CONSUMERS’ ‘BACK TO BASICS’ FORCES LUXURY BRANDS TO CHANGE

High ends luxury brands have boomed over the past 20 years with seemingly nothing to stop their mega-growth. These brands understood this recession would have an impact, but were they prepared to reinvent themselves to play on a new game board with a new deck of cards? They were accustomed to making the rules and playing by their playbook. Now they must adapt to understand the consumer is defining the game with their own rules of engagement.

Over the past decade, luxury marketers have invested millions to grow customer base through expanding their retail store network and creating differentiated product lines to capture increase share of existing customers’ wallets and to appeal to younger, new customers. Most successfully increased their audience and frequency of purchase cycle amongst existing heavy owners. And the growth invigorated and motivated corporate executives to continue on the mission to expand and capitalize.  But, no one had a crystal ball.

In 2009, the gears of luxury goods growth are grinding, with sales declines in major double digits: Tiffany: (-16%), Richemont (parent to Cartier and Montblanc): (–16%), Saks: (–15%), Neiman: (–23%), Swiss watch exports to US: (–40%).

Executives are strategizing quickly for ideas to stimulate sales, gain share of market, and how to weather the storm of the American recessionary crisis.  They are looking to growth in overseas markets and a plan for surviving in America.

Meanwhile the American woman, who is acting CFO of her family, is more critical than ever about her purchases as her concerns about the economy, unemployment, our nation’s deficit, and the future for her children are growing daily. Female consumers influence 85% of all purchase decisions and are responsible for $7 trillion in spending. Purchases that seem frivolous are clashing with her concerns. The luxury goods consumer may be less enamored with her Jimmy Choo shoes, LV bags, David Yurman jewelry, Cartier watches, and large carat diamonds and gemstones.

Luxury brand marketers get flexible and ready to play her way. Be ready to clearly define and refine your marketing strategy to survive, and be ready for the rebound!

Define Your Brand’s Core Consumer Communication Message:

• What won’t matter any longer is your history and heritage – that’s a given but not a reason to call her to action. Brands that have long established histories of craftsmanship and heritage are realizing that is just not enough of a reason to gain her shrinking disposable income. Resting on the past is a sure way to stay successful in the past.
• The price-value ratio is more important to her than ever.  If you have a premium product, find a simple communication message justifying your retail price. Why is it I should spend more for your brand? What is it you will deliver to me in this purchase? Why do my family or I deserve it? Whether it is design superiority that speaks to her heart, or lasting materials that will never wear with time.
• Superior Customer Service must be your brand’s everyday working philosophy.  Treat her with appreciation for her past loyalty/ purchases.  Offer her special value offers on VIP in-store events, gift with purchase. Or simply thank her for her loyalty via email or letter. Offer her advice regarding style and design choices, industry trend information, etc.  Use this general industry content on your website as your service. Ask for her opinions and assure she is pleased with the service she received during the purchase process. I call it “CSS” or “Customer Service Squared.” Essentially whatever you have been doing step it up! Get everyone in your company to think about the final end consumer of your goods. How do you answer emails? How do you train sales people who deal with the end consumer? What feedback do you get through your website?  How do you reply? And who manages this in your company? It cannot be an admin assistant. Executives get involved now.
• To craft the right message, you must know your core customer in greater detail than ever. Engage her and speak to her with a message that resonates at this time. She is playing her game and will still want products in her life that make her feel good. Be sure she feels your brand fits her now. Do your research and don’t assume her attitudes today are the same as they were a year ago. Keep delving deeper into your research. Use your website and social media sites to engage with her and hear what is on her mind.
• Define your pro-social, philanthropic donations as it relates to her purchase. Gone is the day that companies need to keep every margin point or turn it back to a retail partner. Today it is about saying as a brand and corporation that you believe in the need to give back to a cause that makes sense. If your product is related to children or targets women of childbearing age/inclination, a children’s charity makes sense. Be sure that you explain why that cause was selected and meaningful to your brand. Make it personal and real or she will perceive that it is meant to just sell a product. Dawn and their donation to Wildlife preservation is gaining attention in grocery stores. The Cartier Love Bracelet has raised $4.5 million for 24 global charities.

Communication Vehicles for The Message:

• Multi- Platform Programs that are creative and out of the box, taking your media plans beyond traditional advertising vehicles is critical today.
• Selecting the right platform means you know where to reach her. Research her habits, talk to her friends and know where she plays.
• Your message must extend to your website, online tactical plans, social media consistency messaging, screening what consumers speak about your brand, and always measuring ROI on these activities.
• Assign your internal Brand Manager or internal PR manager to be your key “Brand Blogger” – this person needs to dedicate time everyday to sending content to your social media sites, updates to your website (be sure you have an admin feature to your website!)

Deliver the Promise with Your Products:

• How many times has a CEO blamed the marketing message or marketing plan when a product lacked the anticipated sales results? And marketing professionals defended with stats and ROI analyses and the “if I only had more budget.”
• In the words of the watch world’s iconic business mogul Mr. Nicholas Hayek Sr., “Great brands start with product and end with product and every step in the success of a brand is the product.”
• If the product in its design, quality and experience does not hold up to the promise of the messaging, you wasted a lot of time and money. And that customer will never be back. Be sure the most important relationship in your company exists between EVP of product development and marketing CMO. It is never too early for that partnership to assure the messaging and delivery of product meet expectations.
• Consider in this economy a “sub” brand or “mini” brand.  Make it available at the same channels of trade, a new product line that “fits” your brand DNA but also can be seen as an appropriate giftable price point. See Coach Poppy collection. Editors at a recent event of top luxury fashion magazines were looking for products under $100. One major publication is assuring that products in their gift guide will offer a discount on one key item to their readership.  Products should be related but new and have the ability to tap into a younger demographic. Jewelry brands think cell phone charms and women’s accessories. Leather brands; think small wallets and Kindle Covers.

Stay focused and consistent. Integrate your marketing team into the solutions.  The focused navigators, those that have the inherent strength to be flexible and adaptable, will be the lux brands of today and tomorrow.

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CONSUMERS’ ‘BACK TO BASICS’ FORCES LUXURY BRANDS TO CHANGE