When luxury brands fail to provide more than just luxury, they confine their customers to the wealthiest 1%. This strategy focusing solely on exclusivity and inordinately high prices is becoming less viable as the consumer demand continues to evolve. In 2008, when the United States was struck by a huge recession, many consumers were awoken from their brand-obsessive daze and forced to pay attention to the true value of their purchase. The Wall Street Journal supposes that today, even the wealthiest are getting tired of high prices. So what can luxury brand owners and managers do?
Instead of hiking up prices to account for lost customers and assuming the ultra-rich will continue purchasing, these high-end brands should first focus on widening their target audience; This way they can capture those in the middle-upper class who value a brand and have enough funds to purchase say a Versace wristlet, but maybe not the Palazzo tote. A few big name designers have already begun to do this by producing additional lines of product that are more affordable. For example Michael by Michael Kors and Marc by Marc Jacobs. Back in 1997, Tiffany & Co. accomplished this by beginning a line of silver jewelry called Return to Tiffany that middle class shoppers could purchase for just over $100. This product and pricing decision earned Tiffany a 67% increase in sales from 1997 to 2002, as well as a two-fold increase in earnings from $72.8 million to $189.9 million. The only problem with this was a threat to their reputation for luxury. As teens began to crowd their stores, managers feared the perceived quality of their products would decline and they would begin to lose their top customers who once enjoyed being one of only 10 who strolled along Park Avenue with a Tiffany ring. To preserve their brand, Tiffany increased prices, later experiencing an expected fall in sales. So how have they found balance today and how are other successful high-end brands preserving their luxury factor while maintaining high sales?
The answers extend much further than pricing. Consumers, wealthy or not, are now demanding more than just price and product information; they want value, a story, and an experience.
On one side we look at physical retail stores. With shifting values, “brands now must find a way to communicate their lifestyle stance through the physical environment,” says Tammy Smulders, managing partner at LuxHub UK. Luxury brands can do this using nothing other than our good friend, technology. In 2014, Marc Jacobs opened a pop-up shop for three days to promote his bestselling line of perfume, Daisy. Instead of paying with cash or a card, Jacobs asked customers to pay in tweets and instas. Through this promotion Jacobs was able to thank his customers and gain new ones. In London, Burberry has designed a physical, online shop. “Walking through the doors is just like walking into the website,” says former CEO, Angela Ahrendts. Throughout the store are interactive screens and other digital displays to engage shoppers. A technologically advanced store attracts both the young aspirants and the wealthy.
On the other end, it is important to focus on the online realm as well. In fact, a survey conducted by Google and Unity Marketing in 2008 showed that wealthy online shoppers spend more money than wealthy in-store shoppers ($114,632 against $23,000). Additionally, the net worth of online shoppers is much higher than that of in-store buyers. Ahrendts caught onto this trend of online shopping along with the rising power of millennials and capitalized on it. She sought opportunity in reaching millennials and revamped Burberry’s online presence by adding a multi-media experience to their website. “The result was a brand that Gen Y could align with, even though a record 21.6 million of them were living at home in 2012, as Pew Research found, or saddled with student loan debt,” says Jill Kransy. In 2012, the luxury brand’s sales doubled and stocks boosted. Other brands that once exclusively sold their items in retail stores now utilize the web as well, such as Dior, Prada, and Louis Vuitton.
The superior reputation of a highly exclusive brand is no longer sufficient to keep a company afloat in our dynamic marketplace. Consumers are looking for something extra; some sort of value. For luxury brands, it’s a balancing act.
This article was syndicated from Business 2 Community: Luxury Goods for the Non-Luxurious
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