Luxury Marketers Can Transit From Instinct To Info-based Decision-making

by Richard Baker , March 3, 2009

Marketers of goods and services for high-net-worth households (top 2% income, 1% of assets) have historically operated on the instinct of their founders or designers. But as the economy presents new challenges, as competition increases, and as leading competitors become publicly owned, reliable information and systematic decision-making processes are required.

One approach is Lifestyle Marketing, the strategy of appealing to the pattern of underlying values (personal drivers) and tangible benefits (attributes) that create harmony in a target Life Style segment. The Lifestyle Marketing process involves a series of nine steps, the first four of which are summarized here.

1. Defining the lifestyle of the target consumer

Lifestyle is a better tool statistically for segmenting affluent consumers than everything except gender. It is more likely than age, income, education, zip code, etc., to predict what affluent people will do and why. Targeting a Lifestyle, rather than a demographic, provides a more detailed definition of the best prospect, how many, why they buy and specifics about how to reach them.

2. Project the desired results

Lifestyle segments are statistically projectable to the affluent U.S. population, especially the hard-to-measure top 5%. If a brand has a goal of achieving a certain share of market at a certain price point, it can break that into shares of specific Lifestyle segments. This step allows the development of budgets, projecting marketing ROI, etc., to form the basis for making decisions about advertising, communications, distribution, channel support, and the other tactics in the marketing mix.

3. Positioning

Lifestyle segments have clear priorities regarding which values (personal drivers) they are interested in satisfying. Some luxury brands refer to priorities as "passions." A brand can compare alternative positioning within a Lifestyle segment to determine which of the high priority drivers (passions) it can be most competitive and successful in satisfying. For example, Lexus focused on satisfying the personal drivers associated with "practical" and "avoiding social discomfort" whereas BMW competes on "makes me feel good" and "performs as intended."

4. Product and service differentiators

After deciding on the personal drivers, the marketer must decide which tangible product and service attributes provide proof that the needs will be satisfied. Again, the importance of these attributes varies by Lifestyle. This step would be very important in marketing any activity, such as travel, which has a cultural aspect. For example, each Lifestyle places a different priority regarding the relative importance of culturally related activities when traveling.

5. Developing an integrated multi-channel strategy

Today most consumers, even the most affluent, shop multiple channels. But luxury brands are often tentative about developing multi-channel strategies. There is a concern that marketing in the more direct channels (catalog, internet, direct sales, etc.) will create confusion or lower the perceived prestige of the brand.

6. Word of mouth

Recommendations from peers and family are the greatest influence on all Lifestyles. The principle communication question, then, is "how to create positive word of mouth." The answer varies by Lifestyle with some more influenced by publicity and editorial than by advertising.

7. Relationship building

Many premium brands are already shifting more money into "non-traditional" modes that emphasize creating links with many aspects of an affluent consumer's life. For example with non-profit organizations the affluent cares about. Involvement with these organizations (we call it "social networking") creates access and intimacy.

8. Personalization

Lifestyle Marketing provides real personalization in direct marketing. Customers in a ZIP plus four do not have the same motives for consumption. (We say ZIP is worth zilch: Birds of a feather do not flock together.). Marketers need a database, which identifies the Lifestyle of each individual household in the most affluent areas to target messages to the personal drivers and preferred attributes of each recipient.

9. Alignment

Finally, after a Lifestyle Marketing strategy is developed, the marketer can check to ensure that there is alignment of all elements in the marketing process. Only a research-based framework can guide decisions at each step of the marketing process.

Editor's note: If you'd like to contribute to this newsletter, contact Nina Lentini.

commentary, retail

3 comments about "Luxury Marketers Can Transit From Instinct To Info-based Decision-making".

Check to receive email when comments are posted.

Timothy Miller from GrandLuxe Registry Magazine, March 3, 2009 at 9:16 a.m.
Applying the nine steps, how or what would you implement in an advertising/marketing plan for a local based jewelry retailer of premium brands? Especially being budget conscience at this time. What methods would you recommend in reaching the luxury consumer now and why?
Reply

Paula Lynn from Who Else Unlimited, March 3, 2009 at 10:26 a.m.

High end fashion is a passion. Cars, homes, furnishings and whatever else is a fashion statement, not that there is anything wrong with that. 2 things I have specifically noticed over the last few years that have changed. One is that prices have just about doubled for luxury brands (Chanel is a luxury brand; Coach is label and not a luxury brand.) The other other is that the lower ends have been catching up in style and to a degree, quality. ---My favorite are products with no labels and mixing-----Outside of any conspicuous consumption momentum - yeah, yeah, yeah - there is an actual consumption cutback financially rather than outward appearances along with those who would have spent the extra $1500 on a handbag but not $2200 - sales, like magic, disappear. The very tippy top, asking how much is more like a style than a necessity...4 carats, 6 carats, what's the dif?

Evan Brownstein from Bright Monkey Marketing, March 3, 2009 at 12:47 p.m.

It is more important than ever for luxury brands to communicate consistently a unique image and experience through all touchpoints. Mr. Baker very astutely touches on many of them (integrated multi-channel advertising, word-of-mouth, social networking, et al).

But today's luxury customers are more knowledgeable and get that than knowledge from more sources than ever. A luxury brand must enagage in conversations in new and ever more challenging environments. No one wants to drive a $150,000 car from a bankrupt auto company. So we must help our brands navigate the financial media (online and offline) in unprecedented ways. A woman may not want to wear a $10,000 gown or $200,000 necklace she saw on an actress who was photographed endangering the welfare of her children. So we must be more fluent than ever in the conversations being conducted in the world of strategic celebrity and event alliances.

With more luxury customers more knowledgeable than ever, but less likely to spend than any time in decades, the dominant trend (in addition to the quest for memorable, unique experiences) seems to be the sustained rise of connoisseurship. So it is increasingly important for luxury brands to cultivate connoisseurs and create environments for connoisseur conversations.

All customers, including luxury customers, are increasingly discerning about when and where they will spend. No brand can merely communicate "buy now" (however creatively, apologies to Crispin Porter) then simply measure the effectiveness by how many sales they make.

What we can do is create a conversation with potential customers and encourage them to converse amongst themselves about our brands so that they are aware of us and positively predisposed to buy/use us at the moment they decide to buy. At Smart Monkey Marketing, this is called the Inspire Desire philosophy. www.smartmonkeymktg.com

Fortunately for luxury brands, we knew how to do this long before the current economic environment presented new challenges, because this has always been the case for luxury brands. People spend $200,000 for a necklace or $10,000 for a dress when they are ready to buy. We have never been "buy now" brands. We have always endeavored to be the brands which our desired customers are thinking of and predisposed toward on the day they buy.

But it used to be enough that the brand promise and the brand experience (in store, with the goods, all brand ambassadors within and external to the brand, et al) had to communicate consistently a certain image. For example, You Feel Like and are Treated Like Royalty with Harry Winston or You are the Star of a Romantic Fantasy with Tiffany.

Now, with luxury customers' increasing use of research and consumer-to-consumer communication tools online and via word of mouth, there are more connoisseurs than ever. But they are less likely to spend given today's economy and the societal driver to consume less conspicuously.

This community of connoiseurs is hungry to learn, and wants to be educated, in a sophisticated fashion, about what constitutes the best. One-to-one, personalized, high-touch, highly customized marketing which demonstrates understanding of their needs, wants and values is imperative at all brand communication touchpoints (advertising, word-of-mouth, events, store experience, strategic alliances with celebrities, et al).

In order for a luxury brand to succeed today, they need a marketing and communications partner who is proven fluent in the language of luxury as it is being spoken in traditional venues (print, TV, celebrity and event strategic alliances, etc.) as well as new, uncharted venues (financial media, experiential, social networks, online, innovative forms of branded content). Luxury brands neeed someone who both knows their world and is intimately able to engage customers in conversations to attract them in to that world.

Hope this is useful.

Cheers,
Evan Brownstein
Partner
www.smartmonkeymktg.com