The Luxury Institute has issued The Wealth Report, which looks into the state of the luxury sector.
We have picked out some of the report’s key points and if you want to read the whole thing, please click here to download a PDF. International readers should be aware that the report has a US bias, but its conclusions could apply to any market.
Retail Gets Rocky
The holiday shopping season turns out to be a dismal one for most retailers, but those courting the wealthiest luxury consumers manage to fare slightly better. Saks, with its sharpened focus on luxury, defied expectations for a -2.5% decline, managing to post a 0.8% gain. Getting even more exclusive, Neiman Marcus (combined with Bergdorf Goodman) reported comparable sales rising 2.9 % from December 2006.
Generally for retailers, the more exclusive their clientele, the happier was their holiday shopping season, since the truly rich are truly different and do not need to throttle back on spending during down times the way that the merely affluent and borderline rich do.
During boom times, luxury retailers can tap into a widening pool of potential customers and enjoy spectacular sales growth. But these new and often less wealthy customers can leave as quickly as they arrived when the macroeconomic environment turns less hospitable. However, a deep bond with the wealthiest consumers strengthens brands and buffers against economic weakness.
The need to maintain or acquire bona fide luxury brand status should take on a new urgency in this environment.
Rules of Customer Engagement
Wealthier consumers will continue to be more resilient in their spending on brands that connect with them on an emotional level for their quality, associated prestige, and outstanding customer service. Particularly during challenging times, luxury firms need to reinforce their message of providing customers with a premium product with flawless service and consistently delivering the luxury “experience.”
Failure to do so could begin a sometimes irreversible decline in brand image if firms give in to the temptation to try to make up in volume what they lose in the way of price premium and go downmarket.
Discretion and security with customer data and a consistent experience across all sales channels go a long way toward building trust and loyalty with wealthy consumers. Making refunds and returns speedy and easy is also helpful; so is quickly resolving customer problems to their complete satisfaction. In fact, 91% of wealthy consumers say that a positive problem resolution experience will increase their loyalty to the company, and 82% say they would be more inclined to recommend
the brand to people they care about.
Customer Data Best Practices
Data collection and management practices may seem rather pedestrian considerations for companies selling nuanced concepts like image and experience, but this is where wealthy consumers voice their strongest concerns and where great damage can be done.
On a 0-10 scale, the wealthy assign an average importance level of 9.12 to companies not sharing customer data with outside parties without the customer’s permission. This is even more important (9.36) for women, who also are more demanding (8.93 vs. 8.65 for men) that luxury firms protect all of their information with the best data security.
Wealthy customers do not mind that firms collect their data; in fact, they encourage it if it is used to improve their experience. So what types of personal data are considered legitimate to collect? Eighty per cent of wealthy consumers say that companies should store product and service preferences to provide better service, a preference more pronounced (83%) among those with annual incomes less than $200,000 a year.
Two-thirds of the wealthy encourage companies to record their purchase history; 73% of those who earn more than $300,000 encourage it.
Problem Resolution Best Practices
Almost as important as not sharing personal information without permission is that companies take care of problems fast and free of charge. With an importance rating of 9.21 for women and 8.88 for men, resolving problems without asking the customer to dip back into his pocket is another standout quality for a luxury firm.
Quick and easy resolution (9.00) rates almost as highly, and particularly so with women (9.22). And forget rigid rules. Customers demand individual attention and are not interested in hearing how company policies and procedures get in the
way of their satisfaction.
Problems present luxury firms with opportunities to develop closer relationships with their customers, and thus the human elements of problem resolution should not be overlooked.
Nordstrom stands out as a luxury firm that excels at solving problems. In an unaided mention, 34 of 832 respondents name the Seattle-based retailer as the business providing them with the best problem resolution experience in the luxury goods industry. Rolex earns 18 mentions, while Hilton, Neiman Marcus, and Ritz Carlton each receive nine; Coach is mentioned eight times, Lexus seven.
In luxury services, American Express receives top marks for deftly solving problems with 19 mentions. Citibank and its Smith Barney division earn a combined 14 mentions from respondents; Merrill Lynch had its name called 10 times, Bank of America and Fidelity six times.
Returns and Refunds Best Practices
Related to speedy and free problem resolutions, and just behind it in importance, is a hassle-free return policy. Wealthy consumers say it is important (8.95) that returns be fast, easy and convenient, that products are taken back without question (8.70), and that companies allow product returns via all contact points, regardless of the channel through which the product was originally purchased (8.46).
Nordstrom stands head-and-shoulders above its rivals for having customer-friendly return policies. More than 8.1% of wealthy respondents (68 out of 832) name Nordstrom as the brand with the best return/refund experience in the luxury goods space.
Macy’s earns 10 mentions from wealthy consumers for a distant second-place finish, and Costco pulls down seven mentions as a luxury goods seller with great return experiences. American Express and Bank of America are recognized leaders in refund
and return experiences among luxury services providers.
Returns and refunds are another area where luxury firms have a chance to shine for their customers. Eighty-nine percent of wealthy consumers say that a positive return/refund experience will boost their loyalty to the brand; 83 percent say it will make them more likely to recommend the brand to people they care about. Draconian return policies do more than turn off customers; they drive them away.
Sales Best Practices
In sales practices, consistency is what counts. Wealthy consumers assign high importance (8.29) to products, services, and policies being consistent across all sales channels. For example, they do not want to sacrifice the service or selection of a store when shopping online.
This is especially important to women, wealthy baby boomers between 45 and 55, and those with lower income and net worth. Just behind consistency in importance (8.26 rating) is providing a full disclosure of relevant facts so customers can make informed purchase decisions. Product and service customisation is less important (7.37), especially among younger wealthy
consumers.
January 19, 2008 at 6:49 pm |
[...] Yi Tin Chak wrote an interesting post today onHere’s a quick excerptThe Luxury Institute has issued The Wealth Report, which looks into the state of the luxury sector. We have picked out some of the report’s key points and if you want to read the whole thing, please click here to download a PDF. … [...]