Perhaps the rich are different…but in many ways companies targeting the wealthiest consumers aren’t that different from those marketing to a mass audience. The predictions we’re making for luxury firms aren’t really all that distinct from those for consumer merchants at large.
* Hola, amigos! Innovative luxury goods and services firms are finally beginning to realize that Hispanics, along with African-Americans and Asian-Americans, now make up profitable demographic segments of the wealthy consumer population. Wealthy actors, athletes, and entertainers from minority groups are the most conspicuous consumers of luxury goods (think Jay-Z and Cristal champagne, which he’s now boycotting), but in actuality most wealthy nonwhites are conservative entrepreneurs, executives, and professionals. As “new” money, they’re eager to consume and experience top luxury brands–and they expect genuinely friendly customer service.
The savvy luxury marketers will not only embrace these consumers on their own terms, but they will also begin tap their authentic (not stereotyped) cultural roots for new product and service lines that will generate loyalty, affinity, and profits. Ethnically inspired luxury goods and other initiatives geared toward minority segments are bound to have crossover appeal among mainstream wealthy and international consumers as well.
* Delusional “diffusionals.” The true luxury fashion brands that want to retain their upscale status in the minds of wealthy consumers will retreat from–or avoid all together–leveraging their prestigious names to launch second-tier or diffusional lines. It’s delusional to think that luxury firms can pursue a move down-market without losing their standing among their best customers.
* Capital investments. Many luxury brands are starting to look tired and old-fashioned due to a lack of investment. Stay at some of the world’s finest luxury hotels, test-drive the foremost luxury automobiles, buy a new pair of shoes from the best craftsmen, and you will find old, tired brands that need major reinvestment in facilities, models, and products. Today luxury brands must deliver the most up-to-date technology, modern design, all with the greatest of comfort and style. Look for the best hotels to upgrade to high-definition, flat-screen TVs. Look for service providers such as wealth managers to stay on top provide the best security and convenience to their tech-savvy, wealthy customer base.
* Luxury in cyberspace. The celebrated sites of Web 2.0–MySpace, Yelp, Facebook, YouTube–are primarily for the young and restless (and careless) who have nothing to lose. In 2007, Internet entrepreneurs will realize that mature, affluent consumers want to benefit from peer-to-peer affinity communities too. Many of the community sites for wealthy consumers will be subscription- and membership-based–essentially online, commercial-free “gated” communities. And in terms of reaching upscale consumers, the emphasis will continue to shift from traditional media such as broadcast television and print magazines to emerging venues such as video-on-demand and satellite radio in addition to online communities.
* CRM experience. Luxury firms should have been among the first to use sophisticated technological and analytical tools to surgically target and customize offers for their clients. So far, however, most luxury goods and services firms get an “F” in customer relationship management. A shocking number even fail to execute on easy lay-ups such as a well-targeted and measured referral program. It doesn’t help that most firms lack strong marketing departments and even appropriately skilled quantitative and analytical staff to create such programs. Having understood the power of optimizing customer experience in the creative and artistic sense, luxury marketers will begin to develop the personnel, analytics, and data management skills as well as the testing and learning methodologies required to operate a highly adaptive, customized marketing and selling operation. It will be a very difficult transformation to this level of business intelligence, but it will happen with quickening frequency in 2007.
Milton Pedraza is CEO of the Luxury Institute, a New York-based ratings and research institution that focuses solely on the top 10% of America’s wealthy.
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