The top management team of a leading luxury brand asked me recently whether or not they needed to address millennials. Since most of their current buyers are over 50 years old (and few people below 50 bought their brand), they thought it would be a waste of money to target younger people — a common misconception in the luxury industry. Millennials are consumers roughly born between 1980 and 2000 (20 to 40 years old), and — believe it or not — many luxury companies still ignore this important group. I often hear high-ranking brand managers say “millennials don’t have money, so it’s useless to target them.” But in reality, nothing could be further from the truth.
Looking at the numbers, a majority of luxury purchases worldwide are made by millennials, and in China, the group accounts for a staggering 80 percent of luxury purchases. In fact, only around 10 percent of luxury goods are bought by people over 40 in China. This should be a wake-up call. As Chinese luxury consumers have become the most crucial worldwide with the highest growth rate for luxury consumption, falling short in addressing millennials in this country means not only owning a weak brand today but also one likely to fail in the future.
We live in a time of rapidly accelerating disruption, and a brand’s size or heritage doesn’t protect it from becoming irrelevant. Any brand can become irrelevant in the blink of an eye. One well-known fashion brand lost a whopping 70 percent of its younger consumers over only three years. They found out (the hard way) that heritage, craftsmanship, exquisite materials, and design mean nothing if the brand can’t connect with young consumers.
Changes happen so fast in today’s luxury market that by the time a brand understands the severity of their failing, it’s already too late for them. Bentley recently had to lay off 10 percent of its workforce after reporting a staggering $280 million loss and a revenue decline that hit nearly 20 percent. But it’s not just older brands — even new stars in the field can fall fast. For example, one of last year’s most exciting and fastest-growing beauty brands in China recently became irrelevant. Terry Wang, the managing director of JD Beauty at JD.com, told me that new brands that were more authentically connected to younger consumers had emerged, forcing this newly-minted beauty superstar to disappear completely from his platform. JD.com is China’s largest retailer, and 80 percent of its customers are 35 or younger. With today’s younger generations, last year’s success doesn’t matter if other brands can better connect with them. Therefore, the question shouldn’t be whether to target millennials but how to target them better than the competition.
Start young (very young)
Another important question is at what age should a brand start targeting millennials? That leads to a crucial insight all brands must know: Young women in China (and in most other countries) will not wear what their mothers wear, they won’t buy the beauty brands their moms buy, and they want different car brand from their moms. For older generations, on the other hand, it’s the opposite: They emulate the tastes of their kids or other younger people. This is why, to be relevant to millennials, a brand cannot be considered one that “the moms use.” And now we’re seeing that targeting 25-years-old millennials isn’t even young enough. That’s because the next generation, Gen Z, is already starting to join the market, and they are crucial in helping to drive brand preferences for millennials in their 30s. As a rule, brands need to start much earlier and appeal to high schoolers and young college students.
The success stories of Gucci, Supreme, Off-White, and Balenciaga are cases in point. They’ve mastered connecting with consumers in their late teens, and this, in turn, makes them relevant to older target groups, including millennials. Many other brands miss the mark with today’s youngest consumers, and as a result, they’re not only unattractive to millennials but also begin losing their older consumer base. Luxury is always a result of social currency, and only brands that are seen as relevant by younger customers will thrive while those that don’t risk becoming obsolete (which, as mentioned earlier, happens fast).
Find the perfect story
To appeal to Gen Zers, a brand’s storytelling is crucial. Brands need to put their focus on building brand equity — in other words, forming clear rational and emotional positions about what the brand stands for. This needs to be told from a consumer perspective, not as an idea the brand has about itself.
The youngest consumers are the most discerning. If they don’t quickly get what’s in for them (i.e. why the brand should matter to them or what value the brand provides them), they simply won’t be interested. Sometimes managers ask me, “How can we get more authentic?” They ask that because brands will only resonate if they are authentic. And since a brand’s story is the driver of authenticity, regular brand audits and critical evaluations of a brand’s storytelling are indispensable.
Brand storytelling is not primarily about advertising, which is a common misconception. In its most elemental form, it’s the way a brand creates value. Everything the brand does needs to follow the brand story: at each consumer touchpoint and with each product. All actions should be seen as part of the delivery system for the brand story. Brands that are weak in storytelling will never be perceived as authentic and relevant, and they won’t be able to create luxury value and sustain their market position. Brand storytelling describes what the brand sells — both rationally and emotionally. It must be much more distinct than what everyone else in the category does and much more precise than simply claiming to “sell a dream.” Cliches like this mean nothing to consumers.
The message must be digital
To deliver these stories, digital capabilities are critical. Most brands lack in most CRM (customer relationship management) capabilities, and even if they have a system, it’s not connected and efficient enough to support personalized customer interactions. But going even deeper, most brands lack IRM (influencer relationship management) systems, which help identify and engage with necessary KOLs and influencers. Not having those capabilities is deadly, because younger consumers — particularly in China — are more receptive to people than brands. Therefore, key opinion consumers who influence their peers and followers need to be managed as precisely as any other brand element. It’s important that influencers accurately reflect a brand’s storytelling to help create consistency.
And finally, many brands also lack real-time consumer insights, which are necessary for management teams’ daily decision making. To glean these insights, a brand needs artificial intelligence to process the big data it’s constantly receiving. Today, insights from traditional market research studies are too slow and imprecise, and thereby, in most cases, they’re irrelevant.
The good news is that rapid change can provide incredible opportunities for brands, but only if they’re properly prepared. In luxury, the youngest consumers have to come first since they influence all the other generations before them. Thus, different thinking beyond one’s comfort zone is imperative. This isn’t optional, because, in a competitive environment, to become comfortable means to become obsolete.
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