The 3 Essential Luxury Strategies For 2021

Key Takeaways : 12 to 15 percent of the luxury purchases are already being made by Gen Zers in China. And, by 2030, Gen Z will account for the majority of luxury purchases — not only in China but all over the world. Gen Zers view luxury brands much differently than previous generations by expecting them to have a purpose and a political position, which is fundamentally opposed to traditional corporate branding strategies that avoid polarizing stances at all costs. For past generations, traditional brand equity models were sufficient for success. But Gen Zers expect compelling, insight-driven, authentic, distinctive, and relevant stories from brands. Over the past few months, I have had numerous conversations with CEOs of luxury brands in China, South East Asia, North America, and Europe about where the luxury industry is heading and the best ways brands can prepare for post-pandemic realities. Most luxury brands have been at least partially impacted by the effects of COVID-19, whether through temporary store closures, reduced store traffic, travel retail disruption, changing customer preferences, or the dramatically changing nature and role of digital platforms. Those disruptions have only added to a previous shift, for which most brands were unprepared: the rise of Gen Z as the new luxury influencers. Gen Z’s view on brands differs significantly from previous generations, adding an already challenging 2020 for luxury brands. They expect brands, particularly in the luxury space, to be 100-percent authentic and have a purpose and a political position, which is fundamentally opposed to traditional corporate branding strategies that avoid polarizing stances at all costs. Since most of today’s luxury brands are either European or US-based, the critical influence of global Gen Zers still seems far away to most luxury managers. In fact, many luxury brand leaders have shown surprise whenever I highlight how crucial it is to adjust brand strategies to include Gen Zers in my luxury workshops. Their typical viewpoint is: “Our customers are all over 50... why should we care about Gen Z? They don’t even have any money yet.” But 12 to 15 percent of the luxury purchases are already being made by Gen Zers in China. And, by 2030, Gen Z will account for the majority of luxury purchases — not only in China but all over the world. Additionally, Gen Zers are a critical influence on older generations, including millennials. If a brand is not relevant to Gen Zers today, it is unlikely to grow more relevant as Gen Zers age because preferences are built early in life. As such, the Gen-Z influence will drive the future success of practically all luxury brands. Without a doubt, 2021 will be a critical year for luxury in many aspects. Thanks to the recent availability of vaccines, there is a light at the end of the pandemic tunnel, even though growing health challenges are affecting many parts of the world. We can expect the Chinese market to keep accelerating its growth and the US and Europe to rebound in Q2 or Q3 of 2021, at the earliest. But once customers go back to buying, not all brands will receive the expected uptick. In fact, the brands that are not preparing for the Gen-Z shift will not only underperform during the recovery; they will also risk their long-term relevancy and survival. A luxury brand’s first move should be an audit that takes a critical view of its brand equity. More than 90 percent of brands have at least some shortcomings in this area. Yet, I regularly speak with CEOs who believe their brand definitions are perfect. But when we survey their top leaders, we get different answers from each of them, showing a lack of branding precision and common understanding across the company. This typical problem drastically reduces a brand’s ability to create value and be perceived as unique and different. So why are so many brands so poorly defined? The reason is that, for past generations, traditional brand equity models were sufficient for success. Brand descriptions like “our passionate experts and craftsmen only use the best available materials to craft the finest products” are typical across all categories. Brands then add brand attributes like “boldness” and “innovativeness” and believe that is sufficient for differentiating themselves. What they underestimate is how all their competitors use those descriptions. We find that, nearly always, brands tell their category story and not their brand story. As such, every brand tells the same story instead of positioning themselves differently. A brand’s story is the foundation for any other strategy it attempts. So without a precise brand story, any other initiative will fall short. It is impossible to have a consistent and relevant execution without a clear base. And today, brand storytelling is more critical than ever, as it is the hook that inspires Gen Zers. It is also the basis for extreme value creation and, therefore, crucial for luxury brands. Without a compelling, insight-driven, authentic, distinctive, and relevant brand story, there is no value. And without value, your customers will not pay a premium — and then your brand will stall and fail. Additionally, the story is the only way to differentiate in the digital realm. If you think your story is excellent, try to tell it in less than five seconds (the attention span of a Gen Zer is six seconds.) and include both rational and emotional components. If you can do that in a differentiated way, then congratulations! If not, it’s time to get to work. The second critical strategy for 2021 is translating that brand story into a compelling experience. In practically all experience audits, we have found total failures in the way branding comes to life. In one of our recent luxury car audits, there was zero brand storytelling during the purchase process of a 150,000 car. And this issue was also prevalent for most competing brands. The sales staff did not bother (even once!) to explain anything about any of the brands. They did not even see a reason to try to differentiate themselves. The service experience, while friendly, was completely interchangeable with many others. Nothing felt special or was memorable. But we’ve made similar observations across all categories, from fashion to hospitality. Also, an experience strategy needs to fully connect to the customer's digital journey. Here is where we regularly observe huge downfalls across an entire digital brand experience. Too many brands still treat digital as an afterthought — not as a central experience hub. And in a time where over 95 percent of purchase decisions begin online, this shortcoming is deadly. But to make this second strategy successful, brands must incorporate another critical strategy: train staff in the exact brand message and luxury itself. The founder of a China-based fashion brand recently told me that many of his employees do not live with luxury as their customers do. As such, they don’t understand the values, lifestyles, or needs of their customers. They cannot even imagine what it is like to buy what their customers purchase. This gap leads to critical issues within the customer experience. Knowledge about luxury becomes indispensable. Without proper training and experience, the staff cannot offer a consistent luxury experience. Nonetheless, I am excited about 2021 and believe it will usher in significant growth for many luxury brands. But brands that do not take the proper actions today and instead take a wait-and-see approach, the year won’t be as bright. Don’t be one of them. Daniel Langer is CEO of the luxury, lifestyle and consumer brand strategy firm Équité, and the professor of luxury strategy and extreme value creation at Pepperdine University in Malibu, California. He consults some of the leading luxury brands in the world, is the author of several luxury management books, a global keynote speaker, and holds luxury masterclasses in Europe, the USA, and Asia. Follow @drlanger

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The 3 Essential Luxury Strategies For 2021