How Experiences are Defining Today’s Luxury Market

Luxury causes such strong emotions, I sometimes compare it to love and romance. It can be so unique, it sometimes feels like a once-in-a-lifetime experience. Those aspects make luxury brands a challenge to manage. A luxury brand can only create extreme value for a customer if it excels in every way. If it fails in even just one dimension, the allure of the brand is shattered. One of the most underestimated dimensions in luxury is experience creation. Many brands fail to keep up with today’s rapidly changing expectations for extraordinary experiences. This may be surprising because, after all, isn’t luxury primarily about experiences? Indeed, luxury managers often passionately describe their brands by saying “we create dreams” or “we are in the business of making dreams come true.” Yet the issue is that the brand’s internal dream often doesn’t match the customer’s external dream. We live in a time of rapid change. Luxury customers have come to expect the highest quality, the finest materials, and the greatest savoir-faire from every luxury brand, and if it’s not up to their expectations, they quickly move on. But once they’ve experienced something good, it becomes their new benchmark, and the next time they buy a luxury item, the new benchmark is “priced in.” In other words, the new level of value becomes expected. If craftsmanship is missing, people will not buy a luxury brand. What was extraordinary even two years ago is not enough to be successful today. The stakes get higher and higher, expectations multiply, and companies must change accordingly. It’s a rapidly-evolving game where those who stand still become obsolete. How customers experience the shopping process, how personalized their treatment is, and how special they feel is now equally important to the product. This paradigm shift comes from customers all over the world, however, it is young, urban Chinese customers who are disrupting luxury the most. The youngest customers now have the highest expectations toward luxury brands, yet many traditional brands still underestimate them. I meet a lot of managers who tell me customers under 40 do not have the buying power for their luxury brands. Yet the numbers contradict them: In China, more than 80 percent of luxury goods are bought by consumers under 40, including a rapidly increasing share of Gen Zers, who are all 20 years old or younger. If the majority of consumption is in that age bracket, no brand can afford to ignore their preferences or expectations. And in China, the expectations of extraordinary experiences for these consumers are heightening at a rapid pace. Take the case of a young female office worker in Shanghai I know who has a monthly income equaling roughly 3,000. She recently went on a trip to Paris and wanted advice on where to spend three unforgettable days. She said her budget was 2,000 per day for a hotel, and she wanted to get the best possible experience. She even stated that she would make the trip shorter and pay 50 percent more if it meant a significantly better experience. This is quite a different mindset from traditional travelers who would spend less on a hotel so they could extend their stay, even at a middle-class income level. For many, the quality of experience has become more important than anything else. This is true in every luxury category. Wellness, for example, has become a big luxury trend in China. Now, top-end customers not only expect personal trainers for their sessions, they even demand the entire gym for themselves so they can have the most individualized experience possible. Shopping for a handbag has become that kind of experience. How customers experience the shopping process, how personalized their treatment is, and how special they feel is now equally important to the product. Many of these customers now expect luxury brands to have an internal personal shopper who excites them with behind-the-scenes information, collection previews, and a curated selection of relevant new items. Total personalization has become the ultimate luxury, and this requires knowing the needs and expectations of your customers in-depth. In Japan, for instance, there is a service that allows customers to rent a luxury sneaker by the hour, so they can take a picture in them for their social media postings. That’s how important experiences are today. But the issue of providing a once-in-a-lifetime experience is that it no longer surprises the consumer after the first experience. Hence, luxury brands have to constantly create new experiences to stay relevant. The ability to influence, innovate, and inspire becomes a significant factor for successful luxury brands. Yet, many luxury brands do not have an established process for creating innovative experiences. Very few brands have Chief Experience Officers who are responsible for ensuring that their brands surprise and wow their customers again and again. And most brands don’t even understand that these rapidly changing expectations exist. That’s why for larger luxury brands, relying on simple social media listening tools or classic market research isn’t enough to help them win over consumers. In other words: It’s a recipe for failure. Systematic consumer data collection and the scanning of social media conversations of customers using highly sophisticated data querying technologies aren’t optional tools anymore — they are must-haves for any luxury brand in today’s competitive market. The changes are real, and the old days won’t ever come back. Luxury brands need to refocus on delivering customer value, not just products. Fine materials and great services are expected. Those who win can make the experience “branded”— very distinct and different from any other brand — not just in terms of aesthetics but also the emotions they can make their clients feel. This is why rational and emotional clarity about the core values of the brand is indispensable. The brand’s purpose needs to be defined and understood by everyone in the organization, the customer journey must be detailed meticulously, and the staff must be trained on their roles in delivering the company’s branded experience. Luxury will always be about extreme value creation. It’s pure emotion that features the highest end of artistry and excellent storytelling. It must lead to an unexpected experience that’s always surprising, never entirely predictable, and always exciting. In our fast-changing times, with millennials and Gen Zers demanding such high levels of disruption, creating these experiences is more important than it has ever been before. Daniel Langer is CEO of the luxury, lifestyle and consumer brand strategy firm Équité. He consults some of the leading luxury brands in the world, is the author of several luxury management books, a regular keynote speaker, and holds management seminars in Europe, the USA, and Asia. Follow @drlanger

How Experiences are Defining Today’s Luxury Market

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Published October 28, 2019

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How Experiences are Defining Today’s Luxury Market