Luxury Institute News

September 25, 2014

Social network aims for country club status

September 25, 2014
By Katie Humphrey

It could be a story from “The Onion”: Join an online country club for the elite, memberships starting at $9,000.

Except it’s true. Last week, a Minneapolis man launched Netropolitan.Club, a social network for the rich and exclusive. Forget the commoners on Twitter and Facebook. Netropolitan founder James Touchi-Peters bills his site as “a place to talk about fine wine, fancy cars and lucrative business decisions without judgment.”

Its Sept. 16 launch got so much buzz — mostly of the snarky variety — that Jimmy Fallon mentioned it on “The Tonight Show,” imagining posts about firing the gardener and the caviar bucket challenge.

The site’s landing page got so many hits it was slow to load. Then the hackers descended. On Sunday evening, Touchi-Peters, who used to conduct the Minnesota Philharmonic Orchestra, pulled the site down for security upgrades.

“We were aware that people would try to hack the Netropolitan Club, but we were not prepared for the overwhelming amount of attacks,” he said in a statement posted on the Netropolitan Club’s Facebook page. (Because, apparently, even elite social networks need Facebook.)
He said it would be back up by the end of the week.

But will it catch on? We may never know. Touchi-Peters won’t say how many members have joined the site, or give any hint of their backgrounds. He also won’t give anyone a peek at the advertising-free network — unless they pony up the whopping membership payment.

“The attraction is that it’s private,” he said. “So far it’s exceeded our wildest expectations.”
Still, it could be a tough sell.

Privacy is valuable to the wealthy, but so is value, said Milton Pedraza, CEO of the Luxury Institute, a New York City research firm specializing in data and insights of high-net-worth consumers.

“I’m a bit of a skeptic,” Pedraza said of Netropolitan. “What are the benefits?”

Previous attempts to create elite-only networks have mostly fizzled, Pedraza said. One that is still active, ASmallWorld, is focused on jet-setting young adults, offering travel perks and hosting parties around the world. Membership, by invitation only, is $105 a year.

Touchi-Peters, a musician who travels frequently, said Netropolitan is aimed at like-minded people who may not have time to socialize in person, a group he calls the “working wealthy.” Or, he said, it could also appeal to rich people who live in rural areas and don’t have access to traditional social clubs. Users create profiles and can post on message boards organized by interest.

“Most people are going to join to meet other people,” Touchi-Peters said.

More specifically, people who can afford $9,000 upfront and the subsequent $3,000 annual fee.
So much for the idea of an open, egalitarian Internet.

That was a myth, anyway, said Seth Lewis, assistant professor of digital media and journalism at the University of Minnesota. Even Facebook started as the digital playground of Ivy League college students.

“It’s almost like [Netropolitan is] trying to put the genie back in the bottle,” Lewis said, referring to the site’s exclusivity. “The proposition is interesting. It’s hard to see how it succeeds.”As for the name Netropolitan, Touchi-Peters said, it’s a play on the words “metropolitan” and “Internet.” He wanted something that spoke to a cosmopolitan crowd, but the title “Cosmopolitan” was already taken.

“Netropolitan does not stand for ‘net worth,’ ” Touchi-Peters said.

But you’d better be worth a lot if you’re going to get past the virtual gate.

September 8, 2012

Internet finance: How to kick-start your bright idea

By Claire Adler
Financial Times
September 7th, 2012

A watch brand has emerged as the king of crowdfunding, a trend that allows creative people to connect online with the public for cash to fund their business ideas.

In April, after numerous rejections from venture capitalists and rapidly running out of cash, five 20-something men from Silicon Valley turned to Kickstarter, a site that allows creative companies, including many filmmakers and musicians, to raise money from individuals online.

The site does not charge to set up a campaign. But, if it is successful, the site takes 5 per cent of the final amount. Amazon, which processes the payments, takes 3 to 5 per cent.

Click the link to read the entire article which includes quotes from Milton Pedraza, CEO of Luxury Institute:

September 5, 2012

Get Ready for the Loyalty Marketing Renaissance of 2013

Six New Ways to Serve Loyal Consumers in a Smartphone Age
By: Adam Broitman
September 04, 2012

The essence of loyalty marketing has not changed since its invention; incentivize your best customers and they will not only remain patrons, they will tell their friends about their experiences with your brand. The rise of social technologies has multiplied the positive effects of a brand supporter and underscores the importance of influential evangelists.

Though the substance of loyalty has not changed in the past 30 years, the tactics and technologies required to implement a loyalty program have been displaced — so much so that history may designate the years between 2012 through 2015 as a renaissance in customer loyalty. Here are a few guidelines to use when planning your customer loyalty programs for 2013:

Don’t Just Be Social, Be Helpful
According to a survey by American Express one in five American’s have used social media for customer service. Furthermore, customers, on average, are willing to spend 21% more with companies that provide great service. Given that social media is an ideal channel to directly interact with your customers, a strategic approach is imperative. The mere presence on popular social networks is no longer enough. Simple, canned responses to comments on social networks no longer meet consumer expectations. It is crucial for social media to be treated as a service channel in addition to a promotional channel. The installation of an uninformed employee, armed with no more than a hyperlink to a customer service page is only slightly better than ignoring comments made within social networks.

Forget Gamification, Learn The Game
The Gamification gold rush has led many brands to the construction of superfluous “cart before the horse” initiatives in which badges and leaderboards serve little to no strategic purpose. There are countless theories that marketers can borrow from games, but in order to accurately take advantage of such ideas in an effective manner, marketers must dig deeper and strive to realize the various compulsion loops and social dynamics that make games “sticky” (apologies for the late 90′s lingo). Here are a few links for inspiration:


Feel The Power of Post-PC
The post-PC era has put massive computing power, packed in every shape and size screen, in the palm of the everyday consumer. If your legacy POS system is getting in the way of allowing you to implement a cutting edge loyalty program, consider taking advantage of consumer grade products to get the job done.

Take a look at the following payments systems that have integrated elements of loyalty into their platform:

  • Square
  • SAIL (Verifone)
  • PayPal Here
  • NCR Silver
  • Revel Systems

Learn to Outsmart “Showrooming”
“Showrooming” has become a plague for retailers. According to eMarketer, 59% of US smartphone owners have engaged in “showrooming”. Ironically, the very same mobile device that consumers are using to “showroom” can be used to create value. Marketers should look at the way in which luxury brands create value. Luxury marketers are notorious for creating value adding experiences in lieu of price breaks—as such, mobile has become a no-brainer for luxury marketers. According to the Luxury Institute, luxury shoppers expect the following from mobile applications:

  • 46% expect loyalty programs
  • 45% expect early access to sales
  • 53% want access to a sales professional that can help with finding the right product

Remember That Likes Don’t Equal Loves
These days, it is all too easy to create a “like-gated” promotion yet many of the programs that ask for personal information in exchange for entrance into a contest fall flat when it comes to any type of long term engagement. In the endless debate about the value of a “like,” many marketers have concluded that a like is only as good as the communications that follow it. Loyalty can certainly begin with a like, but a like is not guaranteed to get you to a “love”. According to eMarketer, nearly half of branded “likes” have no influence on consumer purchase decisions.

Make Love
Though last on this list, this is the most important thing a brand can do. We have seen brands like Zappos and Warby Parker take brand “amore” to new heights. Each brand uses social media and technology in exciting new ways, but each brand also manages to present their costumers with something marketers and advertisers speak about ad nauseam, “surprise and delight.” There are a variety of new brands such as Warby Parker that are set up as B Corporations. This corporate structure requires a company to generate some sort of “general benefit for society” as part of the way it defines profit. While long established plans will likely not reincorporate, this model has loyalty baked in and big brands should be looking at the types of ways these companies do business

As you are planning your loyalty efforts for 2013, do your best not to get so caught up in the trees that you forget to look at the forest. The seemingly endless number of mobile and social loyalty platforms can be so overwhelming, they can divert even the most savvy of marketers from their core objectives. With the above guides and a constant eye on ROI, 2013 should be a banner year for customer loyalty.

August 7, 2012

10 Things Apple Won’t Tell You

From customer service to app safety and even how its devices affect our relationships, here are 10 things Apple won’t likely tell you about its products and its business.

By Quentin Fottrell
August 6, 2012

1.”Our customers are worn out.”

All that initial excitement over the first iPhone or iPad has quickly given way to what analysts are dubbing “upgrade fatigue” — with even Apple’s most loyal customers upset about the steady stream of newer models. In fact, when people buy Apple’s latest product, the company is usually already preparing its replacement, says technology consultant Patchen Barrs, who has owned 25 Apple products over the last 20 years. “Everything we buy from them is already out of date,” he says. Take a count: Since 2001, there have been six iPods, two iPod minis, six iPod Nanos, four iPod Shuffles and four editions of the iPod Touch. Apple has released five iPhone models since 2007 and has had three iPads since 2010.

Of course, newer models have their upsides: They’re usually slimmer, faster and have additional features like better cameras and improved screen quality. And Apple, which declined to comment for this story, has said that such improvements more than justify the fast pace of their new additions. (In March, for example, Apple spokeswoman Trudy Muller said the latest iPad delivered a “stunning” screen display.) But that argument isn’t enough to appease some cash-strapped consumers. Almost 50% of consumers say they’re increasingly unwilling to buy new products for fear that they will be rendered outdated by even newer versions, according to a recent survey of 2,000 people by Marketing Magazine in the U.K.

Click the link to read the entire article which includes a quote from Milton Pedraza, CEO of Luxury Institute:{61E63842-DFED-11E1-961B-002128049AD6}

July 13, 2012

Did Apple Tame the Salesman?

By Quentin Fottrell
July 12, 2012

Salesmen are going soft. They’re toning down their pitch and ditching the “always be closing” approach. And consumers largely have the Apple Store to thank – or blame.

Industry experts say Apple’s blue-shirted smiling staff is now the envy of other retailers. Best Buy is remaking its “Geek Squad” in Apple’s image, in a pilot program at its Richfield, Minn., location. General Motors plans to institute “no-haggle prices” on some models, which will remove some of the salesman’s role in negotiating a car purchase. “Apple has had a tremendous amount of influence,” says Milton Pedraza, the president of Luxury Institute LLC, a marketing firm.

The floor staff at Apple emphasizes customer service over sales, with new employees taught an APPLE acronym for their “five steps of service,” says Carmine Gallo, a communications coach and author of “The Apple Experience.” (Approach in a warm manner; Probe politely; Present customers with a solution that may not involve a sale; Listen carefully; End with an invitation to return. ) “AT&T retail is closely following these steps,” he says.

Click the link to read the entire article which includes quotes from Milton Pedraza, CEO of Luxury Institute:

June 26, 2012

Social Responsibility Is Nice But Not Worth Paying for in Today’s Economy, According to Wealthy Consumers Surveyed by Luxury Institute

(NEW YORK) June 26, 2012 — In a new survey by the independent and objective New York-based Luxury Institute, “Corporate Social Responsibility: The Wealthy Consumer’s Viewpoint,” U.S. consumers earning at least $150,000 per year define socially responsible corporate behavior, rate companies and divulge importance of socially responsible practices in shaping purchase decisions. Responses were compared to those from the same survey in 2007.

Most (82%) wealthy Americans define social responsibility by a company behaving ethically with employees, customers and suppliers. Environmental behavior and philanthropic actions are both named by respondents as an essential component of CSR (58%).

Almost half (45%) of wealthy consumers say they seek out brands with high ethical standards, but only 39% of these shoppers would be willing to pay a premium. That’s down from 56% who would pay a premium in 2007. Apple, BMW, Coach, Lexus, Mercedes-Benz, Nordstrom, Starbucks and Whole Foods are frequently cited as highly ethical standouts.

Twenty-seven percent of wealthy consumers learn about companies’ socially responsible behavior via Facebook or Twitter. That’s up from 8% who received their information from social media in 2007. Reading news articles is the most popular (52%) way to learn of CSR efforts, down from 64% five years ago.

“Even wealthy consumers have de-emphasized social responsibility as this economy focuses everyone on price/value and away from social issues,” says Luxury Institute CEO Milton Pedraza. “Nevertheless, we see that luxury and premium brands that are socially responsible do better even during recessions because doing well by doing good is a universal and timeless concept.”

Respondents reported average income of $307,000 and average net worth of $3.1 million.

About Luxury Institute (
The Luxury Institute is the objective and independent global voice of the high net-worth consumer. The Institute conducts extensive and actionable research with wealthy consumers about their behaviors and attitudes on customer experience best practices. In addition, we work closely with top-tier luxury brands to successfully transform their organizational cultures into more profitable customer-centric enterprises. Our Luxury CRM Culture consulting process leverages our fact-based research and enables luxury brands to dramatically Outbehave as well as Outperform their competition. The Luxury Institute also operates, a membership-based online research portal, and the Luxury CRM Association, a membership organization dedicated to building customer-centric luxury enterprises.

November 14, 2011

Lagging Lexus aims at creating exciting, sporty new image

By James R. Healey and Chris Woodyard
USA Today
November 13, 2011

When Toyota was preparing for the 1989 launch of Lexus, the man appointed to birth the luxury brand, J. Davis Illingworth, often said: “We don’t have a single dissatisfied customer.” 

Disingenuous, of course, because the gestating Lexus had no customers at all. But the strongly implied remainder — “… and we intend to keep it that way” — helped raise the bar for luxury car brands.

But now, after phenomenal growth that made Lexus the top-selling luxury auto brand in the U.S. from 2001 through last year, the marque is tumbling. This year, it’s unlikely to finish better than third behind BMW and Mercedes-Benz…

Click the link to read the entire article which includes a quote from Milton Pedraza, CEO of Luxury Institute:

October 13, 2011


By Hedda Schupak
The Centurion
October 12, 2011

New York, NY—Despite burgeoning sales for 2011, most luxury brands have an appallingly low customer retention rate, losing between 80% and 90% of their customers in any given year.

No, that’s not a typographical error. Most luxury brands are deficient in retaining even half of their top customers, says Milton Pedraza, CEO of the Luxury Institute, a global luxury consulting and research firm. These figures are the central focus of the Luxury Institute’s most recent white paper, Wealth and Luxury Trends 2012 and Beyond: Raising Customer Loyalty in the Midst of an Uncertain World. (The Luxury Institute data is aggregated from all its clients; it doesn’t release individual company figures.)

“Nobody likes to publish those numbers because they’re not pretty,” Pedraza said in an interview with The Centurion this week. “But 80/20 doesn’t have to be the rule.”

Contrast those grim metrics to non-luxury e-tailer Zappos’ customer retention rate of 75% (the company does release figures) and it’s clear there is much opportunity for luxury brands that create customer-centric cultures, both in-store and online.

Luxury brands really fall down when it comes to customer relationship management (CRM), an area one would most expect them to shine, says Pedraza. Very few have a truly customer-centric culture, very few do proper clienteling, and many have surprisingly poor service for what’s supposed to be a special experience.

The good news is that customer retention figures for multi-brand luxury retailers—like jewelers—typically are a good bit higher than for single-brand shops. And the other good news is that most luxury brands and retailers already have the tools for increasing customer retention; all they need to do is use them.

Creating a customer-centric culture starts at the top, and assuming staff compensation is competitive, comes from three things: being expert at what you do, earning the trust of customers, and having a pleasant personality. Luckily, luxury jewelers excel in these areas, but Pedraza says it’s essential to ensure your employee compensation isn’t counterproductively holding you back.

“If you pay a low salary and expect sales associates to ‘eat what they kill’ as many luxury retailers call it, your customers are going to be attacked by sharks.” Better, he says, is to set commissions based on group sales and include customer relationship building goals as part of the total package.

Get social—or don’t. One of the biggest misconceptions about social media is that it’s the greatest marketing development since ads for sliced white bread. Yes, luxury consumers are online and on Facebook. And, yes, many luxury brands have millions of fans that “like” them on Facebook. But despite the fact that Facebook regularly tries new ways to influence purchases online, the Luxury Institute says there’s no evidence that having millions of fans has helped luxury brands acquire new customers or build business significantly.

But CRM metrics have shown that customers who have a human relationship with a brand ambassador (be it owner or sales associate) typically buy double from that brand and stay loyal for a longer period of time. The long-term success of the brand depends on the individuals who interact physically with the customers. This means both minimizing staff turnover, and doing a lot of old-fashioned legwork: knowing the customer’s likes and dislikes, calling when something special comes in, sending handwritten notes, knowing their special dates and life milestones, and so forth.

“I don’t mean that social media isn’t good. Does it build awareness? Yes, and that’s good. Does it build relationships? It might, but clienteling is better,” Pedraza told The Centurion. Social media is appropriate for most luxury brands—but not all. For an upscale community jeweler who uses it to have an ongoing conversation with customers, it’s wonderful, but for a super-high luxury brand whose cachet is extreme exclusivity, customers don’t want it to be where “everyone” has access to it.

Ironically, one brand that still uses mainstream advertising—TV, print, and even billboards—more than social media is Apple. And while its legendary in-store retail experience is central to Apple’s image and success, Pedraza thinks the brand could do even better if it would follow up after sales, an area where it’s surprisingly lacking. He says he’s never been contacted by an Apple associate following any of his purchases. (Editor’s note: We own two Apple computers, two iPhones, and countless iPods, but we haven’t ever been called for follow-up, either.)

Luxury predictions for 2012. While 2011 was the year luxury came back—indeed, a banner year that topped even 2007 sales figures for many brands—next year growth is likely to slow down, especially on a global scale, says Pedraza. He predicts there will be modest single-digit growth for luxury in the United States—in the area of about 5%—but that growth may be driven by price increases, not volume.

“The top 20% of consumers are doing well. In the intermediate term, we will see the affluent continue to buy,” he said, but cautions that the continued bifurcation of the U.S. consumer marketplace is not healthy for the long term. Furthermore, while the affluent are somewhat insulated from economic ups and downs, they’re not immune.

“For long-term [economic] success we need a strong middle class,” he told The Centurion.

Much of the pre-recession growth in the luxury market came from just such middle class spenders, sparking the proliferation of aspirational, “mass luxury” items to target a wider audience. Then, during the recession, luxury retailers, including many jewelers, found that lower-priced items were the saving grace that kept the doors open.

But with the big spenders coming back, is it now time to reassess? Have too many luxury retailers abandoned the market that made them in the first place? Or is it too soon to cut the affordable-product lifeline?

“Those who serve the ultra-wealthy can have extremely high priced product, but it’s not scalable,” says Pedraza.

“The brands that are most resilient are the ones that have diversified. Tiffany sells both a $250 bracelet charm and engagement rings starting over $10,000,” he says. And they do it very well, he emphasizes. Louis Vuitton is another brand he says has been able to successfully serve mass without losing class.

Achieving the right mass-to-class balance is both an art and a science—and a very fine line that’s often invisible until you’ve crossed it, warns Pedraza. Too much logo, too much bling, and you get too many of the customers that really aren’t your market while alienating those that are.

Even if the price point stays high, straying too far from a brand’s point of view isn’t healthy either, as evidenced by this recent Harper’s Bazaar article detailing the Italian fashion house Bottega Veneta. The brand, famous in the 1970s for its costly but low-key woven leather bags and advertising “when your own initials are enough,” had become a caricature of itself. From the epitome of refined, restrained elegance, by the late 1990s it was sporting hot-pink punk and leopard spots. In 2001, its new creative director Tomas Maier stripped away the wretched excess and restored the brand’s core aesthetic of restraint, till once again it became a brand sought by the world’s tastemakers.

How to reach down successfully?

“The key is in how you define your entry level,” says Pedraza. “You don’t want to go so far down that you make your customers uncomfortable, but having entry level product was a Godsend for many stores [in the recession].”

But diversification is a better strategy than discounting. The fire-sale prices offered by panicked luxury retailers in 2008-2009 may have cleared out inventory, but they also retrained customers to expect a discount every time.

“It makes it very difficult to raise prices [afterward]”, Pedraza told The Centurion.

August 31, 2011

Luxury retailers turn to social media for Hurricane Irene

By Rachel Lamb
Luxury Daily
August 30, 2011

Although luxury brands took precautions and prepared for the worst this past weekend, Hurricane Irene did not do much to hamper sales of luxury goods.

Brands have done their best to keep sales going despite the bad weather in the northeast by promoting their ecommerce sites and other online platforms. Others have even reached out via social media to ensure the safety of consumers and to offer valuable emergency resources.

“I don’t think that luxury branded sales were that affected,” said Milton Pedraza, CEO of New York-based Luxury Institute. “If anything, they  just lost a weekend’s worth of sales from local buyers and from tourists.

“There is significant geography where shopping is a large part of culture, but I think that  consumers will make it up,” he said. “There was more of a lag than a foregone sale.”

Boarded up
Luxury brands, most notably New York-based retailers, took advanced precautions by deciding to shut down locations in the Northeast on Saturday Aug. 27 and Sunday Aug. 28 when the storm was supposed to be the worst.

For instance, department store chain Bloomingdale’s posted store hours and property closings on its Facebook page.

Bloomingdale’s also posted a picture of its stores being boarded up in preparation for the storm.

The retailer was joined by Bergdorf Goodman, which announced that it had boarded its windows and would “see consumers on the other side of the storm.”

“Like all messages, [luxury brands promoting] news of a storm has to be relevant,” Mr. Pedraza said. “You can overdo it because customers certainly have a lot more to worry about than luxury in a hurricane.”

However, other luxury brands decided to use the platform to aid their Facebook fans.

For instance, Mercedes-Benz USA posted a link to the Red Cross Web site with a checklist of preparations for consumers to take note of before a hurricane hits.

“If messages are lending a hand with true resources, that is wonderful,” Mr. Pedraza said. “Otherwise, I think that the messages in the height of an emergency are trite and irrelevant.

Shaken, not stirred
Despite the worries from the past weekend, luxury sales are actually doing well.

Retail stocks are up post-Irene, possibly because retailers emphasized ecommerce options despite the closing of physical retail locations.

Although the effects of this storm were less than those of other natural disasters, it is still encouraging that luxury brands stepped up to help.

Brands may not have posted links like Mercedes had, but many of them reached out to consumers to wish them safety and good thoughts.

For instance, in the height of the London riots earlier this month, luxury department stores Harrods, Selfridges and Harvey Nichols used social media to communicate and express sympathy to consumers.

“Disasters are topical,” said Chris Ramey, president of Affluent Insights, Miami. “Facebook and other Internet media are the fastest ways to communicate with clients.”

Luxury brands may feel the need to reach out to affluent consumers because brands see their customers as family, Mr. Ramey said.

Indeed, social media may be a better approach than sending out an email or another form of digital advertising, since that could just alarm or panic consumers.

“It’s about your relationship,” Mr. Ramey said. “Treat your customers with the same care you’d show your family.

“A deepening relationship always benefits the brand,” he said.

July 1, 2011

With Facebook protest, Israeli consumers shift from talking the talk to walking the walk

By Yael Shpiller
JWT Intelligence
July 1, 2011

In a recent chat JWTIntelligence had with Luxury Institute CEO Milton Pedraza, he forecast that Facebook activism will expand from Egyptian-style political protest to consumers organizing short-term actions to force change. “Ralph Nader isn’t going to be one person anymore, it will be the collective action of people online using social media,” he said. A great example comes from Israel, where average consumers have banded together on Facebook to help put the high cost of cottage cheese on the national agenda.

The price of this beloved staple (now 8 shekels for a 9-ounce container, about $2.30) has almost doubled in the last few years, since the government stopped regulating prices on many dairy products. While we Israelis are not a nation of bans and protests—we tend to talk a lot but not do much—a Facebook event page calling for a boycott, started by a young cantor earlier this month, has more than 100,000 people “attending,” including some members of parliament. Extensive media coverage of the protest sparked national debate, and the government is discussing a deal with dairy brands and retailers to drop the price for a year as long as price controls are not resumed.

The cottage cheese uproar suggests a shift from civic to consumer activism on Facebook, with the social network utilized not only for social and environmental causes but to change the way brands act toward their stakeholders. Israelis are particularly active on the site (spending more time per month on social media than any other citizens, according to comScore), and it seems to be changing how consumers perceive themselves—as having real power and influence over brand behavior. Brands, especially those in industries whose customers are already aggravated, will need to think twice before moving forward with initiatives that negatively affect the average consumer, not only financially but emotionally. And as politicians become drawn into the debate, they’re learning that a happy consumer is a happy citizen, and vice versa.

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