Future of Luxury Brands
People Integrated x Mark Cross
Future of Luxury Brands
People Integrated x Mark Cross
Luxury as we observe it today is a climax in the timeline of events. In Engel & Völkers’ Insight Report, it is argued that “old luxury” is a thing of the past, and that people now want to be “emotionally touched by their experiences” along with maintaining strong ideals of sustainability, ethics and emotional connections. This emotional attachment does not only involve in-person store experiences, but also online shopping and inspirational searching. The consumer is looking for an individualized, seamless brand relationship, which the brands must be aware of. This is not to say that the “old luxury” brands are not still trending and doing well. Instead, the point is that the way of looking at luxury has changed. In the past, luxury products could be defined as luxurious simply because they are made out of something super expensive or rare, or because they were only accessible to the privileged few. Then, exclusivity was the most crucial attribute that defined what considered luxury. Today’s luxury consumers are keen to express who they are in terms of being ethical, social and environmentally conscious. Sustainability matters in where they spend their money, and they look for marketers of social and environmental awareness from the brands. This will be elaborated later in the article. In other words, luxury has become less about “what I have” and more about “who I am”. The table below highlights some of the differences between old and new luxury as described by Mckinsey, Bain and Deloitte in no particular order. The new luxury segment will be elaborated later in the article.
But it is interesting how tailormade engagement seems to be at the center of relevance with individualization, experience and self-fulfillment on the "new luxury" scoreboard. It underlines how your modern luxury consumer expect something special and special for them specifically. Rather than buying access to a certain personification they expect to highlight them individually through the purchase and related experience.
For this article we have collaborated with the luxury brand, Mark Cross and their CEO, Ulrik Garde Due.
Founded in 1845 as a saddlery in Boston, Mark Cross is the quintessential American luxury brand. With its rich heritage and an unparalleled commitment to the finest materials and craftsmanship, the company has been the go-to for generations of refined, global customers. Mark Cross rose to prominence in the early 20th century when its owners, Gerald and Sara Murphy moved the company to New York and expanded its range of products. With their deep connection to the arts, the Murphys established Mark Cross’ lasting identity as a luxury house informed by its community of creative contemporaries from Picasso to Fitzgerald, Hemmingway to Porter. In 1954, the brand became a household name through Alfred Hitchcock’s cinematic classic, “Rear Window” with Grace Kelly, where she carried the iconic Mark Cross Overnight Case. Mark Cross continues to champion this artistic legacy while maintaining a modern aesthetic.
"We need to deliver cross-platform experiences that are visual, engaging and shareable. With the rising tide of affluence, combined with the 24/7 social media engagement and online shopping, access to luxury has become more democratised."
The introduction of truly innovative services in-store and online demands a thorough rethinking of the entire sales process to provide a unique luxury shopping experience. New digital technologies can be used as an ideal way to familiarize consumers with the brand, to inform them about the products, the new trends and even the history of the brand. However, they have to be used in a way that fits the features, demands and codes of the luxury field to avoid confusion among already-existing customers and a downgrading in the quality perception of the brand. As a result, luxury companies will be able to keep and maintain the exclusiveness of their brand. In Mark Cross, this has led to the implementation of a new platform:
"Mark Cross debuted last fall a digital platform called “Hero” which sales associates can use to interact with customers digitally, giving associates a way to deliver personalised shopping experiences at a distance. Additionally a new service called “Toshi” was implemented beginning of 2021 that works to bring in-store services directly to consumers with a fully personalised delivery service."
"A digital chip is embedded inside the product which a smartphone can sense. Upon scanning the chip your phone takes you to the Mark Cross app where you can view the certificate of authenticity, information on the piece’s sustainability, proof of ownership and warranty. In a second-hand situation the ownership of the product can be transferred to the new owner"
Luxury brands are redesigning customer engagement techniques by using data analytics tools. Big data can help luxury brands to provide personalized and superior customer service through consumer segmentation, behavior and sentiment analysis and predictive analytics. According to Deloitte, several luxury brands are already taking advantage of these technologies, using AI-powered technologies, such as machine learning and analytics. They have implemented their own AI-powered chatbots and can sell products using targeted marketing, personalization, and timely automation.
What is the future of luxury?
The luxury market will continue to experience significant growth to accommodate this rising new class. This marked is dominated by Millennial HENRYs and Gen Z with high disposal income and are very prominent within the rising economies of the emerging markets. HENRYs can be any age, but the target audience for most brands is younger HENRYs because they have the potential to become brand advocates and spend more money on products in the future. This article will focus on the Millennial HENRYs, who are born between 1980-1997. While this HENRY demographic might not have as much savings accumulated, they are well on their way to becoming high-net worth consumers.
Meet today's HENRYs. They are mass affluent, the new middle-class customer and your future luxury customer. HENRY stands for high-earners-not-rich-yet. The HENRYs are young, highly educated professionals, engineers, artisans, designers, managers and entrepreneurs. The HENRYs have average to high incomes of more than $100,000, but remain below the ultra-affluent income levels of the top 2-3%, on which the luxury brands traditionally focus. However, they outnumber them as a group. They are digitally savvy, love online shopping and are big spenders. It is therefore important for luxury brands to look at their current strategy and make sure they are tailored and relevant for the new trends and consumers. In Mark Cross this has facilitated a new strategy:
"With the revitalisation of the Mark Cross brand we are within our Consumer Centric, Digital First Strategy Roadmap redefining what Luxury means to the HENRY’s in the 21st century. This new generation of consumers focuses on expressing their own individuality rather than ownership and it reverses the industry dynamic from aspiring to own brands to empowering people and their individual identities."
With HENRYs likely to become some of the wealthiest members of society, the potential benefits of onboarding this demographic to luxury brands’ product and service portfolio are twofold: securing valuable present customers and building client relationships and business with those most likely to be amongst the most affluent consumers in the future.
Credit: Engel & Völkers (2018), Meet HENRY: Influencing the Next Generation of Wealth, p. 04.
According to Engel & Völkers' Insight Report, luxury is not all about the price tag or exclusivity, as previously mentioned. When asked what makes a brand luxury, 80% of respondents said superior quality, 64% cited excellent reputation/word of mouth and only 47% said premium price. When it comes to purchasing, the biggest influence for HENRYs is familiarity with the brand, while reputation for quality came in as a close second. As HENRYs are a critically important customer segment, loyalty could be built by endorsing their core values, such as authenticity, reliability, commitment to doing the right thing, and following sustainable practices. Consequently, brands have started to deliberately focus on values shared by the aspirational demographic. The CEO of Mark Cross sees this tendency as well:
"Having launched in fall 2019, Mark Cross was one of the first Luxury Brands to offer a brand-owned vintage platform for consumers. In recent years, we have seen major growth in second-hand luxury sales amongst 3rd party sites and saw this as a missed opportunity, when there is the option to keep resale in-house, which in return will allow brands to control the inherent value of their pieces. It has also allowed us to attract the millennial HENRY target audience who can buy an authentic Mark Cross pieces at an entry price point. It is not only about the appealing aesthetic of a vintage piece, but also the sustainable and circular ecosystem that supports second-hand retail."
Credit: Deloitte (2019): Global Powers of Luxury Goods 2019: Bridging the gap between old and new: p. 7.
The new luxury customer is present and increasingly active, dramatically rewriting the rulebook of the industry. Clients are morphing from a mere audience to luxury brands, to critical center-stage actors who want to interact, converse, share, observe and judge brands. Brands will need to connect with customers in an increasingly personal way and pivot to a new model to respond to customers’ evolving needs when it comes to buying, consuming or communicating. The products, experiences and ideas that they deliver will need to flow together to appeal to the emotions of younger customers, who are diverse, global and opinionated. The pace of innovation is already rapid, but new models of consumption, evolving channels and changing customer desires will spur the need for even faster adaptation.
Marketing to the new HENRY demographic
As we have already discussed, the digital universe is growing and a brand’s digital presence is crucial. This is also the case when talking about HENRYs. For them, social presence is key. Most of them use multiple platforms, multipe times a day. According to Engel & Völkers, 79% of HENRYs use Facebook, 73% use Youtube and 67% use Instagram. It is therefore very important to have updated social media profiles that are consistent with the brand and the storytelling. By doing so, the HENRYs have constant access to information about the brand and are able to make decisions that are in agreement with their life choices, such as sustainability and quality. Engel & Völkers found that millenialls say they like to research before they buy something, and 69% use their phones to read reviews of a certain product or brand. On top of this, 33% of millennials prefer to read blog posts before they buy versus less than 3% who prefer traditional forms of advertising – like TV and magazines.
Furthermore, two-thirds of HENRYs follow influencers on social media and 84% of them agree to having been impacted by an influencer to make a purchase. These influencers can be topic experts, celebrities, politicians, etc., and on global, national and local levels. Authenticity matters, as HENRYs are not apt to make a purchase from a person or brand they do not trust. The two largest aspects of influencers according to HENRYs is the quality of followers (50%) and that they are referenced by other influencers (41%). Millennial HENRYs have watched social media evolve, and in some cases, take over people’s lives. They represent the first generation of personal branding, which becomes essential for every brand to take into consideration in marketing and e-commerce strategies.
"Masstige"
With the HENRYs’ demands and wishes, Harvard Business Review has written about “new-luxury goods” and the term “Masstige”. Masstige brands are part of the mass-market segment due to their price positioning and availability, but still have a prestige feel. These goods occupy a sweet spot between mass and class. While commanding a premium over conventional products, they are priced well below super premium or old-luxury goods. They evoke and engage consumers’ emotions while feeding their aspirations for a better life, even when addressing basic necessities. These products can be anything from home furnishings, appliances, electronics, to food, apparel, shoes and toys. As consumers shop more selectively, as seen with the HENRYs, the categories new-luxury goods occupy tend to polarize. Consumers tend to trade up to the premium product in categories that are important to them but trade down or even going without in categories that are less meaningful to them. This leaves the mid-priced items out in the cold and are what Harvard Business Review calls “Death in the middle”. These companies are unable to match the prices of low-cost products or promise the emotional engagement of new-luxury goods. Masstige products have great potential, but can be attacked by products that offer similar benefits at a lower price or by premium products that deliver a great number of genuine benefits for a small price increment. No customer wants to be average and today, in most instances, no customer has to be. For those brands that have seriously invested in deep customer insight and committed to a “treat different customers differently” strategy, there is no place for unremarkable competitors to hide. Good enough no longer is.
Conclusion
Consumers have always had a love affair with products, but today they have more money, a greater desire to examine their emotional side, a wide variety of choices in goods and services, and less guilt about spending. They seek goods that make positive statements about who they are and what they would like to be and that help them manage the stress of everyday life. With the rise of the new consumers, HENRYs, who are digitally savvy, love to shop and are very conscious about sustainability, quality and reputation, it is important for luxury brands to look into their own agenda and the storytelling of the brand. Technology is disrupting all industries and its greatest impact on the luxury market is the rise of e-commerce and ultimately the need for brands to operate an omni-channel strategy. The personalized experience the consumers are used to getting in-store must be converted to digital arenas and must support the brand’s story and reputation, in order to ensure a cohesive experience for the shopper. There is a rise in the number of online purchases, as well as consumers who conduct research online, but purchase in-store. To ensure the best use and feedback, the brand should look into using their digital strategy and quality of products and brand as a common denominator when creating content. Content to control the brand story in a given moment and channel. In other words, content is king.
People Integrated see these tendencies through our work with executive search where demands for in-house competencies to control content in all aspects and the versioning needed across consumer touch points are on the rise. Accepting the fact that digital readiness equals designated digital competencies is nothing new. However the fact that all peers and affected departments must share the digital offset and hold a certain level of understanding, adds stress to the more conventional and analogue functions as well.
Today, when supporting luxury brand business leaders, structured communication is key. As the world of luxury changes with increasing speed, the need for a dynamic approach to governance amongst your board of directors follow. Concerns on how to adapt fast enough and secure the execution are common and must be seen as real threats in need of attention.
We see a tendency that luxury brands and brands with a strong brand identity and presence are more attractive and are positioned stronger on the market - especially digital presence. The brands doing well are those that have a dedicated brand focus in all they do and do not give in to quick commercial wins.
