Growing the Brand While Protecting its Value: Five Strategies 2017 KRAUSE
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1 L U X U R Y R E P O R T Growing the Brand While Protecting its Value: Five Strategies
2 projected growth 1% The of luxury brands globally in 2016.* *Bain & Company 1%
3 Why do luxury brands have a hard time achieving real growth? Luxury goods have long been held captive by a simple economic principle: the smaller the supply, the greater the demand. Thus the great paradox of growing a luxury brand. To grow, one must increase supply, which in turn lowers the value of the brand.
4 INTRODUCTION EDGE TARGETING OMNI-CHANNEL EMERGING MARKETS EXPERIENCES OVER THINGS GIFTS OVER INDULGENCES CLOSING So, can luxury brands maintain their value and grow at the same time? We believe they can. Here are five strategies for making it happen.
5 STRATEGY # 1 EDGE TARGETING Many brands discover their sweet spot is found right on the edge of multiple consumer segments. With slight tweaks in their targeting, these brands can easily broaden their overall customer base, and in some cases even reach a more affluent audience than before.
6 Custom Ultra High-End Graff William Goldberg Super Premium Patek Philippe Harry Winston Hermès For example, with the right strategy a Super Premium brand could edge its way into Premium or Ultra High-End consumer groups without doing any harm to its value. Premium Cartier Rolex Louis Vuitton Accessible Luxury Coach James Avery Montblanc Gucci
7 INTRODUCTION EDGE TARGETING OMNI-CHANNEL EMERGING MARKETS EXPERIENCES OVER THINGS GIFTS OVER INDULGENCES CLOSING Who s your HENRY? (High Earners Not Rich Yet) At the edge of every established luxury audience, you ll find a younger segment aspiring to move up. And while they may be new to the category, according to Luxury Society this is an audience worth focusing on. With their high disposable incomes, highly driven attitudes and a desire to spend on exclusive products and the best experiences, the (HENRY) demographic is driving luxury brands to expand their offerings and boost the service that they provide. * *Luxury Society
8 Brands with the ability to create new products that extend naturally out of the core product line and brand heritage. Who can this work for? Brands with the ability to add custom or bespoke services to their existing offerings. Local or regional brands with untapped look-alike customer groups in similar locations.
9 INTRODUCTION EDGE TARGETING OMNI-CHANNEL EMERGING MARKETS EXPERIENCES OVER THINGS GIFTS OVER INDULGENCES CLOSING EXAMPLE William Goldberg is one of the world s top manufacturers of high-end diamond jewelry, but had low brand awareness outside of its aging audience of core loyalists. Krause developed a social media outreach strategy to broaden this audience, attracting younger generations, including many in the HENRY (high-earner-not-rich-yet) segments. Exposure to the brand has since skyrocketed among these young, affluent shoppers, with people under 45 accounting for nearly 80 percent of the brand s social media engagement.
10 STRATEGY # 2 OMNI-CHANNEL High-end brands that have hesitated to embrace a more comprehensive omni-channel approach to marketing often discover a wealth of growth potential by simply evolving their efforts to reflect the manner in which their customers prefer to shop in today s interconnected marketplace.
11 INTRODUCTION EDGE TARGETING OMNI-CHANNEL EMERGING MARKETS EXPERIENCES OVER THINGS GIFTS OVER INDULGENCES CLOSING Connectivity is driving new opportunities in digital innovation. Formerly conservative luxury brands are busy rebooting strategies and are using this newfound digital platform to etch out growth.* *Euromonitor: Harnessing a Global Technological Revolution in Luxury Goods
12 $21 Billion Projected global luxury e-commerce business by 2020.* *McKinsey
13 Higher lifetime value for shoppers who buy on multiple 30% channels (versus those who buy on only one channel).* *JCK/International Data Corp
14 Which one best describes your brand? Growth awaits if you re ready to take the next step. True Omni-Channel Traditional Storefront Selectively Digital You use your digital channels (website, database, social media) as an online showroom for your products, with no e-commerce or retail beyond your own properties. You maintain an online store for entry-level products only, and only sell products via your own branded channels. Database outreach is active but used mainly to drive offline store traffic. You have a diversified retail strategy that truly mirrors how your connected customers shop. This includes the holistic use of all digital and social channels, a fully realized online store, and partnerships with other multi-brand online retailers.
15 For luxury brands that use the internet for little more Who can this work for? than maintaining a digital showroom, a strategic expansion into social media and content marketing will help them engage their existing customers in new and exciting ways. Brands with limited digital initiatives such as a mono-brand online store can explore more diversified retail strategies, such as multi-brand stores, plus a full, 360-degree use of digital channels.
16 EXAMPLE As one of the nation s top makers of high-end exotic skin boots, Lucchese s business was built on a reputation for custom fits and hand-crafted workmanship. As such, the brand found it tough to find its footing in the digital space. We helped Lucchese expand its digital footprint with an e-store featuring non-custom items, plus a multi-channel digital outreach plan focused on reaching consumers for whom these featured products were a good match. Online comp sales doubled as a result.
17 STRATEGY # 3 EMERGING MARKETS Luxury markets that are only now coming into their own provide rich opportunities for luxury brand expansion. At the same time, the distance and disconnection between emerging markets and mature markets helps to insulate the brand from any possible changes in perception.
18 Growth at home and abroad. Argentina, Indonesia and Mexico are not always on the radars of luxury brands when they ponder expansion into emerging markets, and yet they represent some of the greatest opportunities in the next decade, alongside emerging stalwarts like India and China.
19 86% The projected growth in total value of the India luxury market by 2018.* *Luxury Society
20 The power of social media monitoring One of the best ways to identify potential emerging markets for your brand is through monitoring international social media traffic. While you shouldn t assume that every spike in overseas traffic is a surefire indicator of a hot new market, sustained engagement with your brand from specific regions is always worth deeper investigation.
21 Brands that demonstrate strong affinity among foreign tourist shoppers can tap into those audiences on their home turf. Who can this work for? Lifestyle luxury brands can take advantage of aspirational customer segments worldwide. Brands with the ability to easily adapt a current product line can make simple tweaks to better align with emerging market tastes or customs.
22 EXAMPLE When Moët observed the growing demand for premium Champagne in the emerging market of Nigeria, they knew they had to act. But wisely, they didn t simply flood the marketplace with existing product. Rather, they created a sub-brand that best reflected the particular tastes of affluent Nigerians. And Moët Ice Impérial* was launched to overwhelming success. *Marketing Edge
23 STRATEGY # 4 EXPERIENCES OVER THINGS Millennials who value luxuries as experiences make luxury purchases more frequently whereas Millennials who define luxury as an indulgence purchase less frequently.* *Monicle Research: Millennial Luxury and Purchase Frequency
24 And why do Millennial luxury preferences matter? Here s why.
25 $30 Trillion The amount of wealth Millennials will inherit over the next years the largest transfer of wealth in history.* *Accenture
26 Experiences give Millennials something to talk about And studies have directly connected favorable views that Millennials have regarding luxury brands to the amount of social sharing that the brands earn.
27 Any brand that organically attracts a large number of Millennial purchasers. Brands that are already experiential in nature, such Who can this work for? as travel brands. Brands that are able to place their products into the context of a broader experience whether emerging from the heritage of the brand, the life stage of the consumer, or both.
28 EXAMPLE Bentley recognized the power of experiences in marketing their cars to the affluent Millennial market, and so created their Ultimate Road Trip* series, which promoted the most amazing drives the world has to offer the Bentley owner. From Chile to Northern California, these experiences were aimed squarely at a younger generation of luxury consumers who value doing things more than things themselves. *Forbes
29 STRATEGY # 5 GIFTS OVER INDULGENCES Buying for others is an essential component of the luxury consumer s share of wallet. Gifting offers brands new entry-point opportunities and greater sales potential.* *Deloitte: The Luxury Opportunity
30 15% 36% 25% of non-holiday luxury shoppers purchase luxury goods as gifts.* of non-holiday jewelry shoppers purchase as gifts.* of all jewelry purchases are engagement or wedding related.* *Luxury Daily *Luxury Daily *YAD Global Advisors
31 Retailers who are able to maintain a large database of current customers are best equipped to reach out year round to promote gift-giving solutions. Who can this work for? Experiential marketers such as wineries, resorts and spas can easily tap into the current trend of luxury buyers giving experiences as gifts. Similarly, luxury brands can bundle their offerings to create unique co-op experiences.
32 EXAMPLE While many premium jewelry brands bill themselves as aspirational indulgences, the Tiffany brand has always kept gifting at the core of its strategy. The Tiffany box itself has grown to become a symbol of a gift that means something special, even at price points lower than one might expect. As gifting becomes a more and more important element of luxury brand strategy, Tiffany continues to thrive as a top-ofmind solution for the luxury gift giver.
33 EDGE TARGETING EXPERIENCES OVER THINGS Which is best for your brand? Likely a combination. GIFTS OVER INDULGENCES OMNI-CHANNEL EMERGING MARKETS Building a luxury brand is never easy, and the best strategy will often be a combination of strategies. Just remember that the potential for real growth is there. Handled properly, it can happen without sacrificing any of the brand s inherent value.
34 We make luxury brands famous. At Krause, we ve been helping iconic luxury brands grow and thrive since And we ve done so by never straying from a simple philosophy: that luxury marketing should be every bit as extraordinary as luxuries themselves. To learn more about what the luxury brand experts at Krause can do for you, contact Candace Krause today at candace@krauseadvertising.com.
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