Andrew Stephenson, Director of Marketing EMEA at Treasure Data, considers how luxury brands can use data as their ultimate key to success.
The luxury industry has entered a new era. And while the global pandemic certainly accelerated matters, there’s no doubt that its reinvention was bubbling below the surface before 2020. In the past six months, we’ve seen iconic brands such as Tiffany redefining its creative direction and marketing strategies to help it resonate with a younger audience. The industry knows it must adapt to excel, but the pace of change presents challenges that must be addressed in order to thrive.
In 2020, the personal luxury goods market declined by 23 per cent (Bain), severely impacted by the lack of global tourism and opportunities to offer high-end retail experiences in stores. The pandemic saw marketing strategies change overnight, as luxury brands halted investment in traditional channels such as advertising and in-store experiences and did everything they could to meet customers online.
As the dust settles, there are three key challenges that brands must address to continue building momentum and relevance in this new era. Firstly, how do brands consistently deliver the same quality of experience online? Secondly, how do they continue to meet the needs of their loyal customers? A customer base that on the one hand, must ensure that older generations of shoppers can access and connect with the brands they know and love online, while on the other hand, increasingly cater towards the digitally native generation who demand high-quality value experiences.
And critical to addressing these issues is the third challenge. The significant shift towards digital channels has seen the data pool for most luxury brands increase tenfold. Luxury brands must ensure that the volume of data they now have access to does not outpace the team’s confidence and competencies in turning it into actionable insights. Brands that do not feel sufficiently armed with the intelligence to make better decisions with greater confidence will face decision paralysis, as they have more data available than they know what to do with.
But there is light on the horizon. The number of high-net-worth individuals (HNWIs) is increasing by 2.5 per cent globally (Bain) with particular markets, such as Asia, growing at pace. And as physical stores reopen and customers navigate their ‘new normal’, luxury brands must capitalise on this new and revitalised market.
With online set to become one of the leading channels for luxury purchases by 2025, brands must make the right decisions to enable a truly effective omnichannel transformation. This is true across the retail sector but will be particularly critical within the luxury market where customer experience holds infinite value.
The new digital world in which customers interact is a smorgasbord of digital creativity and includes things like; connected cars, digital butlers, virtual humans and the metaverse, gamification, augmented reality experiences (the list goes on…). All are becoming commonplace and are seen as the future. It’s the same in the luxury market: so how can brands maintain their relevance as the speed of this innovation increases?
Firstly, luxury brands must strive to create a single customer view so as to truly know who their customers are and use those insights to establish consistent and personalised experiences that can be delivered both online and in-store. For example, a 72-year-old customer born in 1948, who is married, self-employed, has significant personal wealth, holidays frequently in the Alps and loves dogs – could equally be the Prince of Wales or the Prince of Darkness (Ozzy Osbourne)! The point being, you would talk to them both very differently about your product/service despite the fact that without enriched data, they appear on the surface to be the same person. A Customer Data Platform (CDP) is a data management technology that analyses customer data across all available touch points, to ensure luxury brands have access to a 360-view of the customer.
Secondly, data collection techniques must form an essential part of the marketing mix. With the elimination of third-party cookies in the near future, luxury brands will have to expand their efforts on first-party data. Many retailers have already invested heavily in areas such as gamification, partnerships, loyalty programmes, and user-generated content platforms. Of course, the luxury market may require tailored experiences to ensure data capture is accessible and appropriate for HNWIs, but what’s clear is that rather than a ‘nice to have’, this will form an essential part of luxury brand marketing strategies.
And finally, brands must deliver omnichannel experiences that revitalise the in-store experience. Customers now expect their experiences to seamlessly transfer between online and offline. Recent research by Moonshot and McKinsey suggests that the contribution of online luxury sales to the global high-end market will more than triple by 2025 and account for 20 per cent of total sales. But what is even more striking is that at least 80 per cent of all luxury purchases made today are in some way influenced by consumers’ online experience.
Digital and data focused luxury businesses like Net-A-Porter, Farfetch, Burberry and others are rapidly taking market shares from more established, traditional brands – and connecting with their millennial markets is arguably a large part of their success.
Whatever we do within the luxury space, our role is fairly focussed – to encourage trial and ultimately engender loyalty. Loyalty as a bi-product of an incredible customer experience like that provided to the American Express Centurion Cardholders, loyalty driven by an incredible product or service like that of Aston Martin, or loyalty driven by exclusivity like owning a Candy Brothers postcode at One Hyde Park – luxury brands must make their customers want their brand more.
But to do this, brands need to make an impression that lasts. Part of that secret is in capturing customers’ digital footprint, deciphering the data signals, and then using the insights intelligently to drive that personal experience and provide the digital white-glove service that consumers expect.
There is an infinite number of options at the disposal of luxury brands for shaping the customer experience and this ought to prompt the rapid development of new strategies, products, and approaches to customer engagement. But critical to success is that brands recognise that data holds the competitive edge.