• by Thomas Sychterz , Columnist, December 9, 2016

Millennial shoppers wield an ever-increasing share of the dollars that are spent in the luxury market. Professionals have been looking for new ways to market their brands to these elusive customers in the hope of growing their customer base — all while conserving the exclusivity and prestige of their brands. How can luxury brands continue to build intimate relationships with their clients and brand ambassadors as they always have, but at a scale that generates a healthier bottom line?

In traditional non-digital forms of advertising, the first step in building a campaign is to understand exactly who your target customers are. Today, this is particularly challenging, as there has never been a generation as fragmented as Millennials — culturally, economically and socially. Some are still living at home and attending college, whereas others have already begun a career and have children. However, digital channels offer solutions to this problem.

New generation marketing tools allow companies to build brand communities that enable them to understand this large group in all its depth and complexity. Sentiment analysis, live chats and interactive dashboards built into community management tools let brand managers start a conversation with fans to get to know them, all while extracting insights from these conversations. This means brands can go from only having a vague idea of who they’re engaging with to building a precise profile, over time, of their customers and fans — as varied as they might be all while generating insight that can guide business and marketing decisions.

Another difference with this group of newly affluent consumers is that they expect relationships to be just that — not a one-way street, but a real dialog. Luxury brands already know how to talk, but some still need to learn how to listen. Examples of closed, brand-controlled environments exist in the luxury sector, and these communities have been used to drive word-of-mouth marketing, sales and product development.

Nordstrom, the Seattle-based luxury goods e-retailer, has taken this to the next level. The community management team at the popular e-commerce site decided to create an invite-only community on Reddit, the popular social news and discussion website. The site has a reputation for discussions that can be somewhat heated and sometimes downright negative.

Joining this kind of platform carries risk — Nordstrom made a bet that they would be able to control the conversation by creating a private community and embracing members’ opinions. This has been paying off ever since, with Nordstrom spokesman Dan Evans stating, “We continue to learn more about Reddit and what our customers want to hear from us, but so far the response has been favorable.

This example highlights the opportunities and risks that community building represent — the larger and more open the community is, the larger the reward can be — but also the larger the risk that customers will be too negative and vocal. However, brand managers must seize the opportunity while they can, or run the risk of a non-sanctioned brand community forming somewhere else.

Editor's note: This article originally appeared on Sept. 28, 2016, in Engage:Affluent.