How digital transformation and COVID-19 are forcing the luxury industry to accelerate its transformation efforts and shift toward a new set of values and behaviors.
Building Resilience in Luxury is Both a Marathon and a Sprint
Luxury brands have long been masterful in building strong customer loyalty – many have even built a legacy through loyalty – offering more than just products, the values they embody differentiate them from their competitors and help customers to identify more closely with them while also establishing that elusive emotional bond.
And with COVID-19 putting an abrupt halt on many non-essential sales, the luxury industry should prepare itself by anticipating the societal and economic shifts that may well affect consumer sentiment and behavior. Particularly, if customers start to favor more sustainable and responsible consumption.
Now, more than ever, a luxury icon – like any other brand – needs to adapt, stay curious and constantly be looking for ways to exceed the expectations of its customers. In order to steer that effort, we put together seven actions luxury brands should take now to protect and accelerate their growth:
1. Revisit the Core
How relevant is your core DNA? Does it still evoke the same desire it once did? Have you stayed true to it and ensured your purpose – your reason for being – still resonates and holds strong in the modern age? Think of the stories you are telling, the themes that you associate yourself with. After a longer period of success, a unique heritage often gets cluttered by opportunistic moves and messages. Focus on what makes you strong and let go of the unnecessary noise. And it is not about a new logo, go deeper, find your guiding star, the differentiating quality that guided your previous success.
2. Define and Listen to Your Audience
This should actually be pretty easy, because it is by definition a very limited amount of people, right? Unfortunately, the importance of product and service design still sits higher than market insights for luxury brands, lagging behind the approach taken by the FMCG industry with leading brands like P&G and Unilever placing higher importance on qualitative and quantitative customer insights.
Remember, what you offer is exclusive yet attainable and attractive to your target audiences – a group of individuals with unique and specific needs and expectations. Imagine their dreams, think in their context. What is driving those individuals or cohorts? You might apply your very own micro-segmentation, leaving standard sociodemographic or maturity segmentations behind. Take regional specifics into account and make sure that it’s not just a gut feel, but rooted in evidence. When have you last discussed and agreed on two to three core personas to inform your actions? Be sure to install the right antenna for market developments. Do not only try to envision future needs, look left and right to learn from the best. In the end it is the combination of creative potential and insights that leads to the new edge.
3. Think Direct to Consumer (DTC) First
Luxury brands cater to a select number of clients, so why leave the relationship to intermediaries? Even if those third parties are meticulously curated, you will never be able to collect the entire customer feedback if you are not dealing directly with those individuals. Only that direct response assures you have your finger on the pulse of the market, both to adapt the products but also the service that complements the overall experience. Of course, you want to increase reach, but new business models allow for direct interaction even from afar. Imagine what you can do with the increased intelligence. E-commerce still has a way to go in luxury having been discussed for years and implemented rather hesitantly because of concerns in translating the authentic luxury experience in the digital realm. But concepts and technologies are developing fast and the traditional role of partners and channels are blurring. Accept that going DTC is a joint endeavor and will not be perfect from the start.
The fastest growing brands like Chrono24, Chronext (watch platforms) or Tesla and Polestar in the electric mobility space are eliminating the middle man. Richemont was pioneering e-commerce with NET-A-PORTER and MR PORTER and they learned their way through, now also partnering with Alibaba’s Luxury Pavilion – further pushing its Asian exposure. In the midst of the COVID-19 crisis, even Patek Philippe has allowed their authorized dealers to offer their watches online. Watches & Wonders, the Geneva watch fair with a strong Richemont backing, swapped to a virtual-only conference in just a few weeks. Everybody accepted it wasn’t perfect, yet still, it was a blast.
4. Curate the Experience
To provide luxury at scale, you need to tell memorable stories and be able to duplicate experience standards. Selecting and developing the right context and platforms has become as important as curating the living ecosystem. Doing all that without clearly defined experience principles? Impossible. Navigating through the ever-increasing stack of platforms? Necessary! For example, the meticulously curated Las Vegas resort The Cosmopolitan seamlessly integrates stories, guests, platforms and social media to continuously learn and adapt to changing needs and trends. Also, the auction houses like Phillips and Sotheby’s are masters in curation. The sale of the Rolex Paul Newman Daytona was a benchmark example of curation, storytelling, partnership and as a result was also a game changer for the whole auction industry.
Pick your core relationship platform – this might very likely be your website – impart your DNA and focus on your audience by constantly refining the platform. Again, make sure you understand every single move of your audience. There are plenty of tools out there to help you understand and optimise. And remember, the most successful luxury brands are not necessarily the most advanced in digital technologies, but they learned to curate an exceptional experience across platforms and channels. They tell the best stories and those stories can live in all formats.
5. Combine Intuition with Hard Data
For centuries, those in the know were able to better serve the needs of the demanding. That has not changed. Nowadays, each and every individual is expecting nothing less than a perfect personalized experience. Data collection has gone way beyond retailers with transaction and credit card data. Loyalty programs and search behaviors are now used to complement the data set and social media is increasingly used to contextualize this data. Despite a reluctance, or even allergic reaction, to giving away more intimate data, luxury clients expect you to understand and anticipate what they want, tailoring offers and solutions that will seduce them and lock them into your own proprietary ecosystem. Having the right data strategy in place to combine demographic, transactional and behavioral data has become as necessary as having a content strategy. Leveraging your expertise and intuition with a new set of quality data allows you to anticipate the upcoming moves and outmaneuver the competition.
The hospitality and travel industry has a longstanding experience with their loyalty programs like Bonvoy by Marriott or Miles & More by Lufthansa. They combine guest insights with agile processes to come up with unique propositions that increase loyalty way beyond awards. Similar to the FMCG brands on customer insights, the luxury industry can learn a lot from the Amazons in the West and the Alibabas in the East when it comes to collecting and using data. Imagine where Rolex, Patek Philippe or Audemars Piguet could go if they leveraged their already rich data set that they collected with their product and client register by enhancing the data quality and using the insights to have a deeper, more direct interaction with their loyal following.
6. Grow with the Right Partners
Partnering along the brand experience has become another high-performance discipline. Originally something that goes back to the Fifties and Sixties, when luxury distributors like Asprey, Cairelli, Tiffany or Beyer were double signing with Rolex, Patek and the likes, new technologies and new consumer generations are supercharging partnerships. Dealers, ambassadors, authorities, celebrities, influencers, brand partners and many more specialized partners are involved to deliver that high-end curated experience. And it’s not just about the next transaction, it’s about creating stories and experiences that you would simply not be able to deliver on your own. It is now widely accepted to collaborate along any step of the experience chain, from comms, to product to after sales and, of course, also in the wider ecosystem of any brand experience. Your customers don’t care whether you do everything by yourself, they just expect the perfect experience from your brand. Lately, fueled by social media, the trend of co-branding has again proved to be a successful way to expand into new segments or reposition your core, like Louis Vuitton with Supreme, Caran d’Ache with Paul Smith or Rimowa with OFF-WHITE. Collaborate with the best.
7. Be bold, stay focused and stick to your plan
Your marketing budget is limited, so be focused. Stick to who you are and whom you are catering for. What is the content that inspires your demanding clientele? Where do they indulge, how do they escape and feel good? Where do you touch them, what are the right messages? Besides extreme value creation, it is also about the right voice and tone at the right time – always like ‘a first date’. Have a clear plan, stick to it, be creative, surprise! And remember, you got rid of a lot of clutter in the first place, do not add any unnecessary noise now. You cannot and you do not want to please everybody. Stay focused.
It was a brave decision by the Swiss watch brand Breitling to reposition and also to step out of the traditional watches & jewelry fairs. Investing more in its own innovative global experience platforms. Launching a new collection via webcasts was obviously also a lucky decision, now that everybody struggles to go virtual at high speed.
The car industry is struggling a bit here. New electric vehicle concepts for example are only very slowly getting traction. BMW, a bold inventor with the presentation of the i3 series concept at IAA in 2011 was not really able to sustain the momentum and stay ahead of competition, Tesla was.
Get serious about taking a stand and nurture the new luxury. Conspicuous consumption goes out of favor and we’re witnessing a call for a new, silent, meaningful and humble approach to luxury. We saw that trend growing long before COVID, but the crisis has definitely served as an accelerator. Purpose and experience rather than prestige and status are set to take precedent. Removing consumer guilt, living ethically and leaving a positive mark instead of excessive consumption.
But again, always link your activities to your customers’ needs and expectations. Your targets are shifting too, increasingly from emerging markets, female and younger audiences. What will the increasing dominance of Chinese consumers mean for your value proposition?
Now is the right time to pause, re-adjust, focus and then accelerate with a refined proposition. In the end, it is about creating something that we have not imagined before. Something luxuriously new.
Our experts are happy to share more insights on how the current situation impacts the luxury sector and what businesses need to do next. Reach out today!
This article was co-authored by Roland Ott, an expert in Luxury Brand Management. He was part of the successful growth teams at the Richemont Maisons IWC Schaffhausen and Roger Dubuis and the relaunch of Carl F. Bucherer in Brand, Marketing & Communications Management. He is an Alumni of the University of St. Gallen and the Stanford Graduate School of Business.