Bonding with the consumer is key to how luxury brands survive lasting changes in buyer behavior in an era where markets, products, services, marketing and distribution are in a state of flux.
Luxury marketers should also recognize new growth opportunities from changing demographics and market dynamics, according to a study by the Boston Consulting Group.
“Consumers remain hesitant to purchase goods on the basis of something as superficial as a brand image or the urge to show off,” said BCG consultants Jean-Marc Bellaiche, Antonella Mei-Pochtler and Dorit Hanisch in their study. “Demand will need to be triggered by something more meaningful.”
Customer relationship marketing is becoming essential to client retention, the study’s authors pointed out. Successful loyalty programs can push traffic, influence repeat purchases, enable cross-selling and upselling, generate referrals and offer media coverage.
Also, special events, in-store promotions, after-sales services and customer-tracking systems that promote personalized recommendations help keep the luxury brand in the consumer’s good graces.
“Even the best CRM systems, however, are no substitute for a personal touch,” the BCG study said. “Luxury companies should aim to establish relationships with their best customers.
“Special offers and services can help create stronger bonds, but companies also need to retain experienced salespeople to ensure that their top customers are recognized when they step into a store,” the study said.
Old is gold Prior BCG research shows that consumer-facing luxury brands generally have not done enough to learn about their customers.
BCG recommends that luxury brands should not overlook older customers. Indeed, major luxury markets are growing older.
From 2008 to 2020, the number of consumers ages 65-80 is set to grow by a factor of 1.5 in the United States and Canada, swelling the group from 45 million to 65 million.
By contrast, younger segments of the population are expected to grow only slightly in these two countries.
Populations in Western Europe and Japan, in particular, will grow older too.
In Japan, consumers ages 80 and up are set to grow by a factor of 1.7 between 2008 and 2020, while those below 65 will decrease by 12 percent in absolute terms.
But beyond simply the size of this group, targeting consumers over 60 makes sense for luxury brands.
“Compared with previous generations of older consumers, this generation is still young at heart,” the study said. “Most of these consumers are in good physical shape, live longer, and – in Western countries, especially – are accustomed to buying luxury goods.
“They were the ones who fueled the explosion of luxury markets in the 1990s. The trends that are reshaping consumer tastes – notably the importance of value and the growing appreciation of experience-based luxury – will be even more pronounced among these consumers.”
Madam and eve Another demographic that luxury brands should not ignore are women.
BCG estimates that women, on average, influence 80 percent of a household’s spending on luxury goods. A growing proportion of this population is buying for themselves.
Consequently, luxury marketers should tie their marketing messages to the tastes and behavior that drive women’s spending decisions.
BCG and its market research partner, Concept M, identified four female groups of defining characteristics.
The leisure class of women wants to relax and enjoy the finer things of life. Friends are important and shopping becomes a social activity. Their purchases connote creativity or a sense of natural authenticity.
Eternal beauties are defined largely by their health and physical strength. Keen followers of the latest fashion trends to feel dynamic and fresh, for them self-indulgence is not a guilty pleasure but a reward.
The kids on board group believes that “the best is not enough for my babies,” resulting in lavish attention on their children to compensate for not spending enough time with them. Some believe that love and care are traits of good character, while others hold that trendy kids befit a trendy mother.
Finally, there are nesters – women who might say, “Show me where you live, and I will tell you who you are.” Their homes express their identity.
Luxury marketers should use these concepts to shape their outreach to consumers, mindful that the concepts are not mutually exclusive, per the BCG study.
“They must also recognize that the concepts are relevant to all segments, not just wealthy ones,” the study’s authors said. “Someone from a rising middle-class household might identify with, and aspire to, the characteristics that define, say, the leisure class.”
Please click here to read, “Luxury industry caught between growing momentum and lasting change.”