By Milton Pedraza, CEO of the Luxury Institute.
First the story was that luxury was omnipotent and luxury consumers were immune. Even affluents were trading up, they said, and luxury could do no wrong. Now the story is that luxury has lost its luster and even the wealthiest are bailing out.
Reality is that luxury is cyclical, and always has been, as are all industries, and that luxury winners take a long-term view and business approach. Here are seven "tough-love" steps from the independent Luxury
Institute to ensure your brand not only survives, but thrives, in an economic downturn.
1. Eliminate the hobbies
Many luxury brands have entered into categories where they have no expertise because they want to be "lifestyle" brands. Some categories are logical extensions for a luxury brand but most are not a good fit and will be marginally profitable.
Fashion brands are notorious for pasting their logo on anything that they think will generate growth regardless of the impact on the long-term brand equity, and the long- term bottom line.
Conduct a rigorous assessment of your brand's category portfolio and unflinchingly eliminate marginal "hobby" categories. Renew your focus on what you do best and innovate within those categories.
2. Go up-market right now
One of the great ways to kill a luxury brand, albeit slowly, is to move down-market. Gucci was a great comeback story because someone had decimated it before Tom Ford saved it.
If you are a luxury brand that really aspires to be a mass brand, then create and execute a strategy to be distributed in as many mass-market outlets as possible. You have lots of choices.
If you aspire to be a top-rated luxury brand, then Luxury Institute research says that you must serve high net-worth consumers, be unique and exclusive, limit your distribution, and maintain impeccable service. Great quality is not enough.
Focus on going up-market with bespoke, one-of-a-kind, custom-made, made-to-order, limited edition product and deliver service to match. Only then will the new, growing multi-millionaire consumers globally be willing to pay a premium for your products long-term. That's your growth strategy. Period.
3. Innovate and dare to Be different for a change
Some 63% of wealthy consumers feel luxury is being commoditised. Walk down London’s Bond Street, and you see the same look and feel in store designs and products to the point that you can take away the signs and logos and wealthy consumers would probably not be able to identify who is who. The same is true for services.
It is time to stop emulating your competition and begin to innovate such that you are creating never-before-seen products and categories that are relevant and that revolutionise your industry.
Apple is beating luxury at its own game by creating great products and services, innovating features and benefits, and charging a premium. Its stores have become high-tech/high-touch destinations. If luxury has any claim to fame, it is in innovation and novelty. Demand innovation and you will get it.
4. Leverage your PR, not your advertising
Especially in challenging economic times, every pound sterling counts. Public relations is a far more effective and credible vehicle for persuasion of key constituents than is advertising.
Give your agency the opportunity to communicate the authenticity, the rich history of your brand, your brand icon, your brand integrity, your brand's corporate citizenship, your knowledge of the category via your internal data, and most importantly, your breakthrough innovations.
5. Deliver extraordinary experiences
The truth about extraordinary customer experiences is that they are delivered not with gimmicks and props, but by talented, caring people who connect with customers one-to-one.
Great people are the most difficult resource to scale, yet companies such as Ritz-Carlton and Nordstrom are consistently rated by wealthy consumers as delivering extraordinary customer experiences despite their size.
6. Innovate online
Now is the time to use this rich channel to reach global wealthy consumers no matter where on earth you happen to be located.
If a luxury brand asks whether they should spend scarce funds on opening another store, launching a print advertising campaign, or investing in a great website and online advertising, the Internet wins every time as the fastest, cheapest, and most effective way to leverage a luxury brand in today's world.
7. Let the voice of your customer be your guide
Inject the voice of the wealthy consumer into your strategy sessions. Use internal and external quantitative research, create an online community, mine your transactional database, engage customers one-on-one at point of purchase, etc....
In effect, do whatever it takes to understand what consumers are thinking right now and why they are behaving the way they are. Find ways to immediately put consumer feedback into practice.
They will guide you not only to survive, but thrive, in any landscape, including a downturn. This too shall pass, and you will be the stronger for it.
For expert digital strategy advice, contact the experts at The Knowledge Engineers who have a range of digital training courses.
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