Luxury Institute News

December 30, 2014

Lose Insight Into the Customer, Lose the Customer: Here’s Proof

Loyalty360
December 30, 2014
By: Bill Brohaugh

We all understand the importance of knowing your customer, but every so often a needed reminder hits us hard. A recent hit comes from a joint study conducted by Epsilon and The Luxury Institute. The study—The New Face of Luxury: Breaking Down the Myths and Stereotypes of the Luxury Shopper—comes out swinging in a press release announcing its publication: “Luxury brands lose 50% of their top customers annually because they routinely misidentify their demographic and economic profile while also failing to create a personalized sales experience for them.”

Half of your top customers out the door is a big hit indeed.

The study reports findings about the demographic characteristics of luxury customers in particular, but the overall lessons are clearly adaptable to brands and customers of all sorts.

Don’t be fooled by stereotypes. It’s well-known that most luxury shoppers are women, right? Except that the study knows that 57.5% of those shoppers are male.

Don’t be fooled by assumptions. In this prolonged age of conspicuous consumption, the best way to show off is in person, with expensive clothes, correct? But 13.8% of luxury shoppers indicate that their top merchandise categories are décor and gifts, more than those who indicated apparel. (But apparel is certainly in the running.) Hunting and fishing—no surprise—are pretty low on the list, so maybe that assumption was OK.

Fight internet pillage of your brand with instore experience appropriate to the customer. Reports the study: “Luxury shoppers crave the experience of the brand and look for a VIP interaction,” according to the report.

The white paper recommends: “Combine housefile information with third-party data including purchase behavior, to get the real picture of your shoppers. Use this information to segment your housefile into shopper personas.”

Source: http://loyalty360.org/resources/article/lose-insight-into-the-customer#sthash.c4kwQ3gJ.dpuf

 

Hey, big spender: Luxe buyer not who you may think

CNBC
December 29, 2014
By: Krystina Gustafson

Take a minute to picture the stereotypical luxury shopper.

What do you see?

If the vision of a 45-year-old, fur-clad woman immediately comes to mind, you’re making the same mistake as many of the brands targeting high-end buyers.

According to a new study by Epsilon and the Luxury Institute, 57.5 percent of luxury spenders are actually male, and many are of Asian and Middle Eastern descent. But categorizing shoppers by their age, sex and net worth still isn’t enough to get a real gauge on consumers who crave nice things.

The report, which examined 30,000 high-end shoppers, found that luxury brands lose 50 percent of their top customers each year by not correctly identifying them, and thereby failing to create a personalized shopping experience.

According to the study, there are four distinct groups of luxury shoppers for brands to identify, which account not only for net worth, but purchase behavior. They are:

  • “Aspirational” shoppers, who covet luxe brands, but don’t necessarily have the means to purchase them on a regular basis;
  • “Moments of wealth” shoppers, who save up for a certain item, but don’t buy the brand frequently;
  • “Dressed for the part” shoppers, who spend on high-end items to appear as if they live a luxury lifestyle, but may not have the wealth to be a true luxury spender, and
  • “True luxe” shoppers, who can purchase luxury items whenever they want, without financial concern.

“Luxury brands need to truly understand who their customers are and what they are looking for in a luxe shopping experience,” said Jean-Yves Sabot, vice president of retail business development at Epsilon. “This is critical in creating a personalized experience for the customer that drives engagement, retention and satisfaction.”

It’s not just existing customers who are at stake. Pam Danziger, president of Unity Marketing, said luxury brands’ failure to identify potential customers could also discourage consumers who have the money to spend from visiting certain stores, because they feel as if they don’t belong.

She said the reason many luxury brands aren’t well-tuned into their customers is because the industry prides itself on dictating trends, instead of listening to what people want. But communicating with consumers could have some serious benefits.

A recent study by Unity Marketing—which surveyed more than 300 consumers with a minimum net worth of $800,000—found that many wealthy shoppers consider certain luxury brands “overrated.” Luxe mainstays Louis VuittonGucciHermèsPrada and Rolex were at the top of the list.

While some of that could be attributed to each label’s designs, Danziger said the more consumers knew about a brand, the less likely they were to view it as “overrated.”

“The takeaway very simply is that marketing communication aimed at educating the affluent about the luxury brand is very likely to create a positive feeling or halo around the brand, which may well lead to … buying,” according to Unity Marketing.

Source: http://www.cnbc.com/id/102299035#

Pinterest Focusing On Ads, Education In New Year

MediaPost Communications
December 29, 2014
By: Laurie Sullivan

Pinterest on New Year’s Day plans to begin selling ads on the site to brands at a cost per thousand (CPM) in an effort to better compete for ad dollars with Twitter and Facebook, as well as search engines Google, Bing and Yahoo. Promoted Pins, launched eight months ago to its brand advertisers in beta, will be available to all advertisers beginning in January.

Major upgrades to Promoted Pins that are in the works will give brands new ad formats and advanced targeting features. Pinterest says that early results look promising. Brand advertisers achieved about a 30% increase in earned media from their campaigns in terms of site users who saw a Promoted Pin and thought it was good enough to save to one of their own boards. The average Pin gets repinned 11 times. Brands also see those results, and sometimes higher, from Promoted Pins.

The company said brands using the auction-based cost per click (CPC) model also see success. Many of the self-serve beta partners see gains in traffic and impressions, explains Joanne Bradford, head of partnerships at Pinterest. “We’re still making tweaks to the product and want to make sure we get it just right before we roll it out to all businesses,” she wrote in a blog post.

While brands see success with Pinterest, the company needs to rethink how it competes with other platforms — especially Facebook. The platform attracts consumers who gravitate toward luxury brands like Prada, Manolo Blahnik, and Jimmy Choo. Seven in 10 consumers who prefer luxury items used social media in the past year, but more than half use Facebook, per research from Epsilon and The Luxury Institute. The analysis compares 30,000 luxury shoppers to reveal insights, myths and stereotypes of the luxury shopper. Of those, more than 25% engage with brands or retailers on Facebook. When consumers under the age of 50 are considered, the number rises to 34%.

To compete, Pinterest will teach brands how to best use its platform. Pinstitute was built as a way of teaching marketers how to connect with users, as well as building native ads and measuring the performance. It will give them insight into the types of Pins that perform well, and insight into what Pinterest users care about.

The company also expects feedback on the types of services and features that will help marketers get better results from the platform, so it is inviting a select group of brands and agencies to attend quarterly Pinstitute workshops where they can learn, exchange ideas and meet with the Pinterest product team. The first one is scheduled for March.

Source: http://www.mediapost.com/publications/article/240837/pinterest-focusing-on-ads-education-in-new-year.html

December 29, 2014

Luxury Brands Often Misidentify Their Target Consumers

MediaPost Communications
December 26, 2014
By: Steve McClellan

Luxury brands lose 50% of their top customers annually because they routinely misidentify their demographic and economic profile while also failing to create a personalized sales experience for them, according to new research from global marketing and crm agency Epsilon and research and consulting firm The Luxury Institute.

Epsilon analyzed and compared 30,000 luxury shoppers to uncover insights, myths and stereotypes of the luxury shopper, the firm said.

According to the findings, luxury brands mistakenly believe their customers are typically female and on average 45-years old with a net worth over $1 million. However, 57.5% of luxury spenders are in fact male. They are likely to be of Asian and Middle-Eastern descent with a net worth over $500,000. In addition, nearly 13.8% of shoppers with a net worth over $1 million invest mostly in modern, contemporary decor and gifts as opposed to high-ticket apparel items.

“Luxury brands need to truly understand who their customers are and what they are looking for in a luxe shopping experience,” said Jean-Yves Sabot, vice president, retail business development at Epsilon. “This is critical in creating a personalized experience for the customer that drives engagement, retention and satisfaction.”

The report categorizes luxury shoppers into four groups including the so-called “True Luxe” shopper who has the means to purchase luxury items at will without financial concern. But there is also the “Aspirational Shopper,” described as shoppers who “desire to own pieces from a brand, but may not have the means to do so on a regular basis.”

Another group is labeled “Moments of Wealth,” comprised of shoppers that may save for specific piece but do not purchase from the brand frequently. And the “Dressed for the Part” group buys luxury items to give the appearance of someone who lives a luxury lifestyle but often does not have the financial resources to be a true luxury buyer.

The study also found that online shopping accounts for less than a quarter of sales for multichannel luxury retail brands, because these consumers typically want to see and touch the product. While 98% of luxury shoppers use the Internet regularly, more than 50% of the time they are researching products and comparing prices on their mobile devices.

Luxury shoppers “crave the experience of the brand and look for a VIP interaction,”  according to the report.

Recommendations include using insights to tailor marketing communication to the optimal targets for more personalized and relevant communication. Luxury brands also need to do a better job of leveraging external shopper behavior for true one-on-one interaction both in-store and online, the report surmises. They also need to get a complete picture of their consumer target set. Third-party data will help. More on the report can be found here.

Source: http://www.mediapost.com/publications/article/240785/luxury-brands-often-misidentify-their-target-consu.html

The Average Luxury Shopper May Surprise You

The Wall Street Journal
December 24, 2014
By: Nathalie Tadena

The average luxury shopper doesn’t look like a Real Housewife of Beverly Hills.

According to a report from marketing agency Epsilon and boutique research and consulting firm Luxury Institute, a true luxury shopper — one that has the financial means to purchase high-end items frequently throughout the year  – is most likely to be an Asian or Middle Eastern single man between the ages of 25 years and 44 years old,  with no children.

Luxury brands have traditionally pitched their products to women over the age of 45 with a net worth more than $1 million, so many have apparently been failing to engage their best customers. Half of luxury brands lose 50% of their top customers every year, the report said.

The study compared the top 30,000 luxury spenders with a yearly spend over $30,000 in specialty retail and average transactions of over $1,200 to the shopping patterns and profiles of individuals with a net worth of more than $1 million and financial resources over $2 million.

According to the research, there are four types of shoppers who buy luxury goods. The “Aspirational Shopper” desires to own pieces from a luxury brand but doesn’t have the means to do so on a regular basis and might turn to an outlet or discount boutique like Rue La La to buy from a luxury brand. The “Moments of Wealth” shopper saves for a specific luxury piece, but doesn’t buy from that luxury brand frequently. The “Dressed for the Part” shopper purchases high-end items but doesn’t have the financial resources to be a true luxury buyer.  The” True Luxe” shopper — a luxury retailer’s best customer — has the financial means to purchase high-end items and purchases from luxury brands frequently throughout the year.

Nearly 60% of these True Luxe shoppers are male and more than half are single, the report found. The True Luxe shopper also has a net worth of more than $500,000.

Luxury shoppers prefer to shop in stores, where they can get VIP treatment from a salesperson and touch and see products in person, the study said.  Online shopping represents less than a quarter of sales for multi-channel luxury retail brands.

A rude or inattentive salesperson is the biggest reason that a consumer won’t come back to a particular luxury brand, said Luxury Institute Chief Executive Milton Pedraza. Only 10% to 15% of luxury customers said they have a first-name relationship with a sales professional, according to the report.

Brands that use information about an individual consumer’s buying habits and preferences during in-store visits can create a stronger buying relationship, the researchers said.

Source: http://blogs.wsj.com/cmo/2014/12/24/the-average-luxury-shopper-may-surprise-you/ 

December 11, 2014

Where Has All the Luxury Gone?

By: Judith Russell
December 8, 2014
The Robin Report

 

We in the industry have been bandying about the term “luxury” pretty freely of late, but there is growing realization that if a product or brand is easily accessible and relatively inexpensive, it’s not really a “luxury” product. And the minute you add the term “affordable,” it becomes an oxymoron.

As the ever-widening income inequality gap illustrates, the rich are still getting richer. According to Pew Research, the top 1% of households in the US, or those making $400K or more annually, earn 23% of the total income in the country, and control 35% of the net worth. Both figures have been steadily growing for more than a decade.

One ever-present behavior in the spending habits of the superrich of any generation is opting for the special over the mundane. Makers of high-end jewelry and electronics, cars, exotic vacation hotels, and other products and services target this group of discerning consumers for a reason: They value, and are willing to pay a steep premium for, that which is appreciated by and accessible to only an elite few.

Milton Pedraza, CEO of The Luxury Institute, a research firm that tracks and advises the global luxury goods market, says that consumers consistently define luxury as the best of design, quality, craftsmanship, and service. Brands that always deliver against these attributes, including Audemars Piguet, Chanel, and Buccellati, also tend to have a compelling brand heritage story.

Dumbing Down the High End

So where is true luxury retailing today? The high end is on a steady course down market. Nordstrom, Neiman’s and Saks are slowly evolving into off-pricers, expanding their Rack, Last Call and Off Fifth concepts much faster than their full-line businesses. This is eroding their credibility as purveyors to the elite, since one of the strongest pillars of luxury is pricing integrity. But Wall Street can be pretty unforgiving. In order to satisfy investors, these businesses must grow. Opportunity for organic growth is limited, due to intensified competition and more demanding consumers.

Look at the auto market. Mercedes, BMW and Audi are all adding cheaper models to the low ends of their product lines. You can’t turn on the radio without hearing an ad for their affordable lease deals, wooing us to experience a taste of luxury at a discounted price.

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Exacerbating the situation is the fact that many luxury brands, including Louis Vuitton, Prada, Hermès, Burberry and Dolce and Gabbana are now bypassing their retail partners and going direct to consumers, launching their own e-commerce sites and brick-and-mortar stores. The fastest way the Nordstroms and Neiman-Marcuses of the world can grow sales and earnings is to trade down. But they can only do this for so long before becoming known primarily for their discounting, the kiss of death in luxury.

Ubiquity Erodes Exclusivity

Then there are the outlet stores. Many of the veteran brand leaders, such as Coach, Tiffany, Michael Kors, and Ralph Lauren, are finding that they’ve tapped out the full-price specialty market opportunity and are now growing exponentially by expanding their outlet store footprints. Overexpansion breeds ubiquity, ultimately the downfall of premium brands whose hallmark is limited distribution.

Ubiquitous availability in outlet stores also compromises perception of pricing integrity. “Wealthy people are smart,” says The Luxury Institute’s Pedraza. “They’re willing to pay a high price for the best, as long as it’s fair, but they don’t want to get taken advantage of.” Also, many of the leading industry bloggers are of the opinion that much of the merchandise in luxury outlets has never seen a full-price store. It is, they believe, a lower level of design, quality and craftsmanship created specifically for the outlet, and carries faux full-price tags that are then reduced to obfuscate their real value. This breaks another rule of luxury, authenticity.

The New Luxury Customer

In what used to be the high-end luxury sector, a big, gaping void is forming, ripe for the filling by a new breed of luxury brands. Several key factors are contributing to this opportunity.

  • Millennials, who will account for 30% of all retail sales by the year 2020, according to Pew Research, are an increasingly important force in the marketplace. They are already wielding tremendous influence in retail, demanding more elevated, contemporary and technology-driven products and experiences. They are forcing retailers to offer better high-tech, high-touch engagement and greater personalization.
  • Many high-end consumers are beginning to show a distinct preference for experiences over things, having become sated with too much “stuff.” This is driving growth in segments like the ultra-luxury travel industry. These experiential customers are also demanding a meaningful brand connection that elevates the products they buy with an emotional investment. We know that a unique personal experience will make it more likely for that consumer to become a loyal customer.
  • A group of consumers has moved away from playing it safe and shopping with the flock to desiring more individualized offerings. Leading fashion-trend forecaster David Wolfe of Doneger says, “Bye-bye mainstream, hello to thousands of tiny consumer tribes.” And these tribal members are demanding fresh, frequent new products and experiences that can be customized, personalized and unique.

The New Face of Luxury

The next generation of luxury brands, I predict, will focus on meeting the needs of a relatively small, yet potentially profitable group of consumers. The brands will deliver quality of workmanship, authenticity of design and materials, and customized fit and trims. Whether casual or dressy, products will be limited in availability. There will be no sales, no coupons, no department store gatekeepers, and no need to get big fast. These brands will need to reach critical mass of between $500 million and $1 billion to generate sufficient profit and cash flow, while remaining exclusive, premium, and ultra-special. Needless to say, service—or its newest moniker, customer relationship building—will be out of this world.

Does this sound like the couture world of times past? You bet it does. But there will be differences enabled by 21st century technology. Brands will use digital tools, including big data, to develop and maintain an intimate relationship with their consumers and engage them on a personal level.

Curated offerings of products and services will be created especially for customers who opt into the relationship. Brands will use store-scanned measurements of their customers’ bodies to deliver a perfect fit. With geo-fencing and other technological capabilities, companies will know where their customers are and where they’re going—even going so far as to deliver a fresh wardrobe to their client’s hotel while on vacation. Sound futuristic? The technology exists today.

Who will be included in the next generation of the luxury elite? Brands like Elizabeth and James, Tom Ford, Bottega Veneta come to mind. The extent to which they succeed in creating luxury businesses with staying power depends on how well they can deliver on their product, service, and customer engagement features, and how well they can rise above the relentless discounting fray that is decimating brands today.

The luxury brands of tomorrow will be privately-owned and managed by a team possessing design genius, marketing savvy, financial prowess and technological wizardry. They will view their work as the intersection between art and science. They will control every phase of the value proposition from product conception to delivery, with customer focus front-and-center every step of the way. These innovators will not think of their businesses in terms of the products they sell or distribution channels, but rather in terms of serving their affinity tribe, a community of customers that share similar values and a passion for the brand, bordering on obsession.

So, back to Wall Street, these guys may not pay any attention to these businesses because they will be privately held. But there’s little doubt in my mind that they’ll become personally invested in the luxury brands of the future—by becoming some of their best tribal customers.

Source: http://therobinreport.com/where-has-all-the-luxury-gone/?utm_source=The+Robin+Report&utm_campaign=c3d66eab66-Where_Has_All_the_Luxury_Gone_12_10_2014&utm_medium=email&utm_term=0_e90268c709-c3d66eab66-201755673

December 1, 2014

Marketer of the Year: Stuart Weitzman

By: Irene Park
Women’s Wear Daily
December 1, 2014

Click on the link to read the entire article (subscription required): http://www.wwd.com/footwear-news/markets/marketer-of-the-year-stuart-weitzman-8049600?gnewsid=a161467a3da489b5897b97c969ca7fb8