Harnessing Customer Data to Unlock the Luxury Market
U.S. luxury sales have grown in recent years due to strong demand from domestic luxury consumers and foreign tourists, according to a Euromonitor International report. In 2014, luxury sales increased because of robust demand from domestic consumers and foreign tourists visiting the United States. In fact, the global luxury market had 330 million consumers in 2014 and is expected to grow to 440 million with a total spend of $1.2 trillion by 2024. This luxury market is a quilt of diverse customers who can be segmented in a number of ways.
There are wealth levels, which consist of ultra-affluent, affluent, emerging affluent and potentially affluent customers. Then there's a specific type of luxury shopper: aspirational, moments of wealth, dressed for the part and true luxe. Lastly, these customers can be defined by overlapping groups: high net worth individuals, affluent women, high earners not rich yet and affluent millennials. Each segment varies widely in behavior, desires, tastes, values, requirements, income, wealth, responsiveness and other attributes.
Luxury is a very broad market and the manner in which specific industries market and sell their luxury products, experiences and services varies widely. Some luxury businesses are prestige brands that sell luxury goods and services at the highest ends of their respective markets. Conversely, five-star restaurants and certain four-star airlines cater to a wider spectrum of customers. In fact, many also offer entry-level products to attract emerging and potentially affluent customers. Other companies take a different approach and target a small line of their overall business to the lucrative luxury market, while their brands aren't primarily associated with luxury goods. Hyundai’s Genesis and Equus sedans are perfect examples as they offer luxury products aimed at Audi, Mercedes, BMW, Lexus and Cadillac customers, even though the bulk of Hyundai’s vehicles are targeted to the everyday motorist.
When it Comes to Luxury, One Size Doesn't Fit All
Every luxury business must determine how to successfully reach, attract, sell to, service and retain these diverse and demanding customers, given that nothing about luxury is one size fits all. In fact, these customers tend to respond poorly to conventional strategies, experiences, products, solutions and services.
Retailers now understand that customer information is a competitive asset, and when used effectively can make a huge difference in attracting luxury buyers. Trusted, valuable information that gives insight and guidance is necessary for navigating and succeeding in the heterogeneous luxury market. For example, research from Epsilon and Luxury Institute indicates that brands that use information about an individual consumer’s buying habits and preferences during in-store visits can create a stronger buying relationship. Luxury businesses gain a competitive advantage when they become better at gathering, developing and leveraging a single trusted version of information about a customer and her or his relationship with the organization.
With so many technology options available, it's important to keep a proper perspective. In the luxury market, high tech isn't a substitute for the high-touch experience of one-on-one interactions. Technology is a means to an end, not an end in itself. Milton Pedraza, CEO of the Luxury Institute, believes that retailers will focus on building better relationships across all touchpoints – brick-and-mortar, online and mobile. “In 2015, we're extremely optimistic that the economic conditions will force brands to get moving on building better client relationships rooted in personal interaction rather than impersonal algorithms,” Pedraza predicts.
Luxury businesses must find ways to engage their customers on more personal and intimate levels, at each and every interaction, especially for those that are done face-to-face. Human intelligence should be used to foster deeper and better relationships instead of over-relying on business analytics. For this to happen, organizational leaders must empower their frontline employees to perform effectively across all customer segments and channels in order to get personal, harness valuable customer insights and information, and ultimately win the loyalty of luxury customers.
Earn the Privilege to Communicate With Each Customer
Many luxury businesses squander opportunities to retain these costly-to-acquire customers, or worse, inadvertently drive them away. Part of the problem is that they continue to apply conventional approaches and technology to capture, analyze and use (or misuse) customer information.
Typically, customer contact information is collected after each in-store, online or phone transaction and stored in an organization’s customer relationship management (CRM) system. While this gives the organization a way to connect with customers, what’s typically missing is useful insight on these customers. For example, these organizations typically push products on their customers based on criteria such as their assumptions of the customer’s wants/likes and their predictions of the customer’s propensity to buy using a back-office algorithm. Yet having already been exhausted by traditional marketing efforts, such customers are unlikely to feel positive vibes about another organization wasting their time.
Marketing efforts are more potent when guided by customer insight. Such insights are discovered as a result of employees engaging more deeply with customers’ minds and hearts, at all points of interaction. There are always opportunities for engagement because customers tend to have a story to tell when they pay a premium for luxury. Each story is unique, interesting and uncovers insights on how best to service the individual customer and create value for them as well as the business.
The wealth of actionable insights and information will enlighten the company on how its luxury customers feel about its products, services, experiences, interactions, information, brand and organization. The company will also learn about its customers’ communication preferences, favorite channels, attitudes, current needs, future needs and purchased products, including why the customer purchased the product. When these actionable insights are captured and used appropriately, retailers can transform their ability to succeed in a luxury market. It will help retailers to better engage customers, improve and expand offerings, maximize sales, and, more importantly, retain these high net worth customers. For example, these insights can guide a company on how to earn the customer’s permission to provide ongoing communications on the topics, products and services that are relevant and useful to them. In turn, this helps to strengthen the customer’s relationship and loyalty.
Use Effective Technology Enablers
If the information that's so carefully collected by companies and their employees isn't stored so that it can be quickly accessed and used, then the information loses value and your employee’s efforts become futile. Traditionally, such information has been stored in either a CRM system or a customer service system. Then, on either a nightly or weekly basis, the information is extracted and aggregated into a data warehouse system where tasks such as predictive analytics are performed. Within the luxury marketplace, a customer-focused culture isn’t just about the information – a 360-degree view of the customer in real time is essential.
The latest generation of master data management (MDM) solutions can achieve this and are more capable, comprehensive, powerful and effective than traditional methods. In fact, MDM technology has evolved to the point where it's able to deliver a single, trusted view of customer, product and other data in a single seamless platform. It's easier to relate the product and customer objects to quickly achieve a 360-degree view. Other advantages of a MDM solution include a single user interface, high user adoption, lower cost of ownership, and easier maintenance and upgrades.
However, achieving a single, trusted view requires an organizational standard, system and process. As a first step, the organization gathers critical data on its customers, products and other domains. Frontline employees, for example, capture relevant information that they discover about each customer at all points of interaction. Next, the organization processes, consolidates and maintains a single, trusted version of this information throughout the business. This master data is accurate, reliable, trusted, relevant, consistent, unduplicated, up-to-date, complete, timely, secure and accessible.
Using accurate data, organizations can quickly and accurately identify actionable customer insights — e.g., products purchased, consumer sentiments and needs — and use this intelligence to market and sell to each individual customer. In addition, this insight can be employed to improve organizational learning to optimize the experience for each customer. The value to both parties is immeasurable and chances are you'll be well on your way to creating a meaningful and long-term relationship that can translate into increased revenue and loyalty.
Companies can strategically employ their customer and product information to create desirable and exclusive products while improving responsiveness relative to their customers. The foundation for winning and retaining luxury customers is leveraging a MDM solution to intelligently apply this highly valuable information.
Irene Nathan is director, North America, at Stibo Systems, a provider of multidomain MDM solutions. Irene can be reached at email@example.com.