Luxury Institute News

April 12, 2018

When Marketing Luxury Vehicles, ‘Electric’ Is No Longer a Bad Word

Bloomberg Pursuits
By: Hannah Elliott
Thursday, April 11, 2018

Feeling good about your car is the new feeling cool about your car.


Inside the 2019 Bentley Bentayga Hybrid SUV at the Geneva Motor Show. By 2025, all Bentley cars will offer some version of an electric drivetrain, executives say. Photographer: Chris Ratcliffe/Bloomberg

Many Bentley customers believe they have obtained their wealth because of luck.

So says Bentley Motors Ltd.’s new chairman and chief executive officer, Adrian Hallmark, during an interview in Geneva.

“I have recognized that a lot of our customers follow a similar thing: They are super-successful. And a lot of them think it’s because they’re lucky,” he says. “That’s really important, because they don’t think they’re above human weakness and frailty.”

Such perceived (and believed) good fortune is spurring the world’s millionaires and billionaires to make luxury purchases, based on a system of values such as reduced carbon footprints and sustainability, he adds. According to Hallmark, hybrid and electric cars allow them to express in a novel way, he says.

“There is a new dimension long-term in the purchase decision—the ethical value,” Hallmark says, referring to gleanings from a 2008 internal study Bentley did of the world’s wealthiest people. “Electrification is part of it, and electrification isn’t going away.”

In fact, this new addition to the traditional considerations for buying a luxury car—performance, quality materials, and craftsmanship—is manifesting so strongly among the world’s top 1 percent that it is influencing Bentley’s product planning for the next two decades.

The company debuted its Bentayga Hybrid, a mid-six-figure SUV that can run 31 miles on purely electric power, last month at the Geneva Auto Show. (The 5,400-pound SUV isn’t exactly an econobox, but the hybrid badge certainly adds a feeling of green-tinged do-goodery—both for drivers and for onlookers who know what it means.) By 2025, all Bentley cars will offer some version of an electric drivetrain, Hallmark says. That includes its growling 12-cylinder Continental GT line, the latest generation of which is due out early next year.

It may take up to a decade to make an electric version of such a car, but the way Hallmark sees it, Bentley has no choice.

“We already know that the [next version] will be a battery electric vehicle,” he says. “It will have all of those moral and ethical benefits with it. By not going that way, even if we don’t have to, we would be massively under-performing in terms of customer potential.”

Successful—and Enlightened

Of course, the Crewe, England-based brand isn’t the only one to reckon that, in addition to being more efficient, electric power bestows a mark of honor upon its best clients. Top luxury automakers have been producing hybrid and electric vehicles for years, such as Bayerische Motoren Werke AG’s i8, Porsche AG’s 918 Spyder Hybrid, and Mercedes-Benz AG’s sold-out Project 1.

We take it for granted that a fair number of wealthy car buyers admire electric power, thanks to the cool cachet of Tesla Inc. But not long ago, electrics were viewed as anathema by serious car people, who favored traditional air-cooled engines with their guttural roars and grit. Then Toyota Motor Corp.’s Prius introduced the modern electric car to a broad audience. That one, with its awkward angles and gutless drive train, made electric cars feel like medicine we took with eyes closed and a quick swallow.

The few electrics that did get car fanatics excited were rather fragile, million-dollar hypercar one-offs that spent more time in the garage than on the road. These days, well-heeled buyers consider a hybrid or plug-in vehicle a crucial part of a well-rounded garage.

“It is definitely high-performance with sustainability that resonates on a values and ethics level … with affluent and wealthy automotive buyers,” says Milton Pedraza, founder of the Manhattan-based Luxury Institute, which studies trends of the world’s rich.

Witness Porsche’s upcoming Mission E, an electric-powered sedan that the automaker has hyped for years and plans to unveil on the eve of its also much-hyped 70th anniversary. It will probably cost more than the $90,000-plus Panamera, and while its driving range and battery power remains obscured, it will undoubtedly be a car to impress with next year. Among Porsche’s notoriously rabid fans, it will be the only new model that could divert attention from the usual adulation attending icons such as the brand’s GT3, 911R, or 930. More crucial on a broader scale, if Porsche delivers on its promise, it’ll be the first sedan to challenge Tesla’s Model S in terms of sales volume.

Or take Aston Martin Lagonda Ltd., which has announced it’s turning an entire heritage brand, Lagonda, into an electric powerhouse. The wedge-shaped Lagonda Vision Concept that debuted in Geneva is an all-electric sedan that marks how Aston expects the long-extinct brand to look when it returns.

Aston Martin hasn’t divulged many details about the new car, which, after all, is only a conceptual exercise, but Andy Palmer, president and chief executive officer of Aston Martin Lagonda Ltd., says it will get 400 miles on one charge—enough to drive from Los Angeles to San Francisco in one sitting, with self-driving capability and zero emissions.

“The Lagonda Vision Concept is our plan for the rebirth of a great brand,” he says. “It’s a new kind of luxury car.”

The New Future

Some of the most prestigious brands are holding off on electric for now. McLaren’s Global Head of Sales, Jolyon Nash, recently said no way, not ever (probably). Automobili Lamborghini SpA’s chief engineer, Maurizio Reggiani, says it would take quite a lot of persuasion—maybe an act of God—for the brand to make anything electric in the near future. Bugatti Automobiles SAS’s Stephan Winkelmann, who incidentally came from Lamborghini by way of Audi Sport, said “it’s too early to talk about” electrification at Bugatti, though he recognizes the potential.

“We are not influencing this discussion, but we take this very seriously,” he says. “It’s something to look into.”

Stephanie Brinley, senior analyst for IHS Markit, takes it all with a grain of salt. Some of the “ethical value” status symbol talk is hopeful thinking and marketing, she says. After all, car companies have invested billions in electrification; they have a lot riding on their ability to sell the story that a massive, expensive hybrid SUV is cool, not just “eco-friendly.” (Because, let’s be honest, if you wanted to really reduce your carbon footprint, the answer would be to buy a cheap, tiny electric car, or ride a motorcycle—or a bike.)

Still, the automakers are on to something real, she adds, that’s not going away. Young drivers are going to care about sustainable and ethical transportation in the next decade—more than any buying group ever has, especially when it comes to aspirational brands.

“If you look at millennials or the younger generation, there does seem to be more thoughtfulness about what kind of mark you leave on the planet—more so than a decade ago,” Brinley says. “As we move forward in the luxury landscape, for this type of buyer, having one in your garage will be crucial.”

For automakers, at least, it’ll take more than luck to get them there.

 

SOURCE: https://www.bloomberg.com/news/articles/2018-04-11/when-marketing-luxury-vehicles-electric-is-no-longer-a-bad-word

 

 

April 5, 2018

7 Complaints of Successful Luxury Salespeople

CEPro
By: Jason Knight
Wednesday, April 4, 2018

 

Change these seven problems, from spending too much energy on social media to altering product lines, and boost sales by 30%, according to the Luxury Institute.

 

7 Complaints of Successful Luxury Salespeople
New York’s Luxury Institute finds sales training to be a waste, and product discounts are ineffective on high-end clientele. 

 

Has any integrator playing in the high-end luxury market ever wondered why one of his or her previously top-performing salespeople suddenly seems to be demotivated and in a sales slump? According to information from the independent New York-based Luxury Institute, it could be something you are doing, not necessarily a problem with the salesperson.

The Luxury Institute recently held “intimate and confidential individual interviews” with top performing in-store sales associates across the spectrum of top-tier luxury and premium brands. The Institute also cross-checked the findings with store managers and retail heads to confirm the results. These top performing associates average more than 12 years of experience, and most perform supervisory roles. They are among the 20 percent of associates who deliver 80 percent of the dollars to top brands, comprising all genders and ethnicities.

The data reveals a “performance-numbing lack of communication” between top-tier luxury brand headquarters and their front-line associates. “The consequences continue to be a significant loss of sales, high employee turnover, poor morale, and most importantly, severed or damaged client relationships,” says the Institute. While the focus of the study was on retail luxury brands, many integrators may be able to relate to these same issues for their own sales teams.

According to the Luxury Institute, luxury employers who adopt these principles will boost their sales by 20 percent to 30 percent.  Here are the seven critical issues that top-performing salespeople say negatively affect their sales performance.

1. Sales Training Is a Waste

Top performers are unanimous on this point, according to the Institute. Successful salespeople learned how to build client relationships from parents and exemplary mentors who inspired in them a passion for living their life purposefully on a daily basis and helping others at work beyond the training tools provided by the brand. They see product and operational training as table stakes. According to these top performers, current sales training is coercive and dehumanizing.

The best associates tell Luxury Institute that they have honed their skills mostly through trial and error, learning to listen without judgment, asking relevant questions, earning trust, and finding creative ways to make individual clients feel cared for and special.

They acknowledge that it took far too long for them to achieve top performance. They want accelerated relationship-building skills for everyone on the sales team, especially for young associates. These young team members have grown up on social media, and the veterans observe that many can’t make eye contact, they lack empathy, and that they are unable to apologize without stating, “I am so sorry you feel that way,” when they make a mistake.

Some top sellers have hired personal coaches at their own expense.

2. Client Feedback Is Often Ignored: Inventory Is Mismanaged

Clients provide constant feedback to the sales associates about products, policies and trends. According to top sales associates, this critical intelligence is rarely collected systematically, or acted upon. One frequently cited example is the constant tweaking, or discontinuance, of timeless staple brands.

Another impediment is inventory mismanagement. VIP clients are often left wanting due to mismanagement of inventory. These destroy customer lifetime value and relationships. Many clients feel betrayed and don’t return.

Top associates say customer attitudes, desires, and behaviors change often. They recommend that these changes be monitored through periodic market research, or by aggregating customer feedback through the voice of the associate. Also, meet with the sales team prior to rolling out any new product offering.

3. Stop Spamming Clients With Emails

Top sales associates earn trust with top clients by committing to them that they will not be spammed by emails or contacted excessively. But salespeople complain their clients are sent waves of “irrelevant, impersonal emails and other communications,” even though the campaigns are often well-intentioned and well-executed.

Associates say they prefer to keep their frayed, outdated black books, and protect their relationships, rather than enter the information into the database and lose a great client. The result is a massive loss of a critical asset in the era of Big Data. Even more damaging, when a client loses trust, the impact on sales is negative and too often permanent.

The best sales associates suggest using a CRM specialist who understands that personal, measured, humanistic communication is required to build a long-lasting client relationship.

4. Stop Discounting Products/Services

One of the greatest annoyances for both clients and sales associates are inconsistencies regarding product pricing. When clients see products or services for which they paid full price available later for a lower price, they revolt and demand make-goods. The wealthiest clients are particularly vocal, based on principle.

Pricing inconsistencies makes clients hesitant to buy at full price. It also allows sales associates, who want to stay in the client’s good graces, to encourage clients to wait until the products go on sale. Those, according to the top performers, are the games they are forced to play, which adversely affect their credibility and their earnings.

They suggest offering more exclusive products for their own channels, and offering classic, heritage, and signature products that never go on sale. Providing early access to very limited-edition exclusives is not only a more profitable way to engage VIP clients than early access to promotions, it is also a more meaningful way to connect with them. Top associates are happy to let marketing communicate sales and promotions. They would prefer to have the inside scoop topics to talk about.

5. Keep Technology Up to Date

Top performers say it’s a big positive to have “wow factor” in a showroom, but it needs to be kept up to date. That same message goes for the back-end systems, such as inventory management. Even things like making sure the Wi-Fi in the showroom is fast and accessible are a plus. If your showroom Wi-Fi is slow, what do you think a customer will think about the system you can install in their home?

6. Social Media Hurts Local Marketing Initiatives

Top sales associates are active personally and professionally on social media. Many of them post to Instagram almost daily and appreciate that some of their clients stay in touch, albeit lightly, on Facebook and Twitter. However, they report, and the research bears out, that the wealthiest and highest potential clients are less active on social media than aspirational consumers, and are becoming even less so as they become more fearful of the potential damage to their identity, reputation, and privacy.

Wealthy clients have far more to lose in a social media environment where the evidence now shows that their data lacks any protection.

According to top associates, marketing has failed to get the message. They want more funds for customized gifting, rewarding special clients, and creating personalized and exclusive client events. They are happy to be held accountable for the return on investment required to fund those programs and invite marketing to be a part of the brainstorming, execution, and measurement.

7. Offer Flexible Schedules

Calling working schedules “dehumanizing” and “stuck in the Industrial Age,” the study says employers need to be flexible in both scheduling and compensation. Top sales associates who pay for themselves in multiples want flexible schedules and compensation to maximize productivity. For example, part-timers can be some of the most productive sales associates.

 

Source: https://www.cepro.com/article/7_complaints_of_successful_luxury_salespeople

March 28, 2018

Despite deep discounts, H&M can’t get people to buy its clothes

The Wall Street Journal
Abha Bhattarai
March 27, 2018


(Charles Mostoller/Bloomberg News)

Despite a series of widespread markdowns, clothing chain H&M is struggling to sell off $4 billion in extra merchandise — including months-old Halloween costumes and Christmas sweaters — as changing consumer tastes and increasing competition take their toll on the Swedish retailer.

The company, for years a fast-fashion darling, says it’s having trouble persuading customers to buy its clothes. Sales are slipping, profits are down to their lowest level in 16 years, and inventory is way up, H&M parent company Hennes & Mauritz said Tuesday. Shares of the retailer’s stock fell about 6.8 percent Tuesday, to their lowest level since 2005.

“The rapid transformation of the fashion retail sector continues,” H&M chief executive Karl-Johan Persson said in a statement. “The start of the year has been tough. Weak sales combined with substantial markdowns had a significant negative impact on results in the first quarter.”

A confluence of factors have led to H&M’s troubles, analysts say. Chief among them: Millennials are growing up and are more interested in buying well-made clothes than in buying cheap items. There is also more competition from companies like Zara, Topshop, Uniqlo and Asos — all of which customers tend to associate with higher-quality clothing and better websites, according to Milton Pedraza, chief executive of the Luxury Institute, a New York-based market research firm.

“Millennials are looking for quality over quantity, which means they no longer want throwaway products,” Pedraza said. “They care less about fashion and more about classic and quality, neither of which H&M has been able to deliver.”

The recent backlash over an H&M ad showing a black child wearing a “coolest monkey in the jungle” sweatshirt could also have hurt sales, analysts said. There were widespread calls for customer boycotts after the January incident, and musicians The Weeknd and G-Eazy, both of whom had partnerships with the retailer, announced they would cut ties with the company.

“Whether an oblivious oversight or not, it’s truly sad and disturbing that in 2018, something so racially and culturally insensitive could pass by the eyes of so many (stylist, photographer, creative and marketing teams) and be deemed acceptable,” G-Eazy wrote on Instagram. “I can’t allow for my name and brand to be associated with a company that could let this happen.”

H&M has since apologized for the ad, but some in the industry say the company could feel far-reaching effects.

“There was a huge backlash, particularly in places like South Africa, that could’ve left some customers saying: ‘You know what? I wasn’t that loyal to H&M anyway. Maybe I’ll shop somewhere else,’ ” said Tasha Lewis, a professor of fashion design management at Cornell University.

In the most recent quarter, H&M said inventory rose 7 percent to a record $4 billion. On Tuesday, the company’s website was promoting “further markdowns up to 70 percent off.” Many items were clearly months old: Halloween-themed T-shirts were selling for $3.99, while infants’ Santa outfits were discounted to $4.99.

Excess inventory has plagued a number of traditional retailers in recent years, as customers increasingly shop online and look to start-ups for more unique clothing. Several chains, including Macy’s, Kohl’s and Nordstrom, pared back on holiday inventory last year, hoping to avoid having to offer deep discounts on leftover merchandise. The plan seemed to work: Retailers posted their most successful holiday performance in years, and many said they did not have to resort to huge markdowns.

“We maintained a healthy inventory position, which meant we did not need additional discounting to clear inventory,” Jeffrey Gennette, chief executive of Macy’s, said in a recent call with analysts. “We were disciplined with our promotions.”

That, however, wasn’t the case at H&M. As the world’s second-largest clothing retailer (behind Inditex, which owns Zara), analysts say, the company is particularly susceptible to the whims of consumers. H&M’s quarterly sales began falling late last year.

“There is a massive clash between customers’ expectations and what companies are delivering,” said Andreas Inderst, an analyst for the Macquarie Group in London. “This is an industry-wide issue, but for H&M it has become a particularly pronounced problem.”

Company executives, meanwhile, say they’re planning further discounts in the second quarter, as they look to turn around H&M’s business. The company is also preparing to introduce an “off-price marketplace,” called Afound, that will sell discounted items by H&M, as well as other brands.

Source: https://www.washingtonpost.com/news/business/wp/2018/03/27/despite-deep-discounts-hm-cant-get-people-to-buy-its-clothes/?utm_term=.2e8294e6a60d

January 25, 2018

Best Customer Retention Strategies for 2018

Customer Think
By: Beatrice McGraw
January 24, 2018

 


Photo Source: Export Hub

 

The manner in which a business is run is changing, as the environment is changing. The digital world today is quick, technological and even tumultuous.

While most of the businesses are doing whatever they can to match with the time and scale, they quite easily get distracted in the surrounding publicity of the emerging concepts of marketing, different software and the activity of the latest innovating start-ups.

Peter Ducker, a renowned management consultant, once said that marketing has two objectives – to generate new products and keep the customers.

Here are some of the best customer retention strategies by industry experts to keep your potential customer base intact.

1) Customer Onboarding:

The first and the foremost retention strategy is getting customer onboard. It is a simple method of attaining a new customer and ask them to utilize your product or service most simply to achieve the desired objectives.

A decent onboarding of the product will show the value to the customer about your service or product from the beginning. This will provide the customer with instant satisfaction for buying up your product or service. Most of the companies opt for the concept of self-service almost immediately, while other organizations go for the human interacted perspective. The aim is to make the customer contended and aroused and make it worthy for them to remain loyal to your product.

 2) Develop Customer Follow up Programs:

As per the report provided by Econsultancy, nearly 82% of the companies reached to an understanding that retention given to the customer is economical than shutting down a new customer.
Another research from KPMG states that retention among the customer is the driving force behind the revenue generated by the company.

According to the Pareto Principle, 20% of the database of your customer will produce 80% of the revenue for the company.

In addition to that, CRM software shows a great deal of value. Through the software, you can quickly generate the scale to help you recognize the customers who should get the most of your attention. This way, it will be convenient for you to efficiently use your time on the customers that need your attention and care the most.

 3) Locate Customer Risks:

Majority of the companies lose their best customers. In most of the situations, a customer will not do any business either they are not happy with the product or because they didn’t get the attention you promised them.
Either way, it is quite vital to locate the customers that you believe will stop doing business with you as a process of your customer retention weekly, monthly and on a quarterly basis.

Research provided by Forrester states that it will cost five times more to get a different customer than to keep the prevailing one. Locating the customers who are risky is done in my different ways.

4) Follow Back to Customers:

The client experience board of the Luxury Institute states that every time a customer returns, there is a possibility that they would purchase a product or service again. After the first purchase is made, it is entirely possible that they will come back for more.

When they return to make another purchase the third time, the buying percentage increases remarkably. By the third time they are done purchasing, there is a high possibility that they will come back again to purchase.

It is believed that the best customers don’t usually come back to purchase themselves; they are needed to be reminded that your services and products are waiting for them. Following up on customers creates an impression to the client that your seller values you deeply, and for the sellers, it is an opportunity to increase their profit sales quickly.

5) Get Back the Lost Customers:

What’s the point of spending tons of money on new customers when you can easily get back the old ones?

When you plan on getting back to the old customer who stopped doing business with you, you are not supposed to be nervous around them in making mistakes. That customer had already lost his faith in you which is precisely why he stopped doing business with you. As a result of that, you are not left with other options but to get them back.

E.B White states that a mistake is just another excuse for doing things correctly. According to a book Customer Win back, there is a possibility of 20-40% to sell a product or service to the lost customer. The chance of selling to the new customer is only between 5-20%.

The marketing professor at Georgia State University, V. Kumar states that there are few steps in getting back the lost customer:

    • The customers who are lost have the desire to purchase your product or service again enabling them the potential target for your product or service.
    • They are already aware of your brand and its product and services. You will spend more time in selling them and less time informing them about your product.
    • In modern technology, you can easily know how your customers are using your product or service for the first time. In this way, you can easily regulate which customers are potential, and you can target them later to generate revenue for the business.

 

Conclusion:

By following these steps for the customers daily, you will be able to get back your lost customer easily. It is essential to reach out to them and give them the service they will never forget and come back again to purchase.

 

Source: https://customerthink.com/best-customer-retention-strategies-for-2018/

January 11, 2018

Saudi Arabia’s tourist visa supports plans to reconfigure economy

Luxury Daily
By: Brielle Jaekel
January 4, 2018


Four Seasons looks to open new location in Saudi Arabia amongst news of tourist visa. Image credit: Four Seasons

As affluent travelers continue to look for destinations that many others have not been, Saudi Arabia’s tourist visa announcement will likely attract the luxury vacationer.

While Saudi Arabia has been open to business travel and religious pilgrimages, visiting for pleasure has never been an option. But now the Middle Eastern destination will be opened up to tourists through a new visa that extends to leisure travelers, likely attracting affluents who seek out unique spots and true cultural experiences.

“There is clearly a segment of the luxury market that is interested in middle eastern destinations – you only need to look at the growth of travel to UAE to see that,” said Taylor Rains, managing partner at Flugel Consulting. “What Saudi Arabia offers, though, is a purer cultural experience.

“Travelers looking for history, culture and a unique experience are likely to be interested in exploring new opportunities in the region,” he said.

Unseen experiences
Saudi Arabia’s decision to welcome leisure travelers will attract visitors outside of the Middle East in a manner similar to when Cuba’s borders opened to United States travelers.

When the U.S. government’s travel ban to Cuba lifted, the island nation quickly climbed into the top 15 of desired destinations among affluent American travelers, according to a luxury survey conducted by Travel Leaders Group.

The Caribbean country was a destination previously unseen by many U.S. travelers due to the past travel restrictions imposed by the government, but many affluent travelers have flocked to Cuba now due to the exclusivity (see more).

Since Saudi Arabia has not had previous experience with excessive tourism, visiting the country will mean a true authentic cultural experience. Many destinations that see a flurry of leisure visitors will accrue touristy traps that turn off affluent travelers, but Saudi Arabia’s lack of vacationers have kept it a cultural mine.

The country is already home to a series of five-star hotels including locations from brands such as Four Season, Ritz-Carlton, Rosewood and InterContinental. But top locations such as the Holy City of Makkah, also known as Mecca, Jeddah and Saudi Arabia’s capital of Riyadh will likely see an increased presence from additional luxury brands and hoteliers after the visa is instated.

In October, Four Seasons announced a second property in Saudi Arabia.

The hospitality brand currently operates a property in Riyadh and will add a hotel in Mecca, through a development partnership with Jabal Omar Development Company (JODC). Due to the new Four Seasons’ adjacency to the Al-Masjid Al-Ḥarām, or Grand Mosque, the hotel is likely to be of interest to affluent Muslims visiting the Holy City (see story).

For instance, a series of resorts across the Red Sea will be opening in the near future.

Tourist trap

While Saudi Arabia is not currently a touristy area, this could change within the next couple of years after the visa is out. U.S. theme park brand Six Flags is already working with Dubai Parks and Resorts DUBA.DU to build a series of amusement parks in Saudi Arabia.

The destination’s future theme parks and increase of luxury brands are a few initiatives that will hope to position its image as a luxury hub to compete with Dubai and Abu Dhabi, United Arab Emirates, cities known as top luxury locations in the Middle Eastern region due to the prevalence of high-end shopping, automobiles, hotels and residential properties.

Reports have also noted that the country is looking to develop more entertainment to help support its economy. However, experts have noted that the future the country looks for could be complicated, as Saudi Arabia is known for its strict guidelines on women’s clothing and gender segregation.

Women have only just recently been given the right to drive, but Crown Prince Mohammed bin Salman has been making continual strides similar to these to adhere to a more “modern Islam.”

The Crown Prince originally announced he was looking to overhaul the economy in Saudi Arabia, to help its dependence on oil. These new policies will start to take effect this year, which includes women being able to drive (see story).

Saudi Arabia’s Crown Prince will also allow commercial movie theaters to start to open up, as well as allowing women into major sports stadiums to better accommodate families.

In an interview with CNNMoney, the Crown Prince stressed that with these changes he is hoping to see 30 million visitors a year by 2030, an increase of 12 million.

CNNMoney interviews the Saudi Arabian Crown Prince. Image credit: CNNMoney

In 2016, Saudi Arabia saw a total of 18 million visitors, most of which are a part of Hajj, an annual pilgrimage to Mecca and the Grand Mosque. The journey to Mecca is to be taken at least once by every adult Muslim, which is regarded as Islam’s most holy city.


Travel increase
The inclusion of a tourist visa in the hopes to attract affluent travelers might come at a good time for Saudi Arabia. While 2017 was a solid year for luxury, 2018 is projected to see slight increases to total spending, with most of the growth coming from travel-related purchases.

This data comes from Luxury Institute’s annual study on the state of the luxury business, which surveyed thousands of affluent customers from the wealthiest nations in the world. The data supports the growing understanding that luxury consumers are beginning to value experiences over products (see more).

“This step by Saudi Arabia could be indicative of a turning tide in the tourism industry,” Flugel Consulting’s Mr. Rains said. “A handful of middle eastern nations have maintained a tight control over tourism in the country, Saudi Arabia being one of the most notable.

“In effect, this region has been a last frontier for luxury travel,” he said. “With Saudi Arabia loosening restrictions on travel, it’s possible other nations in the region will follow suit.

“The infrastructure for luxury travel in these countries is already in place, it’s just a matter of access. With that access permitted, I imagine there will be a large influx of luxury tourists, particularly those interested in cultural and experiential travel, planning trips to the middle east.”

 

To read the full article, please subscribe or login to Luxury Daily: https://www.luxurydaily.com/saudi-arabias-tourist-visa-supports-plans-to-reconfigure-economy/

November 14, 2017

Facial-tracking study reveals 4 key tips for successful luxury advertising

A study of luxury ads released over the last two years by The Luxury Institute and emotion measurement firm Realeyes has revealed the four key ingredients to successful luxury brand advertising – and highlights which ads were the best.

Using facial tracking technology, the firms analysed how video ads from 24 brands were perceived by 1,200 people from $100,000+ income households (the findings are applicable to the UK).

One of the key findings was the gradual shift in luxury brands’ communications from “show and entice” to “engage and connect”, or as Realeyes CEO’ Mihkel Jäätma says, “We’re beginning to see signs that luxury advertising may be shifting away from what might be considered a more aloof and elitist past to trying harder to connect emotionally with viewers.”

The four key ingredients are:

Avoid the ‘look-book’: videos that are just lovely moving images don’t cut it – an emotional connection must be made with the viewer. Speaking has high engagement value. Films with dialogue outperformed films with monologues or no speaking at all.

Tell relatable stories: a simply story that a viewer can understand, follow and relate to yields a stronger emotional reaction compared to those that don’t.

Question celebrity: Recognisable stars may grab attention but it doesn’t ensure engagement in itself, unless the celebrity is seen to interact and engage. It’s the story that helps make the more important emotional bond.

Income matters: The highest income bracket was generally far more emotionally engaged across the videos within the study, which highlights the benefits of accurate targeting.

Milton Pedraza, the Luxury Institute’s CEO says: “The luxury industry has a very strong tradition of creating a mysterious and distant dream in its advertising but as consumers change, it’s responding by making clever use relatable truths and humor, casting celebrities in a more approachable light, and representing a broader spectrum of the human experience.”

These are the three ads that scored the highest emotional engagement with viewers:

1. Mercedes’ “Easy Driver” with Peter Fonda (scored better than 87% of all ads ever in Realeyes’ database): a strong start and a steadily increasing “happy” response ensure engagement keeps growing. The film’s nostalgia, manliness, humor and celebrity has particular appeal to a female audience, with a higher engagement score (9) and a perfect 10 in attraction.

2. Dolce & Gabanna “Light Blue Eau Intense: a new chapter” (better than 87%): sex sells but does so even better when combined with humor – the happiness curve spikes as the director interrupts at the end.

3. Kate Spade “#missadventure” with Miss Piggy (better than 83%): starts on a neutral note before introducing a story to hold attention and artfully strengthen engagement. It finishes with the highest impact score of all the films in the study.

“The key to success in luxury advertising today is in mastering the perfect balance between building the desire of the exclusive, whilst making it tangible enough to buy,” concludes Jäätma.

 

Source: http://www.netimperative.com/2017/11/facial-tracking-study-reveals-4-key-tips-successful-luxury-advertising/

November 2, 2017

Millennial Debt, Data-Driven Relationships, And Survival Of The Store Among Luxury Institute’s Top Ten Luxury Trends For 2018

NEW YORK, NY–(November 01, 2017) - Changes in the luxury market in the coming year are driven by factors from the financial challenges of millennials to the increasingly omnichannel nature of the customer experience and the ascendancy of data and artificial intelligence in building relationships. At the October meeting of the Luxury Client Experience Board, Luxury Institute CEO, Milton Pedraza analyzed the current state of the high-end market and presented the Luxury Institute’s “Ten Luxury Trends For 2018″ focused on the importance of services within the luxury industry and the distribution of wealth among luxury consumers.

Top executives in attendance from major luxury brands, including fashion retail, watches & jewelry, textiles, hotels and resorts, entertainment and media, as well as representatives from data-driven marketing agencies and innovative technology firms, broke into smaller groups to identify ways in which brands can complement their product offerings with a service component.

Luxury Institute’s 10 Luxury Trends For 2018

1. Growth remains uneven for luxury goods, but solid growth continues in luxury services, particularly health & wellness, beauty, travel, and technology. Sales growth will be sluggish in categories like apparel, accessories, and jewelry. Apparel is an example of a commodity category that is only becoming cheaper. The ability to produce original product that commands premium pricing is limited when fast fashion brands like Zara and H&M can quickly produce a low-cost imitation of an expensive item from a luxury house; an appealing alternative for many cash-strapped millennials and others facing constrained consumption. Offerings like these may not have the same quality of items from more prestigious brands, but they have the look and they are widely accessible. While there will be a few apparel and accessories brands that are major exceptions to this trend, most brands in these categories will feel the effects. Jewelry is another commodity category with a low opportunity to differentiate. Watches are in lower demand, because people simply don’t wear them frequently, especially younger people. Millennials are three times as likely as consumers 55-years and older not to own a watch. Growth looks to be robust by comparison on the services side, with consumers of all ages preferring to consume experiences more than they want more products. Boomers are downsizing and decluttering, while millennials face the need to prioritize purchases. Consumers will continue to find money in the budget for services provided by health and wellness companies like SoulCycle, Equinox, and Ulta Beauty, as well as for upgraded health care services, high-end travel, and massage therapy. Technology is another area where consumers continue to boost spending to upgrade into the latest devices and to take advantage of lifestyle enhancements available in every room of the connected home.

2. Millennials are much more numerous than boomers (92 million vs. 77 million) but their spending power will be subdued for years to come. The younger generation wrestles with staggering levels of student debt, low-paying jobs, and postponement of family formation. Millennials are not spurning luxury goods as much by choice as they are out of economic necessity. Student debt has more than doubled in the past decade to more than $1.5 trillion in outstanding higher education loans. Loan repayment consumes a considerable share of disposable income for graduates who last year left school with an average debt of $37,172. Many holders of college degrees take on the debt and then find themselves involuntarily underemployed as baristas or otherwise working at jobs that pay far lower than what would be necessary to make them comfortable. Marrying later in life also correlates with lower levels of wealth accumulation through home ownership, investing, and more moderate spending habits.

3. An over-hyped generational wealth transfer will begin slowly, and may well disappointthose who are banking on it. Wall Street has long been anticipating a massive transfer of $30 trillion in assets from baby boomers to their heirs over the next several decades. Millennials seem to be anticipating it, too, with 59-years being the average age at which people under 35 plan to retire; six years earlier than age 65, the average age boomers plan on retiring. Millennials may not want to make too many plans for spending the money. A recent survey by Natixis shows 70% of millennials expect to receive a large inheritance from their family, but only 40% of baby boomer parents plan to leave an inheritance to their children. Some of that wealth may be lost to future market returns, and rising costs of health care in old age, like the nationwide median monthly cost of $7,698 for a private room in a nursing home. Current economic headwinds hitting millennials, along with uncertainty over whether mom and dad will bail them out, imperils the future net worth of a large percentage of the millennial generation.

4. Tax cuts may be coming, but don’t expect a big boost to luxury spending. Most taxpayers would get at least some tax relief next year if the U.S. House of Representatives and Senate pass tax cuts this fall, but the biggest benefits would accrue to the top 1% of earners. An analysis of President Trump’s proposals by the Tax Policy Center showed that the tax burden on taxpayers with incomes of $150,000 to $300,000 could actually increase due to the elimination of popular itemized deductions like those for state and local taxes. After-tax income would jump 10.2% for the top 0.1% who earn $3,439,000 and up, but rise just 0.8% on average for those earning between $149,400 and $216,800. Whatever tax savings these consumers achieve will likely be consumed by credit card and automobile debt, with little left over for additional luxury spending. In the luxury goods market, the top 5% of your customers generate 40% of sales, with the middle 15% generating 30%, and the bottom 80% accounting for another 30%. With little net benefit accruing to most of these groups, lackluster gains in overall luxury spending should come as no surprise next year.

5. Luxury firms place greater emphasis on emotional benefits for the consumer and focus less on product functionality. Through reverse engineering and nimble manufacturing, mainstream goods have largely incorporated the features of luxury goods. There will be less focus on the functionality of items that consumers are purchasing, and a greater effort on the part of luxury brands to generate emotional benefits. There is no universal roadmap for producing emotional connections with customers. Doing so successfully incorporates elements of authentic storytelling and communication of brand identity, with rigorous empirical testing to see what really resonates with the clientele.

6. The appeal of the surrounding shopping center or village is rivaling the importance of the individual store in attracting traffic drawn to a retail destination for the quality of the overall experience. The entire shopping center, or the mall, have to create a great experience, and those on the leading edge of luxury offer shoppers spas, art exhibitions, music and other entertainment to enhance the shopping experience. Staff at these shopping centers, from the valets to the shop clerks, provide gracious, helpful, and expert service to create a positive emotional experience. Potential clients may visit an individual store, but they are more likely to be drawn to retail destinations that make them feel special throughout the entire customer experience.

7. The in-store experience finally gets the focus it deserves in terms of training people, redesigning the customer experience, and upgrading technology and systems for inventory management and merchandising. E-commerce accounted for 11.7% of total retail sales last year, and drove 41.6% of all retail sales growth in 2016, according to the U.S. Commerce Department. There are signs of a plateau in online sales growth rates for companies not named Amazon. The 14.3% growth rate in web commerce in the final quarter of 2016 was the smallest year-over-year increase since the fourth quarter of 2014. Amazon’s revenue grew 31.3% to $147 billion, accounting for 37% of total sales on the web of $395 billion in 2016. As online growth rates slow further, luxury brands will turn attention back to the store, in many cases totally redesigning the space, while investing in people and technology to optimize the in-store customer experience.

8. Companies will increasingly adopt seamless channel integration between online and in-store experiences. There is a digital transformation that’s required across all channels as companies realize that the consumer experience is non-linear. They may research products in one place, obtain pricing information at another, and then choose to make the final purchase either in-store or online. They may purchase online, and bring returns to the store. Brands must optimize technology to be agile enough to provide their back-office and front-line people with what they need. A seamless channel goes beyond having access to products either in-store or online. Consumers should be able to transact in any way they choose via any channel that the brand offers and 2018 is a critical year for this objective to be met.

9. Data collection and data quality become urgent in order to feed artificial intelligence initiatives. Highly-publicized breaches of sensitive personal data, like the hack at Equifax, have consumers on edge about protecting personal information, but adaptive organizations must continue to collect and analyze customer data to produce more productive relationships with analytics and artificial intelligence. The front-line sales team must be equipped with more than just a ‘black book’ to write down customer information. What matters most is not the algorithm, but the data to feed it. Data is critical if you are a luxury brand, but if you don’t have data to mine, you will be at a major disadvantage that will become an existential threat.

10. Selecting, developing, and retaining talent become even more critical skills. Recruiting and selecting employees capable of growing the business is not a matter of luck. It is a high performance skill. Most innovative firms are using artificial intelligence to help identify desirable candidates, and to provide on-the-job training and coaching. Instead of providing only sporadic education for employees, successful firms are transforming themselves into universities that teach life skills to their employees, like emotional intelligence, which results in higher client performance metrics and productivity. The idea is to create an atmosphere in which people feel cared for and an environment in which they have the right tools so they can prosper. Front-line professionals will need to combine technology advances with their own emotional intelligence skills to be true brand ambassadors, far beyond most current sales associate job descriptions. The front line of the future will need to have the skills to creatively demonstrate expertise, deep empathy, trustworthiness and generosity to engage productively with clients.

Building Relationships Based On Data

Luxury Client Experience Board event partner, Epsilon, a global marketing company, explained the importance of understanding and analyzing data to gain insights into building relationships and creating superior customer experiences. Epsilon presented a case study of their client, iPic Theaters, the innovative disrupter in the theater and cinema industry. In the case of iPic, there is more of an emphasis on the service of providing a customized dining and viewing experience, and less of an emphasis on the product of the actual film showing on the screen.

Epsilon’s perspective on taking the guess-work out of creating a holistic focus on service and experience through the collection of accurate, qualitative data resonated with the group. Ultimately, insights derived from data, paired with an emotionally intelligent workforce, will be the keys to creating customer experiences that excel.

For more information on best practices in luxury and client experience, visit www.LuxuryInstitute.com, or contact CEO Milton Pedraza with questions and information about becoming a member of the Luxury Client Experience Board. 

About the LCEB: The Luxury Client Experience Board (LCEB) is a membership association of luxury industry practitioners, co-founded by Luxury Institute and The Ritz-Carlton to enhance the education and development of leading luxury brands. LCEB members receive ongoing education opportunities in industry best practices through original research and interactive events. Members come from diverse industries, united in their goal to build long-term, high-performance relationships with clients by delivering exceptional, seamless, and measurable omni-channel client experiences daily.

Source: http://www.marketwired.com/press-release/millennial-debt-data-driven-relationships-and-survival-of-the-store-among-luxury-institutes-2239087.htm

October 13, 2017

‘She just broke her brand’: Donna Karan’s defense of Weinstein is taking its toll

The Washington Post
By: Abha Bhattarai
October 12, 2017

 


(Craig Warga/Bloomberg News)

Donna Karan’s clothing lines were already struggling before the designer sparked a fury over remarks she made this week asking whether victims of sexual harassment were “asking for it.”

But retail analysts say Karan’s comments, which she made after a number of women said they had been sexually harassed and assaulted by film producer Harvey Weinstein, have further complicated turnaround efforts at her namesake brand.

“How do we present ourselves as women?” Karan was reported as saying at an awards ceremony Sunday evening in response to a question about the accusations against Weinstein. “What are we asking? Are we asking for it? By presenting all the sensuality and all the sexuality? What are we throwing out to our children today? About how to dance, how to perform and what to wear? How much should they show?”

The Daily Mail reported that Karan, who stepped down from her leadership role at the company in 2015,  later told a journalist: “It’s not Harvey Weinstein, you look at everything all over the world today, you know, and how women are dressing and what they’re asking by just presenting themselves the way they do. What are they asking for? Trouble.”

On social media and elsewhere, the reaction has been swift: TV host Megyn Kelly and actresses Mia Farrow and Rose McGowen have said they will stop buying Donna Karan products, and an online petition with more than 8,000 signatures is calling on Nordstrom to drop DKNY and other Donna Karan-branded apparel, bedding and accessories. (Beginning in February, Macy’s will be the exclusive retailer of DKNY products.)

Shares of the company that owns Donna Karan International have fallen nearly 10 percent this week. Stocks closed down more than 2 percent on Thursday to $26.03 a share.

“What she did was a terrible mistake,” Paula Rosenblum, managing partner of Retail Systems Research, wrote in an email. “General consensus is she just broke her brand.”

Karan has since apologized for her comments, which she said were taken out of context. “I believe that sexual harassment is NOT acceptable and this is an issue that MUST be addressed once and for all regardless of the individual,” she said in a statement released by her publicists. “I am truly sorry to anyone that I offended and everyone that has ever been a victim.”

Representatives for Donna Karan International and its parent company, G-III Apparel, did not respond to requests for comment.

On Thursday, a Nordstrom spokeswoman responded: “We’ve heard from some customers, and we certainly understand their concerns. We’ll continue to listen to their feedback.”

G-III Apparel purchased Donna Karen International for $650 million in December. The New York company also owns Calvin Klein and Tommy Hilfiger. And it manufactures clothing and accessories for first daughter Ivanka Trump’s brand, which has weathered its own share of boycotts and negative press.

“The acquisition of Donna Karan fits squarely into our strategy to diversify and expand our business,” the company says on its website. “We intend to focus on the expansion of the DKNY brand, while also reestablishing DKNY jeans, Donna Karan and other associated brands.”

Karan, 69, founded her eponymous fashion house in 1984 and eventually sold it to the French conglomerate LVMH Moët Hennessy Louis Vuitton in 2001. In the years since, analysts say the brand has lost much of its luster.

“DKNY is a brand that has been struggling for years — that’s why LVMH got rid of it,” said Milton Pedraza, chief executive of the Luxury Institute, a New York-based research firm. “Somewhere along the way, it’s lost identity and direction.”

G-III Apparel, however, has vowed to reinvigorate the brand. In the most recent quarter, the company said the Donna Karan and DKNY brands brought in $45 million in sales, accounting for about 8 percent of the company’s total sales. “We believe that our investment in Donna Karan was the right one for our company,” G-III chief executive Morris Goldfarb said in an earnings call with investors last month. “We continue to see Donna Karan as potentially the highest operating margin business in our portfolio. ”

But analysts said Karan’s recent comments could still introduce new challenges, even if shoppers have a short attention span when it comes to consumer boycotts.

“Was this a screw-up? Yes,” Pedraza said. “It might cause some short-term issues, but I think people will forgive it in the long term.”

Source: https://www.washingtonpost.com/news/business/wp/2017/10/12/she-just-broke-her-brand-donna-karans-defense-of-weinstein-is-taking-its-toll/?utm_term=.191183479af3

 

October 10, 2017

DSW steps into shoe rental

Retail Dive
By: Daphne Howland
October 9, 2017

Dive Brief:

  • Among the initiatives in DSW’s overhauled business strategy unveiled last month are plans to test shoe rental and shoe repair services, according to a company press release.
  • Rentals would focus on high-end shoes, according to a report from The Washington Post, a departure from the retailer’s traditional sales of new shoes. The move follows in the footsteps of Rent the Runway, which offers some 65,000 items and reportedly loaned its customers an estimated $1.35 billion worth of high-end items in 2015.
  • Milton Pedraza, chief executive of the retail consultancy The Luxury Institute, told the Post the move takes the sharing economy too far. “Shoes are such a personal item — you’ve got to worry about fit, style, so many things — that I don’t think it’s necessarily something people want to share with strangers.”

Dive Insight:

Shoe rental is par for the course at the bowling alley, and in that context consumers have a high tolerance for the years’ worth of scuff marks and the odd sensation of wearing shoes that have been worn by many others. But it’s not so easy to picture how that would work for shoes that would be worn for more than bowling night.

Even a short-term event like a wedding involves walking in unpredictable weather and activities like dancing, not to mention the everyday way shoes stretch and bend to their wearers’ size and stride. Still, both rentals and repairs are on DSW’s lists of things to try in a new era of retail, where consumers aren’t prioritizing apparel sales and are interested in cutting down on waste.

Beyond access to apparel otherwise outside the financial limitations of many younger shoppers, Rent the Runway’s business model also complements consumers’ growing environmental concerns, breathing new life into merchandise customers would otherwise likely wear only once, at weddings and other milestone social events. Two thirds of consumers in 2015 were willing to pay more for a product if it came from a company that’s committed to making a positive environmental impact, up from 50% in 2013, according to a Nielsen study.

DSW also last month announced a redesign of its storeswith a new warehouse-like look that will allow 70% more merchandise to be showcased, along with new proprietary technology to allow store associates to spend more time with customers. Several electronic devices that store staff now juggle will be reduced to one simple, streamlined tablet. The footwear retailer is also revamping its loyalty program next year, leveraging its 25 million-customer database.

Source: http://www.retaildive.com/news/dsw-steps-into-shoe-rental/506823/

October 9, 2017

‘A new extreme’ for the sharing economy: Shoe rentals

The Washington Post
By: Abha Bhattarai
October 5, 2017


You may soon be able to rent a pair of designer heels at a nearby shoe store. (Caroline Blumberg/European Pressphoto Agency/EFE/REX/Shutterstock)

The discount shoe purveyor DSW says it wants to give its customers what they want, which is how the chain has arrived at this: shoe rentals.

The retailer announced last week that it is considering adding a rental service, as well as shoe repair and storage facilities, to some of its 511 shoe-and-accessories stores. The experiments are part of a broader effort by DSW, which stands for Designer Shoe Warehouse, to get more customers into its stores.

“Today’s customer craves more than just a transaction, they want an experience,” Michele Love, the company’s chief operating office, said in a statement.

Retailers across the country are racing to add services that might keep customers coming back to their physical locations, where people are more likely to make impulse purchases — and spend more — than online. Nordstrom this week opened its first merchandise-free store, staffed with stylists, tailors, manicurists and bartenders. Apple, meanwhile, is outfitting its stores with outdoor plazas and indoor boardrooms in hopes that shoppers will linger.

At DSW, executives say the idea is to create a one-stop shop where customers can buy everyday footwear, stash items that are out of season — and yes, rent shoes.

“This is something we’ve had a lot of customers ask us for, particularly with special-occasion shoes,” said Christina Cheng, a spokeswoman for DSW. “When it comes to prom or a wedding or a special event, people are usually looking for a very specific shoe in a particular color, that matches a particular dress, that they probably won’t ever wear it again.”

But, Cheng added, shoe rental — which the company will begin testing in coming months — also raises a number of logistical questions: How will stores know which styles and sizes to keep on hand? How will they clean them between uses? And how do you determine the cost-per-wear of a bedazzled stiletto?

Industry experts also raised concerns about the program. Sure, it may be commonplace to rent shoes at the bowling alley or skating rink, but are people willing to wear someone else’s open-toed, high heels to a wedding? Some are unconvinced.

“It’s good to think outside the shoe box, but this is taking the shared economy to a new extreme,” said Milton Pedraza, chief executive of the Luxury Institute, a New York-based retail consultancy. “Shoes are such a personal item — you’ve got to worry about fit, style, so many things — that I don’t think it’s necessarily something people want to share with strangers.”

And, he added, what happens if a suede shoe gets caught in the rain? Or a glittered heel pops off into a ditch? Or a particularly large foot stretches out a loafer?

“I don’t think shoe-sharing is going to be either in high demand or highly profitable,” Pedraza said.

There are, however, a number of other apparel and accessories rental models that have worked: Rent the Runway has created a $100-million-a-year business offering dresses, gowns and jewelry for short-term wear. Bag, Borrow and Steal has found similar success — and millions in venture capital funding — by renting out designer handbags. Other start-ups allow you to rent watches, earrings, necklaces, even custom wigs.

The larger challenge for DSW, analysts said, is getting customers to buy and returns items at its stores. Online shopping has become a particular problem for shoe retailers, which often struggle with high return rates. It’s become commonplace, analysts said, for some people to order eight pairs of shoes in different styles and sizes, and keep just one. Fulfilling those large orders, then processing returns and covering shipping costs can add up to an expensive problem.

“Getting traffic to their stores is really the most critical component,” said Steven L. Marotta, a footwear analyst for CL King & Associates. “And having a very large footprint around the country, which DSW does, has been a real advantage.”

The more reasons a customer has to walk into a DSW store, the more likely they’ll walk out with a pair of new shoes. And that, executives said, is ultimately why they’re experimenting with shoe rental, repairs and storage.

“An example would be, you come in today, it’s raining and you want to pull your rain boots out of storage,” Roger L. Rawlins, chief executive of DSW, said at a retail conference last month. “When you pull them out of storage, we also offer you an opportunity to buy rain boots that just arrived so that you aren’t using necessarily the ones you’ve had in storage for two or three years.”

DSW is also looking for new ways to turn its existing stores into mini-warehouses. It is often cheaper and easier, Cheng said, to ship a shoe from a nearby store than from the company’s fulfillment center in Columbus, Ohio. The company is also reconfiguring its shops to add taller, deeper shelves that can store up to 30 percent more inventory, and it recently merged computer systems so that online orders, store purchases and inventory catalogues are in one place.

“Today’s retailer needs to be able to do it all,” Marotta said. “Ship to store, ship from store, ship store to store. Anybody who can’t offer that is at a disadvantage.”

Source: https://www.washingtonpost.com/news/business/wp/2017/10/05/a-new-extreme-for-the-sharing-economy-shoe-rentals/?utm_term=.56e2987f39f0

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