Luxury Institute News

August 29, 2013

Retail loyalty programs add tiers to reward big spenders

By Kelli Grant
CNBC
August 28, 2013

Taking a page from airline programs, more retailers are adding elite levels with extra perks to their loyalty packages. But shoppers may find membership nearly as pricey as a first-class airline ticket.

In July, Sephora relaunched its Beauty Insider program, adding a reward level with free shipping, early access to new products and sales as well as VIP event invites for shoppers who spend $1,000 or more in a year. Around the same time, flash-sale site Gilt.com introduced its Gilt Insider Program, awarding shoppers five points per dollar spent and weekly bonuses for interacting with the brand. Tiers with extra benefits such as exclusive sales and a VIP customer service line kick in at the 5,000-, 10,000- and 25,000-point thresholds.

“To make it fair we crafted a program that rewarded engagement, i.e. site visitation and social interaction, in addition to purchasing, so that members could advance up tiers as they earned points,” said Elizabeth Francis, Gilt.com’s chief marketing officer.

Click the link to read the entire article which includes a quote from Milton Pedraza, CEO of Luxury Institute:
http://www.cnbc.com/id/100991902

August 23, 2013

Biggest risk of partnerships is brand dilution: Luxury Institute

By Erin Shea
Luxury Daily
August 22, 2013

Collaborations can sometimes be risky for luxury brands, and half of affluent shoppers say that the biggest risk for a luxury partnership is the potential damage to the brand’s image or reputation, according to the latest survey from the Luxury Institute.

Overall the study found that most affluent shoppers enjoy brand partnerships, even with the risk. However, luxury marketers should pair up with brands that have the same goals and mindset when seeking partnerships.

“Nearly half of wealthy consumers think that long-term collaborations are most effective for luxury brands,” said Meera Raja, director at the Luxury Institute, New York.

“Luxury brands should utilize partnerships not just to showcase their strengths, but also to create unique and innovative experience for consumers,” she said.

Luxury Institute surveyed consumers with a household income of at least $150,000 about the appeal and impact of brand partnerships.

Pairing up
The survey found that in addition to partnerships being the biggest risk for a brand, affluent consumers also thought that partnerships could be beneficial if done correctly.

Affluent consumers ranked joint advertising, products, events and sponsorships as the most effective types of brand collaborations.

Aston Martin partnered with Jaeger-LeCoultre to create a watch collection.

Also, consumers reported that partnerships with hotels, travel brands, fashion labels and airlines are the most fruitful.

Women are more likely to be interested in fashion, jewelry and beauty partnerships, while men seem to enjoy automotive partnerships more.

Shoppers who are older than 50 are interested in airline and cruise partnerships.

Affluent shoppers also said that they would like to see luxury collaborations between a number of brands including: Michael Kors and Apple, Chanel and Air France, and Lexus and The Ritz-Carlton.

Furthermore, affluent shoppers are not turned off by luxury brands partnering with mainstream brands. Those surveyed said they would like to see Starwood Hotels and Resorts and Bed Bath & Beyond, Gucci and Coca-Cola, and others.

Many luxury brands have engaged in partnerships with other luxury brands with similar statuses as to not hurt their brands.

For instance, spirits brand Johnnie Walker eyed affluent men through a partnership with Alfred Dunhill to create a limited-edition gift set that likely extended the reach of both brands.

The Johnnie Walker Blue Label limited edition collection by Alfred Dunhill is a collection of British-inspired gifts in addition to a designer bottle. The partnership helped both brands solidify their position in the luxury industry and as well as their reputation as men’s lifestyle brands.

Additionally, high-end smartphone manufacturer Vertu continues its six-year partnership with Italian automaker Ferrari with the release of a limited-edition Android smartphone inspired by the automaker’s design features.

The limited-edition Vertu Ti Ferrari smartphone is the latest in Vertu’s smartphone collaboration with Ferrari. By designing the smartphone to resemble the vehicle, the phone will likely appeal to a wider group of consumers (see story).

Luxury brands can gain additional exposure and attract new customers through partnerships with other luxury marketers.

“There are still many benefits of partnerships, but luxury brands must really focus on relevant opportunities with companies that share the same values,” Ms. Raja said.

http://www.luxurydaily.com/biggest-risk-of-partnerships-is-brand-dilution-luxury-institute/

August 20, 2013

Wealthy Shoppers Enjoy Brand Partnerships, But Brand Dilution Is A Risk

(NEW YORK) August 20, 2013 – The Luxury Institute surveyed consumers with a household income of $150,000 or more about the appeal and impact of brand partnerships. These wealthy consumers also shared brands that they would be excited to see partner in the future.

Half of all affluent shoppers surveyed agree that the biggest risk for a luxury firm partnering with another brand—luxury or mainstream—is damage to the brand’s image or reputation. Joint advertising, products, events and sponsorships are the most effective types of collaboration.

Among the industries where partnerships are seen as most fruitful are hotels and resorts, travel, fashion and airlines.  Women are far more likely than men to applaud fashion partnerships, as well as those involving jewelry and beauty.  Men, on the other hand, are most enthusiastic about partnerships involving automobile companies.  Affluent shoppers older than 50 are exceptionally interested in airline and cruise collaborations.

Luxury brand collaborations wealthy shoppers would like to see include Michael Kors and Apple, Chanel and Air France, and Lexus and The Ritz-Carlton.  Missoni offering its fashions at Target and Vera Wang selling at Kohl’s are two high-profile examples of luxury brands partnering with a non-luxury outfit.  Affluent shoppers would like to see additional partnerships of this ilk, including Starwood Hotels and Resorts and Bed Bath & Beyond, Gucci and Coca Cola, among others.

“Brands should partner with companies with similar values and service standards to avoid potential risks of collaboration,” says Luxury Institute CEO Milton Pedraza. “This maintains credibility and helps to ensure a consistently positive customer experience.”

About Luxury Institute (www.LuxuryInstitute.com)
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 LuxuryBoard.com, a membership-based online research portal, and the Luxury CRM Association, a membership organization dedicated to building customer-centric luxury enterprises.

August 15, 2013

Report: Even the wealthy love loyalty programs

Editorial
RetailCustomerExperience.com
August 14, 2013
In a new survey of affluent consumers by the Luxury Institute, wealthy shoppers earning at least $150,000 a year share detailed observations and evaluations of various loyalty and rewards programs, and offer suggestions for improvements to existing frequent shopper initiatives.Overall, 72 percent of wealthy consumers participate in some kind of loyalty program, with the most popular ones connected to credit cards, airlines, hotels and grocery stores. Men are significantly more likely to be members of airline and hotel rewards programs, while women are disproportionately represented in programs sponsored by grocery stores, drugstores and department stores. Previous Luxury Institute research has shown that Sephora, American Express and Amazon are the top three favorite rewards programs among affluent consumers.Very few respondents say that they belong to a luxury brand rewards program. The main perceived benefits of luxury brands’ loyalty programs are special offers and rewards, earning and redeeming points, and free goods and services. Free gifts carry more importance among women, shoppers under 50, and those with net worth less than $1 million.Satisfaction with existing loyalty programs is high and most high-income shoppers say that they have had positive experiences with their memberships. The vast majority of shoppers report that loyalty programs exert a strong influence over purchasing decisions.

http://www.retailcustomerexperience.com/article/217915/Report-Even-the-wealthy-love-loyalty-programs

Bespoke Jewelry, Made With You in Mind

By Shivani Vora,
The New York Times
August 14, 2013

Temple St. Clair, a NoHo jewelry designer, has built her reputation on ready-made yellow gold amulets, which usually cost from $2,000 to $10,000 at places like Saks and Bloomingdale’s.

But when she acquired a 10-carat Burmese sapphire earlier this year on a buying trip to Asia, she knew just the client who would want to commission her to transform the rare stone into something unique. It was a woman in her 40s living in TriBeCa who already owned many of Ms. St. Clair’s signature pendants, and had a generous husband who wanted to buy her a gift to mark their 20th wedding anniversary.

After several weeks of discussion with the couple, which involved sending multiple sketches and three-dimensional molds, Ms. St. Clair created a ring for a fee, she said, of approximately $350,000. “I have always been focused on finished pieces, but personalization is a natural evolution of my brand,” she said.

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

http://www.nytimes.com/2013/08/15/fashion/bespoke-jewelry-made-with-you-in-mind.html?_r=0&pagewanted=print

August 14, 2013

Successful Rewards Programs Prove That Even Wealthy Shoppers Like Freebies And Special Gifts

(NEW YORK) August 14, 2013 – In a new survey of affluent consumers by the Luxury Institute, wealthy shoppers earning at least $150,000 a year share detailed observations and evaluations of various loyalty and rewards programs, and offer suggestions for improvements to existing frequent shopper initiatives.

Overall, 72% of wealthy consumers participate in some kind of loyalty program, with the most popular ones connected to credit cards, airlines, hotels and grocery stores. Men are significantly more likely to be members of airline and hotel rewards programs, while women are disproportionately represented in programs sponsored by grocery stores, drugstores and department stores. Previous Luxury Institute research has shown that Sephora, American Express and Amazon are the top three favorite rewards programs among affluent consumers.

Very few respondents say that they belong to a luxury brand rewards program. The main perceived benefits of luxury brands’ loyalty programs are special offers and rewards, earning and redeeming points, and free goods and services.  Free gifts carry more importance among women, shoppers under 50, and those with net worth less than $1 million.

Satisfaction with existing loyalty programs is high and most high-income shoppers say that they have had positive experiences with their memberships.  The vast majority of shoppers report that loyalty programs exert a strong influence over purchasing decisions.

“Loyalty Programs combined seamlessly with one-to-one customer relationship building can be highly effective in driving conversion and retention while making data collection easier,” says Luxury Institute CEO Milton Pedraza.

About Luxury Institute (www.LuxuryInstitute.com) 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 LuxuryBoard.com, a membership-based online research portal, and the Luxury CRM Association, a membership organization dedicated to building customer-centric luxury enterprises.

21.6 Billion Reasons The Luxury Industry Needs Oprah And Her Friends

By Russ Alan Prince
Forbes
August 13, 2013

The Boston Consulting Group estimates that US$130 billion is spent per year on luxury fashion and accessories including US$38,000 handbags. Of course, the vast majority of goods sold are priced considerably less, and we learned even billionaires such as Oprah Winfrey hedge at such sky-high prices. She said that had she been given the chance to buy the bag, she probably would have passed.

About 90% of private jet travelers buy some type of luxury fashion and accessories annually – leather goods such as purses, wallets, briefcases and shoes – and the average spent is about US$120,000 per household. The super-rich like Ms. Winfrey likely account for around US$21.6 billion in annual purchases of gowns, skirts, suits, totes and, of course, handbags. Milton Pedraza, the CEO of The Luxury Institute, believes as many as one billion consumers worldwide purchase some type of luxury good or service, be it staying in a five star hotel or buying a luxury brand fragrance or key chain.

If you want another way to think about the luxury product purchasing power of the ultra-high-net-worth sliver of the world’s population, get out a map: Go to the South Pacific and find the 15 strong Cook Islands chain. Single out Rarotonga, a 26 square mile microdot of land that is home to the capital. Now go to North America, a continent accounting for 16% of the world’s landmass, and you will have a good idea about the relationship between the global super rich population and how much they spend. While the jewelry market is more concentrated than fashion, London based diamond house Graff’s 2012 IPO filing, for example, revealed that just 20 customers made up 44% of their US$756 million in annual sales.

Click the link below to read the entire article
http://www.forbes.com/sites/russalanprince/2013/08/13/21-6-billion-reasons-the-luxury-industry-needs-oprah-and-her-friends/

August 10, 2013

Luxury Landgrab

By Russ Banham
Washington Post
August 9, 2013

With the rise of newly affluent consumers in the Asia-Pacific capitals of Hong Kong, Seoul, Shanghai, Mumbai, and other fast-growing metropolises, ultra-luxury brands like Chanel, Louis Vuitton, Cartier, Ferrari, Hermes, BMW, Prada, and Rolex are aggressively expanding their physical footprints and shifting their marketing strategies to reach this new audience.

Most luxury brands have focused on indigenous cultural, demographic, and behavioral differences to craft regional marketing messages that inform neophyte shoppers about their brand’s value proposition, and their long heritage of fine craftsmanship, innovation, and exclusivity. “There is still some confusion regarding the identification of mid-tier brands from top-tier brands,” explains Sandilya Gopalan, vice president and Asia-Pacific practice leader at Cognizant Business Consulting. Unlike the more mature American, European, and Japanese markets, “the Chinese and Indian luxury retail markets are just getting exposed to luxury items and high-level customer service,” he says.

THE POWER OF PRESENCE ON HIGH STREET
All luxury brands leverage a customized mix of print, television, and social media to deliver their unique message to shoppers, but chief among their marketing strategies is having a shop located on the world’s priciest retail streets. “Putting luxurious flagship stores on the high streets of Asia-Pacific is critical,” says Milton Pedraza, CEO of Luxury Institute, the New York-based research and consulting firm.

Madison Avenue in New York and Michigan Avenue in Chicago are the shopping thoroughfares of the wealthy in the United States. Overseas, their counterparts are Queen’s Road Central in Hong Kong, Tokyo’s Ginza-Chuo Street, Orchard Road in Singapore, Mumbai’s Altamont Road, and Nanjing Road West in Shanghai. “The newly affluent travel a lot, and know the luxury brands from their excursions to Europe and the U.S.,” says Pedraza. “A highend store at home demonstrates the power of the brand, and is considered the top form of marketing.”

Click the link to read the entire article which includes several quotes from Milton Pedraza, CEO of Luxury Institute: http://www.washingtonpost.com/sf/brand-connect/wp/2013/08/09/luxury-landgrab/