Mon, 31 Oct 2022 16:43:00 GMT
As Halloween passes by and the Christmas ads begin to roll out, attention is turned to the gifts that everyone will be writing in their letters to Santa. Usually a time of great festivity, generosity and - for many - excess, Christmas shopping can certainly cost a pretty penny. This is never truer than for the fans of luxury items. Be it designer bags and clothing, swish cars, high-end cosmetics or random household items with a hype beast brand’s logo embossed on the side, luxury products are expensive and inaccessible to many - even during the most stable and prosperous economic times.
Conventionally, the wisdom has been that luxury brands and their affluent clientele are somewhat impervious to recessions and economic downturns, thanks to the customers’ greater average personal wealth - and therefore, the sustained business for the brands. However, research into the last major recession from management consultancy Bain & Company has revealed that luxury item consumers were just as affected and reacted like everybody else. The ‘Luxury Goods Worldwide Market Study’ reveals that during the financial crisis of 2008, the global personal luxury market actually shrank by nearly 10%.
But showing its resilience once more, the market for personal luxury goods experienced a V-shaped recovery in 2021, following the covid-19 pandemic. Despite the travel restrictions and other health precautions resulting in ‘luxury experiences’ remaining at lower levels than pre-pandemic spending for significantly longer, personal luxury item spending recovered quickly. In fact, Bain & Company says that by last Christmas, “all personal luxury goods categories except apparel were back to their 2019 level.”
So how can agencies help their luxury brand clients adapt to the cost of living crisis being felt around the world this winter? How can they alter their products, messaging and image to attract customers that are feeling the pinch of inflation and rising fuel, energy and food costs - and are less likely to be spending big on luxury items this winter?
To answer these questions, LBB’s Ben Conway spoke with luxury experts and leaders at agencies around the globe, including dentsu X, VMLY&R’s Hudson Rouge, Publicis Groupe Hong Kong, Harbour, M&C Saatchi London and Havas Media Group. Read below to see what they had to say.
Money talks, true wealth whispers.
The people who traditionally chose the finest brands and products did so because those things were the best. They were not ‘luxury’ items, they were of higher quality and simply either out of reach or, more likely, unknown to the majority.
Balancing true exclusivity with more contemporary inclusivity, along with societal changes celebrating conspicuous consumption has seen a period of growth, diversification and accessibility by consumers to the most desirable brands. Advertisers know more about their customers than ever before, and leveraging technology and data to deliver consistent experiences at every touchpoint is a challenge for luxury brands.
Marketing, PR, CRM, and retail have historically had their own budgets, teams and distinct responsibilities. Integration is critical to enable a customer to navigate seamlessly across a brand’s ecosystem - facilitating either transactions or data sharing. Consumer data and motivations must therefore be treated as a strategic and shared resource underpinning every touchpoint; it is the glue creating a truly connected and personal experience which exceeds expectations.
While there is a temptation to try to be all things to all people, being focused and consistent is key. Investing time in a communications strategy that is adhered to across all touchpoints can facilitate a connected culture and enhanced customer experiences. By truly understanding consumer motivations, standouts can be created through either unique luxury brand codes in all channels, or in collaborations through unexpected partnerships.
In 2010, after the banking crisis, tailors on Savile Row were heard to remark they had never been busier. Straitened economic times led to a ‘flight to quality’ as true value was sought by high-end customers. It remains to be seen if the current economic ructions will deliver a similar boon for luxury brands.
During the 2008 recession, while working in luxury and premium liquor, we noted our luxury brands fared comparatively well. With consumers trading both up and down, brands in the middle were hit hardest. The takeaway is that even during times of instability, luxury brands have much to offer.
Similarly, we observe people today becoming more discerning with their spending and choosing more carefully — trading up in some areas of their lives, while buying value brands in other areas. But the meaning of ‘luxury’ is also expanding, and today’s luxury market is more global and less reliant on heritage brands.
Through the pandemic, a more intrinsically motivated sense of luxury emerged: a state of being where people have choice, and value the present. Instead of conspicuous consumption, customers see time and space as sought-after luxuries. Increasingly, people are placing a higher value on their time and buying products and experiences to help create space.
The brands we work with are really focusing on understanding human motivators and the changing nature of modern luxury, e.g., service mentality; helping customers to connect on their own terms, and building greater immediacy and response. The luxury marketplace is also widening. With increasing crossover buying, it’s becoming harder to define a ‘luxury customer’.
As many APAC consumers (especially in China) are still experiencing limited access to physical retail, technology and innovation have become even more crucial for selling direct to consumers in Asia. Metaverse, digital avatars and NFTs are adding a new dimension to the brand ecosystem, providing opportunities for more immersive end-to-end omniverse experiences.
One of my favourite examples is Alibaba’s Tmall Luxury Pavilion, which hosted an AR fashion show with a number of brand mascots and introduced a ‘Meta Pass’ that granted customers priority access to limited-edition items from Bognar to Max Mara. Guests at retail spaces could try on AR glasses and products while shopping.
Digital collectables and NFTs have become one of the fastest-growing revenue drivers, allowing luxury brands to expand their offerings by leveraging radical collaborations with brands, creators and games. By creating a network effect that appeals to novelty-seeking Asian customers, brands can attract new customers with a more native approach. Following ‘Balenciaga X Fortnite’ and Jimmy Choo’s ‘Be@rbrick collectables’, there are the ‘Gucci X Crypto Janky NFT drop’ and handmade collectables, Tiffany’s ‘CryptoPunk Pendants’, and Burberry’s ‘Roblox Lola’ collection. Ralph Lauren has made its virtual wardrobes available for avatars in Zepeto, and the world’s first luxury gaming suites are now available at the Fairmont Hotel in Singapore - while a ‘Rimowa X RTFKT Mint Event’ is coming soon.
The evolution of APAC’s luxury ecosystem will further blur the line on where the ‘master experience’ lies. We’re entering the age of the ‘luxury omniverse experience’, where luxury brands need to find creative and native ways to drive a real value exchange for consumers in the multiverse, and co-create a seamless multiverse journey. Outlasting the looming recession means embracing digitisation, virtualisation and the creator economy, to provide personalised, end-to-end omniverse experiences for many.
People make huge errors in the luxury category because, too often, they try to apply the rules of ‘normal’ marketing to it. It’s not a world of RTBs [Reasons to Believe].
How can you try and make ‘sense’ of or strategise about a $1,000 handbag or a £250,000 supercar in a cost-of-living crisis? How can you at any time, whether one of feast or famine?
Stop over-intellectualising it.
The strategy of the category is the same in 2022 as it was in 1922. It remains consistent, regardless of what is going on outside the window. It is about aspiration. It is about desire. It is about ‘what I think I deserve’ or ‘what I think the purchase will say to the person I want to impress’. It is ‘want’, not ‘need’.
Luxury is about all the glorious nonsensical aspects of the human condition. Why doesn’t perfume advertising make any sense? Because perfume doesn’t make any sense. Why pay £100 for a bottle of something to smell nice, when I can get a 50p deodorant that’ll do the same rational job?
Luxury will survive this crisis - like it survived all the other ones - by understanding that luxury marketing is 100% for the heart, and not the head… even the tiara-topped one.
A mud-pit… Perhaps Balenciaga’s location for its latest catwalk presentation says it all. Not about the state of the world – though it is a right mess – but about how fast the luxury landscape is changing.
While current times continue to be ‘unprecedented’, luxury’s storied houses have always made longer-term bets. In this case, that’s on the expectations of generations z and alpha - [who are] excited more by cultural proximity than by craving possessions. It’s Gucci on the Adidas app, it’s Valentino’s buy-back programme, it’s Balmain’s Barbie collection in the metaverse.
If these mega brands -for whom ‘the brand’ is everything - can shake off the constraints of long-standing house codes, there is a lesson here for all brands. As the apex category of brands loosens up, I think we’ll see a trickle-down effect on the playfulness of all brands. Perhaps it's because luxury brands have the wedge to walk where mass-market brands only talk. Or, perhaps they’ve looked further ahead and seen it’s the only way to survive? Either way, they’ll continue to offer a crucible of cultural innovation we can all learn from.
Luxury is one of the rare few industries that is proving resilient, and even thriving, in today’s tumultuous macroeconomic climate. Post-pandemic, the sector is poised for strong continued growth, but from where?
Gen-z is expected to make up 40% of the luxury goods market in 2035. The biggest challenge for brands in the coming decade will be adapting and shaping new codes of engagement with tomorrow’s luxury consumer.
Strikingly, 75% of consumers wouldn’t care if a brand disappeared. Moreover, 60% of content provided by luxury fashion brands is not meaningful to consumers (according to Havas Media Group’s ‘Meaningful Brands’ research). The stakes are high to do better, and fast.
Today, luxury consumers expect more transparency from brands - on sustainability, inclusivity, and diversity. Our global client, De Beers, recently launched its first-ever gender-inclusive collection, ‘RVL’, with support from international LGBTQ+ ambassadors. Another client, Hermès - synonymous with leather handbags - now produces a sustainable material that incorporates mycelium. We’re supporting these brands with meaningful media experiences that uphold these values - whether through ethical media choices or challenging bias in audience strategies.
Beyond product innovation, we have the rapid pace of tech transformation. The convergence of physical and digital experiences is shaping how we design the customer journey in media. The shopping experience starts well before a customer sets foot in store (if they do at all), and brands need to maximise each of those interactions meaningfully. For instance, in China, where millennials and gen-z are social media super-consumers, luxury brands like Gucci have already been working with virtual influencers since 2018.
Ultimately, the future loyalists of luxury are already navigating new relationships with brands, and in order to sustain cultural influence and desirability, luxury brands must embrace forward-thinking strategies to succeed.
view more - Brand InsightLBB Editorial, Mon, 31 Oct 2022 16:43:00 GMT