largest line items for businesses. The costly nature of ideating, producing, and delivering creative assets while also keeping a close pulse on industry trends is a highly labor intensive process. For this reason, many of the Fortune 500 companies work with some of the most elite advertising agencies in the world, the big six agencies (WPP, Omnicom, Publicis, Dentsu, Interpublic and Havas). Accounts with these agencies are multi-millions of dollars and winning the business is a highly competitive process. Because of the costly nature, many businesses take these initiatives in-house and rely on marketing vendors like Launchmetrics and an internal team of advertisers and producers. While a CEO is able to advise on the financial impact of working with agencies, marketers know the intricacies of the agency landscape and can secure better rates and more-predictable ROI due to their relationships. Optimizing these relationships can lead to explosive growth and upwards of 8-figure cost savings.
For smaller brands, agencies act more like consultants since they offer a wider array of services like strategy consulting and product positioning. Given the rise of boutique agencies, being a smaller brand has become hyper-competitive. There’s even more pressure for smaller brands to deliver experiences to paint a clearer picture of their brand identity. Since the cost of experiential marketing is higher and harder to quantify ROI, marketers at this scale are often the most innovative and are creating trends in the market.
Luxury M&A creates new leadership opportunities
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