This article of mine is a revised version of the one first listed on Interbrand’s brandchannel.com in June 2006 and was published in Images Yearbook 2007.
Happy marketing!
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Rich and mass-affluent customers are driving business for many industries including fashion, jewelry, automobiles, real estate and even banking & investments. The future growth from these segments is expected to come primarily from the emerging markets like India, China, Asia-pacific, Brazil etc in addition to the developed economies of US and Europe. In a survey conducted by The Knowledge Company on Indian affluent consumer (India Luxury Trends 2006), it was found that these consumers earning over INR 4,500,000 spend INR 400,000 or above on luxury goods. The highest spends were on categories like jewelry, clothing, digital accessories, timewear and cosmetics. The number of such consumers was estimated at one million, a number that is expected to treble by 2010. According to market estimates, the Indian market for luxury goods and services, currently pegged at INR 1,500-2,000 crores is likely to grow at a rate of 15-20 per cent every year over the next five years. This is owing to strong economic growth and emergence of neo-money clients who are ‘cash-rich and time-poor’. The attitude and behavior demonstrated by this segment is quite different for certain instances as compared to the traditional money clients. There are however certain things that run common and can serve as guidelines for marketing to this class of customers.
Before talking about marketing to these customers it’s extremely important to understand the segment well. Their age, income levels, occupation etc. helps to filter them from rest of the lot. It is however their behavior and psychographics that really matter in striking the right chord with them. What do they wear, where do they buy, how do they think, what matters to them, where are they seen or would like to be seen etc. is extremely important to get this understanding right. Let’s look at some aspects that can help us in this regard:
Ø Affluent customers want to be distinguished from the crowd – They only want to be seen at certain places, using only certain brands. Not just that, they want to be a step ahead of the crowd and look up to brands to identify the key trends for them and help them access/buy these before anyone else. Fashion shows are an attempt by luxury & fashion brands to define what’s next and help the customers access it.
Ø They seek exclusivity - Exclusivity is a big hit with these customers and therefore ‘limited editions’ or ‘only for select audience’ are tactics that certain luxury brands use for their brand extensions. They want access to the most exclusive brands and finest quality. They have a passionate desire for the best things in life. In fact snob consumers perceive price as an indicator of exclusivity and avoid using popular brands, a trend labeled as
‘Uber-Premium’ (exclusive products for status craving consumers, something out of reach of most). A separate store entrance or exclusive outlets, exclusive areas, different branding, very fine décor and ambience, differently dressed personnel servicing them can be used to provide this sense of exclusivity.
In fact the single most important reason for luxury retailing not taking off in India according to ‘India Luxury Trends 2006’ is the lack of luxury retail environments. Existing retail formats in this segment are either in 5-star hotels or as standalone stores. This has however started evolving. Brands and retailers have appreciated the importance of having retail formats catering to the affluent class of consumers. Shoppers' Stop is planning to enter the luxury retail segment with large format properties retailing a range of products from many well-known luxury brands. It has been reported that each of these stores would be spread across 1.2 – 1.5 lakh sq. ft. and will showcase more than 40 global luxury brands, including Louis Vitton, Gucci, Zegna, Hugo etc.
Ø They want to feel unique and special – Personalization of products and services helps to provide these benefits. Brands need to recognize this hidden desire and offer them products that help them achieve it. In the luxury market, high service levels are a given. Consumers are today more individualized than ever seeking goods and services that will satisfy their unique needs, a trend that will only catch on. In fact the Time magazine’s person of the year 2006 is ‘YOU – the individual’.
Ø They seek convenience - Affluent customers value their time as much as their money, making convenience fundamental to success in this market. Kingfisher First offering a mix of exclusivity, convenience, comfort and service has been quite successful in getting the consumers’ attention and creating a niche for itself in the air travel space.
Ø They are willing to pay a premium - They want the best quality, exclusivity, satisfaction and outstanding customer service. Brands that wish to target affluent customers will have to upgrade the quality/caliber of every person who represents them in the market or has any level of interaction with the customer.
Ø High involvement buying behavior – Marketing to affluent customers generally involves selling high-ticket items where the degree of engagement with the client also needs to be high, as most times these purchases are a reflection of the person’s self-concept and have strong self-expressive benefits. The buying decision tends to be more emotional with a touch of rationality to justify it to self and others. Making buying an experience in itself is the key here, something done well by retailers like Neiman Marcus.
Even in the case of emerging economies, these consumers are exposed to the best and most exclusive brands given their inclination to travel across the globe and own the best money can buy. The challenges therefore in the home markets are no less daunting than those in the more developed economies as far as these consumers are concerned. The best way to start therefore is to understand what has happened is the other parts and adapt it to the current environment. Basic human behavior and emotions seldom differ wherever one goes. Adaptation is however a tricky proposition and ‘cultural sensitivities’ need to be taken care of, a ‘cut-paste’ job is not very likely to yield results.
How can brands target these customers?
One point of essence is that it’s extremely important for the brand to have a clear positioning and the image in the minds of the customers, with efforts to keep reinforcing and refining it. Tag Heuer, Rolex, Cartier are all luxury brands but they have different positionings. Consistency in communication efforts plays an important role here and strong brands usually are protagonists for something that is of value to the customers. Celebrity endorsements or as brand ambassadors is also used by some brands like Armani, L’Oreal, Swarovski with good effect.
Though there cannot be a one-size-fits-all kind of an approach to reach out to affluent customers, ones that could be used beyond traditional advertising are:
Ø Direct Mail: Enormous efforts and thinking need to go in selecting the correct list. Equally important is the aspect of creating the mailer – the headline, copy, visual, production quality etc. and above all, the offer (don’t talk price, talk value). In fact Direct Mailing can be an important marketing tool for brands that don’t advertise or advertise only to create imagery.
Ø Endorsed mails: Mailers from brands whose services / products they already use make the maximum impact in terms of the communication being read and carrying the right kind of associations. It also takes away the apprehensions of these customers of being on unsolicited mailing lists, which only harms the brand.
Ø Referrals: Referrals from existing customers willing to share details of people they know who would be interested is the most tried and tested method of getting access to new clients. These customers may not mind their name being used to make contact with the reference (one needs to take permission) and at times act as your best ambassadors. The phenomenon of word-of-mouth can be very effectively used as a marketing tool here and the brand has to proactively manage it.
Ø Pull marketing: Show them benefits of your offering and tell them how you can create value for them by giving them convenience, personalized attention, exclusivity etc. Let them have a taste of it with no strings attached by inviting them to your events, launch parties etc. The idea is to make them aware of the need and giving selling a more consultative approach.
Of the emerging trends and concepts in this space ‘Massclusivity’ (exclusivity for masses) holds a lot of relevance. Luxury in itself has a certain sense of status attached to it. With concepts like ‘affordable luxury’ and the rise of the middle segment (mass affluent) consumers, luxury brands face a challenge to maintain their image and what they stand for. Constantly renovating themselves to stay relevant and being creative about everything they do could be a possible answer.
Before talking about marketing to these customers it’s extremely important to understand the segment well. Their age, income levels, occupation etc. helps to filter them from rest of the lot. It is however their behavior and psychographics that really matter in striking the right chord with them. What do they wear, where do they buy, how do they think, what matters to them, where are they seen or would like to be seen etc. is extremely important to get this understanding right. Let’s look at some aspects that can help us in this regard:
Ø Affluent customers want to be distinguished from the crowd – They only want to be seen at certain places, using only certain brands. Not just that, they want to be a step ahead of the crowd and look up to brands to identify the key trends for them and help them access/buy these before anyone else. Fashion shows are an attempt by luxury & fashion brands to define what’s next and help the customers access it.
Ø They seek exclusivity - Exclusivity is a big hit with these customers and therefore ‘limited editions’ or ‘only for select audience’ are tactics that certain luxury brands use for their brand extensions. They want access to the most exclusive brands and finest quality. They have a passionate desire for the best things in life. In fact snob consumers perceive price as an indicator of exclusivity and avoid using popular brands, a trend labeled as
‘Uber-Premium’ (exclusive products for status craving consumers, something out of reach of most). A separate store entrance or exclusive outlets, exclusive areas, different branding, very fine décor and ambience, differently dressed personnel servicing them can be used to provide this sense of exclusivity.
In fact the single most important reason for luxury retailing not taking off in India according to ‘India Luxury Trends 2006’ is the lack of luxury retail environments. Existing retail formats in this segment are either in 5-star hotels or as standalone stores. This has however started evolving. Brands and retailers have appreciated the importance of having retail formats catering to the affluent class of consumers. Shoppers' Stop is planning to enter the luxury retail segment with large format properties retailing a range of products from many well-known luxury brands. It has been reported that each of these stores would be spread across 1.2 – 1.5 lakh sq. ft. and will showcase more than 40 global luxury brands, including Louis Vitton, Gucci, Zegna, Hugo etc.
Ø They want to feel unique and special – Personalization of products and services helps to provide these benefits. Brands need to recognize this hidden desire and offer them products that help them achieve it. In the luxury market, high service levels are a given. Consumers are today more individualized than ever seeking goods and services that will satisfy their unique needs, a trend that will only catch on. In fact the Time magazine’s person of the year 2006 is ‘YOU – the individual’.
Ø They seek convenience - Affluent customers value their time as much as their money, making convenience fundamental to success in this market. Kingfisher First offering a mix of exclusivity, convenience, comfort and service has been quite successful in getting the consumers’ attention and creating a niche for itself in the air travel space.
Ø They are willing to pay a premium - They want the best quality, exclusivity, satisfaction and outstanding customer service. Brands that wish to target affluent customers will have to upgrade the quality/caliber of every person who represents them in the market or has any level of interaction with the customer.
Ø High involvement buying behavior – Marketing to affluent customers generally involves selling high-ticket items where the degree of engagement with the client also needs to be high, as most times these purchases are a reflection of the person’s self-concept and have strong self-expressive benefits. The buying decision tends to be more emotional with a touch of rationality to justify it to self and others. Making buying an experience in itself is the key here, something done well by retailers like Neiman Marcus.
Even in the case of emerging economies, these consumers are exposed to the best and most exclusive brands given their inclination to travel across the globe and own the best money can buy. The challenges therefore in the home markets are no less daunting than those in the more developed economies as far as these consumers are concerned. The best way to start therefore is to understand what has happened is the other parts and adapt it to the current environment. Basic human behavior and emotions seldom differ wherever one goes. Adaptation is however a tricky proposition and ‘cultural sensitivities’ need to be taken care of, a ‘cut-paste’ job is not very likely to yield results.
How can brands target these customers?
One point of essence is that it’s extremely important for the brand to have a clear positioning and the image in the minds of the customers, with efforts to keep reinforcing and refining it. Tag Heuer, Rolex, Cartier are all luxury brands but they have different positionings. Consistency in communication efforts plays an important role here and strong brands usually are protagonists for something that is of value to the customers. Celebrity endorsements or as brand ambassadors is also used by some brands like Armani, L’Oreal, Swarovski with good effect.
Though there cannot be a one-size-fits-all kind of an approach to reach out to affluent customers, ones that could be used beyond traditional advertising are:
Ø Direct Mail: Enormous efforts and thinking need to go in selecting the correct list. Equally important is the aspect of creating the mailer – the headline, copy, visual, production quality etc. and above all, the offer (don’t talk price, talk value). In fact Direct Mailing can be an important marketing tool for brands that don’t advertise or advertise only to create imagery.
Ø Endorsed mails: Mailers from brands whose services / products they already use make the maximum impact in terms of the communication being read and carrying the right kind of associations. It also takes away the apprehensions of these customers of being on unsolicited mailing lists, which only harms the brand.
Ø Referrals: Referrals from existing customers willing to share details of people they know who would be interested is the most tried and tested method of getting access to new clients. These customers may not mind their name being used to make contact with the reference (one needs to take permission) and at times act as your best ambassadors. The phenomenon of word-of-mouth can be very effectively used as a marketing tool here and the brand has to proactively manage it.
Ø Pull marketing: Show them benefits of your offering and tell them how you can create value for them by giving them convenience, personalized attention, exclusivity etc. Let them have a taste of it with no strings attached by inviting them to your events, launch parties etc. The idea is to make them aware of the need and giving selling a more consultative approach.
Of the emerging trends and concepts in this space ‘Massclusivity’ (exclusivity for masses) holds a lot of relevance. Luxury in itself has a certain sense of status attached to it. With concepts like ‘affordable luxury’ and the rise of the middle segment (mass affluent) consumers, luxury brands face a challenge to maintain their image and what they stand for. Constantly renovating themselves to stay relevant and being creative about everything they do could be a possible answer.
Happy marketing!
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