For decades, the golden rule of the luxury business was elegant, consistent and effective: Don't ask consumers what they want; tell them what they should have.

But according to Bain & Company interviews with chief executives at a score of luxury's top performers, times are changing.

A number of pioneering companies in high-end fashion, food, leather goods, fragrances and jewellery believe their growth will depend on reversing the age-old equation, making consumer needs rather than products the focal point of their strategies.

Such a reorientation could not be more timely.

Although sales of luxury goods have picked up in the past few months, sales growth for many brands has slowed markedly in the past three years, affected by factors such as the weakening dollar, the drop in tourist travel after September 11 2001, and the rise of competition from "mass-market designers", such as H&M and Zara.

Even in the face of these trends, some consumer-oriented pioneers appear to be gaining market share and outperforming the rest of the industry, with revenue growth of more than 15 per cent a year between 2001 and 2003, compared with growth of less than 5 per cent for other large luxury players.

To arrive at these findings, Bain & Company analysed revenue growth from 1999 to 2003 in order to benchmark performance. Researchers then surveyed senior executives of nearly 50 leading luxury brands to identify effective brand strategies and to determine the industry's outlook.

The research and interviews focused on best practices, brand strategy and execution, and emerging trends and industry challenges.

The findings give reason for optimism: luxury continues to have the elements of an attractive sector, selling dreams and well-crafted emotional benefits to relatively affluent consumers.

Yet profitability for many manufacturers has been elusive: the leading luxury goods businesses, which together own 60-70 brands, find fewer than 10 of them account for 80-90 per cent of their profits.

Although not all premium players are ready to change, many top performers in the study believe they can no longer afford the luxury of maintaining yesterday's business model.

They are therefore following the lead of the upstarts and replacing the old product rules with four new customer rules.

First, strive to know your consumer, not just be known by them.

Luxury consumers were once lured just by the cachet of designer labels and fashionable styling. Today they want that—but they also want products that offer innovation and solid value, and an overall experience that reinforces that value. They expect functionality, service, and what one executive called "a vision of luxury, an attitude".

An exemplar of the value driven approach is Coach, a leading US luxury accessories brand. After more than 60 years in business, it continues to place an emphasis on meeting customer needs: for example, it declares that "function is paramount".

Coach pursues extensive consumer research, spending more than $3m annually on surveys relating to product use, and on merchandise testing. Eighty per cent of its products come to the market pre-tested—and with genuine demand.

Coach also assesses potential demand by mining its sales databases, seeking insights into consumer preferences. Such data helped Coach adapt products for younger consumers, doubling its sales to the 18-24 year old segment between 1996 and 2001.

Perhaps the companies that most deeply understand today's high-end value proposition are the luxury carmakers, such as Porsche. Throughout all models, ranging from sports cars to sports utility vehicles, Porsche pays attention to customer-pleasing details.

Second: think merchandising, not just creativity.

The new business model for luxury relies on ever-finer segmentation to find new groups of consumers, identify unmet needs, locate unexploited sales opportunities, and develop offerings for customised or localised appetites based on frequent consumer feedback.

Creativity is still critical in this sector, but not creativity for its own sake. Rather, the new leaders are harnessing creativity in the service of meeting market needs.

Consider the Italian couture house Dolce & Gabbana. The company isn't betting only on raw creativity: it told an Italian newspaper that its seasonal "catwalk" shows were only for fun. Domenico Dolce said the product had been sold at least two months beforehand to the firm's best retail customers at "pre-collection" showings.

Mr Dolce said his "exaggerated" show creations today accounted for only 20 per cent of business.

Dolce & Gabbana's emphasis on meeting broad consumer wants has helped the company create fashion-forward results: in the 2004 financial year, the Dolce & Gabbana Group reported revenue of $585.1m, up 23 per cent.

Burberry, too, is combining creativity with customer focus. No longer just a "trenchcoat maker", the apparel company revamped its women's ready-to-wear segment, expanded or entered select subcategories—such as shoes, handbags, and perfume—and created sub-brands for specific market segments—such as Prorsum, for fashion-conscious consumers.

Similarly, Louis Vuitton has honed its understanding of local tastes to achieve a competitive edge. A few years ago, the company capitalised on European and American consumers' fascination with Japanese pop culture. The result: handbags with smiling-blossom designs, which were a hit.

The third rule: offer a tailored customer experience, not just exclusive stores.

Today's successful challengers have focused their retail operations on delivering an exclusive customer experience.

For example, the new luxury leaders are investing in customer relationship management (CRM) systems to uncover customer preferences and purchasing patterns.

They also go out of their way to offer customised products and services, such as made-to-measure suits, shoes, and bags, along with exclusive events, personal shopping assistants and other personalised offerings.

One high-end men's wear retailer, with stores from Shanghai to New York via Moscow, uses extensive CRM technology to segment and track consumers, enabling it to stay in fashion in the many locales it serves.

This is a significant step away from the old rules, which saw a beautiful store in a great location as the primary draw. Those physical attributes—while still essential—no longer translate into the kind of individual service that today's luxury consumers demand.

The fourth rule: refresh, refresh, refresh.

The shelf life of luxury items is shortening each season, to the delight of successful challengers.

This has spurred luxury goods makers and retailers to rotate assortments more rapidly.

The new rule is "fast fashion", dressing up stores with full collections of new designs several times during the season. On average, time-to-market for some luxury goods has shrunk to between four and eight weeks from as much as 12 months.

Many luxury companies are taking note and working to increase the number and breadth of their in-season offerings. Fashion house Dior has developed so-called "capsule" collections to stimulate rotation.

Vanguard retailers are also changing non-staple designs to bring consumers back to their stores several times each season.

Spanish clothier Zara, which is challenging haute couture by taking upscale apparel to the mass market, is a case in point.

It manages to lure a customer into its store an average of 17 times a year, compared with an industry average of just three or four, largely by featuring new designs, which arrive twice a week.

Indeed, unless it's a clothing staple, Zara keeps no design in its store longer than one month.

The top marketing executive of one luxury food company interviewed by Bain summarised the industry's sharp shift away from product focus.

She says: "Creative people want to launch new blends without having investigated whether these blends correspond to any kind of customer needs. But new trends are forcing luxury brands to take a more systematic customer orientation."

A chief executive in luxury ready to wear added: "The balance between creativity and commercial objective is very delicate. That's why the most successful results are generated by companies where big creative talents are also entrepreneurs with a market culture."

All these changes have serious—and often unrecognised—implications for companies' marketing capabilities. In the past, marketing responsibilities and decisions have been fragmented among product departments, communications departments, and distribution channels.

Under the new rules of luxury, companies need to upgrade marketing capabilities and assemble cross-functional teams so they can deliver the right experience wherever they come into contact with consumers.

Many of tomorrow's leaders in the luxury market are achieving a new and different kind of exclusivity by putting customer value, commercial appeal, individualisation, and variety at the centre of their strategies.

As they do, they are paradoxically discovering high-end fashion's new dictate: that by responding to what consumers want, they are fashioning superior products, as well.

Claudia D'Arpizio is a Bain & Company partner in Milan, and leads its Luxury Consumer Products practice. Marc-Andre Kamel, a partner in Paris, leads Bain's European Retail practice. Cyrus Jilla, a director in London, is leader of the firm's European Consumer Products practice.