By Jo Winterbottom

PARIS (Reuters) - Luxury groups are turning to films, the Internet and private dinners to attract customers as they search for more cost-effective ways to advertise to fight falling sales, executives told the Reuters Global Luxury Summit.

Hermes Spring-Summer 2009

Hermes is increasing its overall marketing budget by just under 10 percent this year to a touch above 100 million euros ($141.1 million), but only a third will be on advertising, Chief Executive Patrick Thomas said this week.

"The rest of the budget goes on shop windows, exhibitions, private public relations operations," he said, including invitations to 10-15 customers to themed store openings.

Thomas said the world's second-biggest luxury goods group after LVMH wanted "to communicate one-to-one and not mass communication."

"We don't believe so much in advertising to explain the particularity of Hermes," he added.

Hermes is using the Internet to push sales with merchant sites in the United States and most European countries. Web-based sales account for only about 1 percent of the total currently but are growing at 40-50 percent annually.

LVMH Chief Executive Bernard Arnault said in May it planned to invest more on Internet ads and better targeted publicity.

Luxury groups are also using the Internet in innovative ways to draw attention to their brands.

One of LVMH's stable, Christian Dior, launched an Internet only advertising film featuring Oscar winner Marion Cotillard to promote its Lady Dior line. Rival Gucci and owner PPR have backed HOME, a film exploring environmental challenges.

Boutique hotels group Baglioni sees the Internet as "an efficient channel" for advertising.

"The Internet is now the best way to reach the biggest number of people in the cheapest way," Guido Polito, vice president of the Italian company, told the summit.

PRIVATE DINNERS

For low slung sports car maker Lamborghini, television and magazine advertising is banned, although some dealers use print.

Chief Executive Stephan Winkelmann said motor shows, factory tours and product placement were more important to boost the brand's image along with test drives for prospective buyers.

"Where we placed all our marketing money is mainly on the motor shows," Winkelmann said. "We have a Lamborghini magazine and we have product placement."

Lamborghinis have appeared in the recent film "Batman: The Dark Knight" and one was blown up in "Mission: Impossible III" but only 2 percent of movie appearance requests are accepted.

Lamborghini, whose cars sell at upwards of 170,000 euros, even organised a "Gentlemen's Trophy" race earlier this year for its customers.

Focused use of alternative publicity is a theme echoed across the industry and regions.

In Dubai, Joe Nahhas, brand director for the Middle East region for luxury pen maker Montblanc, part of Richemont, said the company was carefully choosing its events.

"We have to be a lot more focused on our marketing activities ... it's not about glitzy launches but more targeted activities," he said.

Montblanc is still using traditional media advertising, he added, "but in a very focused and targeted way."

Invitations to exclusive dinners are one way Parmigiani Fleurier promotes its watches, CEO Jean-Marc Jacot said.

Watchmaker and jeweller Chopard has trimmed spending on communication to around 8 percent of sales from 10-12 percent previously and is focusing on the Basel watch fair and sponsorship of major events such as the Cannes film festival.

Keeping publicity targeted has another benefit for luxury companies -- it plays to customers' desire for exclusivity.

"Our customers say please don't advertise," Jacot said.

($1=.7087 Euro)