Redefining “Luxury Brand” for Your Luxury Marketing Strategy

Why do consumers consider one brand to be a “luxury” brand and another brand not? Exclusivity? Performance? Quality? Innovation? Heritage? For the most part, those all have been defining characteristics of a luxury brand, and they still are. However, there’s been a shakeup underway. The traits that carry the most weight with consumers in today’s luxury market have changed.

“The definition of ‘luxury’ is undergoing a paradigm shift in the consumer market,” said marketing expert Pamela Danziger. Unity Marketing and Luxury Daily recently surveyed over 600 luxury retailers and marketers. They found that the definition of luxury is the “number one disrupter of the luxury business.”

What does this mean for a luxury marketing strategy? If you know how consumers think of luxury and what drives their purchases, it can help you determine the best strategy to attract wealthy clients. You can also reduce the cost of acquisition.

Quality Is Now the Top Characteristic That Defines a Luxury Brand

Ask any Apple buyer how well they like their Mac or iPhone. They’ll undoubtedly tell you they believe Apple products are far superior to any competitor. It doesn’t even matter if competitive products offer better features. Apple may got its start by launching a unique computer product to compete against Microsoft. But Apple’s following has grown far beyond disgruntled PC users. There may be a certain “status” to owning an Apple product. However, the company built its brand on a reputation of quality and performance.

Now consumers are defining luxury differently. Just a few years ago, quality took over as the leading characteristic of luxury. Data from a recent major report confirms that quality, not exclusivity, is now the key definer of luxury for consumers globally. According to Albatross Global Solutions and Numberly’s fourth annual “The Journey of a Luxury Consumer” report, 85% of luxury consumers say quality is the most important characteristic.

“What separates true luxury from the idea of luxury is quality,” says Javier Calvar, chief operating officer at market research firm Albatross Global Solutions.

Younger Consumers Are Playing a Bigger Role in the Luxury Market

A change in the demographics of today’s luxury consumer is behind the shift in what defines luxury. Traditionally, the luxury market has been made up of older consumers, many with inherited wealth. Baby boomers and those older still make up 60% of the total global luxury market. But the other 40% is made up of Generation X and millennials. So younger consumers are representing an increasingly significant portion of the luxury business.

Younger people, with newfound wealth, are not only moving into the luxury market, they’re redefining it.

“When money goes into the hands of people that didn’t have much of it before, the relationship those individuals have with luxury brands is very different from those who have been exposed to luxury brands for a long time,” said Calvar. “A really large percentage of our top-end product customers are between the age of 30 and 50. It’s no longer a retirement plan to buy yourself a yacht to enjoy in your golden years. ”

Millennials in particular are a luxury marketing segment growing in importance and wealth. They see exclusivity as less important. Instead, they prefer to “belong,” and have little interest in something that separates them from their peers.

Connecting with the New Luxury Market Consumer

How can you connect with this new luxury market customer? Identify the specifics of your target customer’s profile. Once you know about their likes, dislikes, and best methods of contact, you can build a more effective luxury marketing strategy.

So it’s more than demographic data, it’s about understanding your customer’s mindset, whether your luxury customer is 35 or 65. Appealing to a baby boomer is different than connecting with a millennial, though both may have interest in the same product. Knowing the buying motivations of each allows you to tailor your message to that niche segment.

“Quality always will be essential to luxury, said Lyle Maltz, a director with Kantar Vermeer, WPP’s global marketing consultancy. “But now emotional value and a strong, personalized relationship with consumers are of great importance in luxury marketing.”

Today’s luxury marketing is “highly personalized marketing. It has a very specific and defined message that resonates with an individual’s affinities, interest, and wealth capacity,” agrees WealthEngine’s Patrick Bischoff, president of the Commercial Markets Group at WealthEngine. You need to build that one-on-one relationship with your customer to make them feel they are being treated as an individual.

Following a Customer-Driven Luxury Marketing Strategy

The new luxury market consumer will define what makes a brand a luxury brand, not the other way around. Today it’s less about marketers and more about consumers. That can make it more challenging for luxury marketing strategy, as the definition of “luxury brand” continues to shift. Still, to truly prosper in the luxury arena, luxury marketers will need to follow the lead of their target luxury consumer.

“The change in how consumers define luxury and the new path to purchase is dramatically redefining the marketing strategy,” said an unnamed marketing industry insider in a Forbes article. “Luxury brands must be very agile and innovative in order to gain the favors of the new luxury consumer.”

Giorgio Armani is a brand known globally for its high-end designer men’s clothing. It began by targeting the ultra high-end professionals who desired a high quality product. Since then, Armani has gradually expanded its brand scope with products aimed at broader customer segments. Armani launched a line of jeans in the U.S. market for fashion seeking, price-sensitive youths in urban metro areas. It’s an example of a luxury brand creating sub-brands to capitalize on and cater to a different customer segment.

As stated in a WARC article, “The traditional luxury model has been challenged further with the rise of digital platforms, social mobility, the emergence of ‘affordable luxury,’ and the particular preferences of millennial shoppers.”

With more younger luxury buyers who grew up in a digital world, you must also change your luxury marketing strategy. Part of building a luxury brand involves communicating with customers in the way they prefer. Years ago, that may have been print ads, direct mail, or TV commercials. Today it’s more likely to include special videos, social media, apps, and other digital means that provide a “total customer experience.”

Mine Your Luxury Marketing Database to Lower Customer Acquisition Cost

Everyone is looking for new customers for luxury marketing. What you may not realize is that a great source of new business is your existing customer database. Here’s how you can mine it to lower your customer acquisition cost.

Reduce Your Customer Acquisition Cost

The key to reducing your customer acquisition cost lies in how closely your past customers match your current target luxury marketing customer profile. The better the match, the more likely you’ll attract wealthy clients and have repeat customers. Correctly mining your current customer list can provide an abundance of prospects for your latest products or services.

“There is this philosophy that everybody is driving after net new customers,” said Patrick Bischoff, president of the Commercial Markets Group at WealthEngine. “Certainly, we want to grow our business and want to increase net new customers. Yet we at WealthEngine, together with our clients and some of the premier consultancies, have recently conducted studies. The first step in proper luxury marketing is to go back to your existing database.

Getting Past Customers to Buy

Not only is it less expensive for a business to retain past customers, it’s also more profitable. A Bain & Company study found that just a 5% increase in customer retention can increase a company’s profitability by 7%. Also, the average amount spent by a repeat customer was two-thirds more than a new customer.

According to a MarketingProfs.com article, getting your past customers to buy from you again can also result in more ongoing revenue. If you can convince your customer to make a second purchase, that customer is more than twice as likely to buy a third time. And that customer is more likely to buy even a fourth time! “If you’re able to make even a small increase in your conversion rate for second-time purchases, you’ll see serious revenue growth.”

So honing in with the right targeted marketing for your one-time buyers will increase the amount of second-time purchases. And once you’ve gotten them to make that second buy, it’s often only a matter of time before they make their next purchase. You’ll also reduce the customer acquisition cost.

Mining Your Luxury Marketing Database

Customers who happily made a purchase from you are more likely to buy again. Of course, you can start with purchase data to help determine what else they may buy from you. But purchase history alone may not be a good indicator of future luxury purchases.

Say you bought something at a fashion retail store. You’ll be in that retailer’s customer database. They may have your email address. They may have your name. But they have no idea what your potential is to buy more in the future.

“What is the capacity of the individual to spend with me, who I have already in my database? Most of our clients don’t know,” states Bischoff.

Previous spending is a key component of luxury marketing, but it should not be the only data point you’re using. Not all existing high net worth customers will have the abilty or capacity to spend more with you. So, identifying those who do is essential to enhancing your revenue and driving a higher customer lifetime value.

Finding Repeat Luxury Marketing Customers

Data beyond income or net worth will be valuable in determining your luxury marketing focus. Besides wealth, there are plenty of other data points to consider.

“We advise our customers to take their database and append it with our Wealth Engine information,” explains Bischoff. ”Appending means we match their records with ours. We have a database of 240 million individuals in the U.S., covering about 85% to 95% of the adult population. We match these individuals with our data and our system. Then we can add to the information that our clients have.”

One person may have a net worth of $5 million. Another person’s net worth is over $500 million. Plus there are up to 1,200 different data points on likes, affinities, donations, causes they support, etc. All this WealthEngine information is reported back to our clients. That allows them to start pinpointing their luxury marketing efforts toward people they already know. They already know to contact these people because a lot of them gave contact information in a prior buying session. That is the starting point.

Locate Your Best Luxury Marketing Prospects

Once you understand all of these things about your existing database, you can then start to make use of other resources. Those include AI, machine learning, and any kind of predictive modeling to score that database. By scoring, you can determine the best of the best luxury marketing prospects.

Should your database be segmented or categorized? Should you not market to the entire database, only two segments of it for certain products or services? The real trick is that score, which is a very unique feature of WealthEngine.

Getting specific about who you’ll be marketing to can make your work much more efficient. “It is imperative for brands, both luxury and non-luxury, to prioritize and segment their customer base. Then they can identify who they should focus their time and budget on in their marketing campaigns.”

Going Beyond Your Current Luxury Customer List

In addition to pulling your best repeat prospects from your own list, you can apply that modeling score to new prospects. The WealthEngine database is full of individuals with whom you have not had any previous interaction. Combining your data with WealthEngine data will model those potential luxury market buyers so that you can reduce your customer acquisition cost. Luxury marketing is not just about previous buying habits, but identifying others who are most like you past buyers. They are prospects who have the tendency to make purchases and have wealth to do so.

In that case, WealthEngine will give you the most “lookalikes” to your best customers. Those are people you know as your best customers based on how well they fit your target profile. Then, you will actually be marketing to the people who look most like those who already have some relationship with you. That will definitely reduce your customer acquisition cost.

“Comprehensive and informative data is a prerequisite to everything marketing today. It’s the foundation. You need to know something about an individual before you can customize your engagement strategies.”

Find out more about how WealthEngine data can help you reach more of your luxury marketing customers. 

Luxury Lifestyle Marketing: 3 Ways to Appeal to the Lifestyle Consumer

Luxury lifestyle marketing has changed. No longer can you simply market an image of your brand and how it will make the lifestyle consumer feel. Today’s luxury buyers purchase items that act as an extension of their values and identity. Here’s how to appeal to them.

What is luxury lifestyle marketing?

Luxury lifestyle marketing is the process of high-end brands forming a relationship with a targeted group on the basis of their shared values and interests. High-end brands use their products as a means of communicating and forging deep emotional connections with their consumers.

Each brand has an identity. For example, Jeep’s identity is the “adventurer”. Adidas’ identity is “athletic”. Each brand has an identity that’s connected to a specific set of attitudes, values, and interests. Consumers, then, want to engage with brands that have a similar identity to theirs. So, when a brand with a particular set of values appeals to a consumer with a similar set of values, that process of influence is an example of luxury brand marketing.

Appealing to the Lifestyle Consumer

No lifestyle consumer is the same. Think about your circle of friends: do all of you hold the same interests? Do you all hold the same values? Today’s lifestyle consumers engage with brands that allow them, or give them the tools, to connect with their ideal selves. In that sense, not every luxury brand will appeal to every lifestyle consumer. That is why it is important to find and forge relationships with consumers whose ideals align with your own, and vice-versa.

In general, lifestyle consumers don’t want to be “sold” anything. They want to resonate with high-end brands on an emotional level, and feel that they’re part of a community that they support, and that supports them.

In order to appeal to the lifestyle consumer, you have to ask yourself two questions:

  • What values do we want to promote?

  • What type of emotional connection do we want to have with our consumers?

By determining what type of relationship you want to have with your consumer, you’re better able to cater to their evolving needs.

3 Keys to Building a Successful Lifestyle Brand

Your consumers’ needs and values is the foundation. So, what can we lay on top of this foundation to create something sustainable and influential? Here are the 3 keys to building a successful lifestyle brand:

1. Understand your Lifestyle Identity

Adidas’ identity is athletic. All Saints’ identity is edgy. What’s yours? Being able to clarify your identity allows you to narrow your focus, and understand what kinds of customers you’ll be forming deeper connections with. In luxury lifestyle marketing, knowing your identity helps you identify the values and products your customers will feel most connected to. By determining your identity as a lifestyle brand, you’ve just opened the door to all the necessary information you’ll need, not only to become successful, but to become influential!

2. Be Personal

If you want to forge emotional connections with potential and existing consumers, you need to know who you’re talking to. You may have people walking through your door with differing needs, yet all of them likely share similar values. It is important to create targeted messaging using hyper-personalization so that you focus on their interests. Each consumer is an influencer. You want to articulate that you hear and see them—and that you are not simply trying to sell them your product.

It’s also important to show them that you’re receptive to their perspectives and ideals. The way they are, and who they are, is of value to you, and you want to cater to that. You can also forge these emotional connections by creating novel experiences for your consumers. When your offerings and your overall branding is striking, the experiences that you’re offering to your existing and potential consumers, will stay with the people who believe in your values.

3. Leverage Wealth Data

Correct data tells a story about an individual. Instead of trusting that each of your consumers will find what they need from you, you have to get to know more about them. When you look at the wealth, age, behaviors, and demographics of individual customers, you are better able to anticipate their needs based on their values. We can then identify their propensity to stay with our brand, and understand what they may want to see or purchase in the future that we could create. Becoming attuned to this information allows you to create a loyal customer base. More than that, you’ve now created something even more integral: community.

3 Ways to Provide Hyper-Personalization in Luxury Brand Marketing

Luxury brand marketing doesn’t just involve communicating and delivering products of a specific brand. It also involves creating and maintaining an image for your company that is based on a core set of values. To win over the luxury consumer, you must use hyper-personalization to focus on the nuances of your prospect’s interests.

What is Luxury Brand Marketing?

Luxury brand marketing is the business of promoting and selling the luxury goods of a high-end company. For some luxury brands, that could mean showing your customers that your company and products are novel and iconic. For others, they may want to show their customers that their company and products are unique and creative. Hyper-personalization is one of the best ways to sway the luxury consumer.

Shifting Perception of Luxury

The luxury market is expected to grow 5% annually through 2020. According to Forbes, this growth stems from Millennials’ evolving relationships with luxury brands.

Initially, luxury brands wanted to create elite and exclusive experiences for their consumers. Before, it was about creating spaces for customers to get high-quality products with high-quality service. Today, people still feel the need to be part of a select group but they also want to feel uplifted. They want to support what brands represent. This is a shift in luxury brand marketing. Your value as a brand no longer comes from your name recognition. It is about the personal connections you make with your customers.

Traditional luxury goods, in that sense, are becoming less relevant. In this “new normal” luxury market, consumers want to feel immersed in a highly personal experience. People still want to get something unique, but they don’t want to purchase something based on the value of the brand. Although they still want luxury goods, they also something that makes a personal value of theirs into a tangible reality. Luxury brand marketing now requires brands to forge an emotional connection with their consumers, and to understand their personal preferences.

Personalization vs. Hyper-Personalization

Personalization in marketing allows you to collect the consumer data that’s more general: customer’s name, location, and purchase history. While this information is useful, it only gives you a vague impression of who is buying your products.

Hyper-personalization in marketing, on the other hand, allows you to receive real-time customer data so you can personalize messages you send to your customers, or potential customers. For hyper-personalization, you need to know as much as possible about your buyers, including their capacity to spend and their interests. Fortunately, you can get this regularly updated information from Wealth Engine’s database.

As a result, hyper-personalization allows you to execute your luxury brand marketing strategy with pinpoint accuracy.

Incorporating Hyper-Personalization into your Luxury Branding Strategy

Hyper-personalization is now approached as a necessity in luxury brand marketing. But, how best can you begin incorporating it into your branding strategy? It’s important to hone in your efforts in the following areas:

1. Tailoring Your Messaging

If you want to appeal to different kinds of people, and understand their individual values, you have to communicate with them in ways that make them feel seen. When you hyper-personalize your messaging, you can show your customers how your values align with theirs. It is important to name, acknowledge, and appreciate your customer’s values. Then, you can clearly evaluate and articulate the ways you fit into their values and needs.

2. Leveraging Wealth Data

When you leverage wealth data, you can develop and engage with luxury consumers in a hyper-personalized way. Leveraging wealth data allows you to see how likely your new and existing customers are to make a purchase, and when. This helps you figure out what each individual will need in the future. When you have this tool at your disposal, you’re better able to anticipate and act upon their needs. You’re adapting your customer’s behaviors, and finding ways to be of service to their individual needs.

3. Communicating Your Purpose

It’s important for you to communicate to your consumers what you support, and what your greater intention is for your company. There is a new trend toward “goodness-based spending.” Today’s luxury consumers want to know that you are “honest, relatable, committed to doing the right thing, and follow sustainable practices.”

Consumers value organizations that seek to have a greater impact on the world. Not only do individuals still want their needs catered to, they now want the needs of the greater good catered to.

What do you stand for?

When you articulate the answer to this question, you will be able to find ways to appeal to potential consumers with your values.

 

6 Top Trends in Luxury

The luxury goods sector has long been one that inspired envy, whether it’s the attached glamour or the high margins enjoyed by retailers.

However, reports have indicated that the sector has seen stagnation and a low, single-digit growth rate in 2016 & 17. Under these circumstances, it is important to identify, understand and embrace the trends that define the industry today.

We sat down with Neha Kapasi, our Luxury Sales Director, to discuss her perspective on Luxury Brand Marketing and how WealthEngine can help companies personalize their engagement with wealth and lifestyle data. Listen to the full podcast.

Luxury companies that have foreseen or even set the trend in some instances have benefitted from having a competitive edge and are poised for success. With more brands entering the market at every level of luxury, let’s examine the trends that can help set these purveyors of refinement apart.

1. Becoming Street Smart

When it comes to staying relevant, the luxury industry has it particularly hard. What’s trendy today could become irrelevant tomorrow. Millennials and other young consumers of luxury products and services have shown that they have a preference not only for the indulgent but also for the cool.

The ‘street-edge’ factor is becoming something that is prized among consumers. Fashion giants such as Balenciaga and Balmain have hired creative directors who can create the new cool. Meanwhile, other houses are benefitting from unexpected collaborations such as Louis Vuitton x Supreme and Gucci x Dapper Dan.

2. Communicating with Personalized Precision

BCG has predicted a massive revenue shift towards the top 15% of marketers who embrace personalization. Luxury customers are especially likely to respond to messages that are custom tailored to them. We have talked before about how no two millionaires are the same.

It is no longer enough to look at just wealth indicators for marketing effectiveness. Luxury companies need to have a more holistic view of customers including demographics, lifestyle attributes, and affinities so that their Account Based Marketing is more targeted and therefore more efficient. Luxury consumers, especially those from digitally savvy generations crave an authentic experience. This means that luxury companies need to embrace data and AI to deliver the most personalized, highly customer-centric experience- whether it’s travel, high-fashion, auto, or real estate.

3. Embracing Technology

Speaking of personalization and digitally savvy consumers, luxury companies that are early adopters of technology will emerge as winners. Technology needs to permeate not only communications but also the very delivery of customer experience.

Data and Artificial Intelligence can help identify patterns, create predictive models and customize messaging for Account-Based Marketing. An omnichannel approach enables luxury purveyors to reach consumers where they gather. For instance, Instagram is not just for influencers and aspirational followers. Of the 800 million Instagram users, 80% of them follow brands. 75% of users are reported to take action after seeing a business post.

Augmented and Virtual Reality can provide consumers a richer experience when it comes to product trial, creating shareable media and enjoying a more digitized in-store visit. Amazon and Zippin have set the trend of creating check-out free shopping, eliminating a bottleneck and further integrating online and offline experiences.

4. Weaving purpose into their business

Although this may be more a movement than a trend, purpose, and meaning are extremely important to millennials and younger generations who will soon represent 45% of the luxury market. It is common for luxury conglomerates such as Kering Group or LVMH to have corporate social responsibility units.

Today, however, the emotional and experiential preferences of millennials and gen-Z go beyond perfunctory social impact. It is important for luxury companies to build purpose in the very design of their business. This could be through using sustainable materials, reducing their carbon footprints, supporting or highlighting the work of marginalized communities, ethical sourcing, and treatment of manufacturing partners. Ultimately both clients and employees want to associate with responsible businesses.

5. Making Customers and Employees Feel Included

In keeping with the idea of responsible business, inclusiveness is another big theme in the luxury market. By its nature, luxury is not inclusive. Today, however, seeming out of reach makes brands feel unrelatable.

Fine jewelry companies such as Tiffany & Co and Bvlgari are each doing their part to become more inclusive. While Tiffany has created a modernized and minimalistic space within a new retail store, Bvlgari has created more entry-level pieces to be further within reach. Meanwhile, Gucci has made strides in the area of diversity. Gucci’s rising revenues are a classic example of success bolstered by embracing the current zeitgeist of the luxury industry.

6. Enabling Access as an Alternative to Ownership

Inclusivity is further accomplished by enabling not only ownership but also access to luxury experiences. Experience is the operative term in the luxury industry today, as reports have shown that HNWIs would rather spend big dollars on memories than goods.

This being the case, the sharing economy is also affecting the luxury sector. Luxury holiday homes and private jets have started to benefit from a market that is happy with access for a desired period over long-term ownership. This is bringing about the democratization of luxury consumption, which is predicted to be an ongoing trend.