Luxury which includes clothing, footwear as well as cosmetics and fragrances has been a successful industry long led by creativity, art, emotions and inspiration. However, data driven marketing is the latest trend as more than 45% of all luxury sales are influenced by digital marketing. So the ultimate question is;

How far should the luxury industry rely on data driven marketing strategy while retaining its brand values.

When trying to understand luxury, it’s sufficient to analyze the French brands to draw broad conclusion on the evolution of this industry. (prior to the impact of protests). Driven by an increase in consumer demand, international growth, online sales, market expansion and tourist growth. France became the top performing country in luxury goods sales with 18.7% year on year growth (FY2017).

According to a report published by Deloitte ‘Global Powers of Luxury Goods 2019‘, 4 French companies are among the top 11 luxurious companies in the world. L’oreal, LVMH (Louis Vuitton, Givenchy…), Kering (Gucci, Yves Saint Laurent…) and Hermès (2017).

Why Luxury marketing needs to be data driven?

User Journey:

Unlike grocery shopping, spending a month’s salary or more on a luxurious item is a big decision that will require considerable time of thinking & research before purchasing.

The consumer ‘buying signals’ that reflect their intent to purchasing is what digital marketing can make use of to help generate more sales. Buying signals are everywhere. From accessing the website and spending time reading product details, to google search for reviews & trends, browsing history, location data, lifestyle interests, in-store visits, and actions on social media. These signals along with the right analysis of data can help brands anticipate the user journeys of successful buyers, and understand customer behavior prior to purchasing.

Understanding Channels:

There are various forms of new channels that brands have been utilizing like influencers, content aggregators, reviews websites. As online shopping grows in the luxury industry, along with these new channels, grows the need for clear data. Data that will explain how did these customers reach to your store or website, and what steps did the customer take prior to purchasing.

Data driven marketing will allow you to reach out to the most profitable customer. Although targeted marketing is more expensive than broad targeting with the hopes of reaching your customer. The return of investment for targeted campaigns is definitely worth the investment.

Digitally-Powered Consumers:

The number of rich people globally is rising rapidly which means more money can be spent on luxury. According to Capgemini’s World Wealth Report 2018, for the first time in years, the high net worth individual wealth rose to 10.6%.

But luxury consumers are changing. To grow, luxury needs to meet the demands of millennials, those born between 1981 and 1996 are their new customers. These young customers are high earners but not rich yet (HENRY) & form around 75% of Luxury brands customers. The millennial generation are educated, tech savvy, short attention span, & value experiences over things. What makes this segment extremely valuable for luxury brands is that most rich started out as ‘HENRY’. Therefore identifying these long term prospect customers is important to ensure the brands future growth. Millennial luxury shoppers invest a lot of their time and money online, on mobile apps and on social media. Luxury brands should not only listen to what their customers are saying, be present where its customers are, but to also thrive in the digital universe.

Age Breakdown Luxury Buyers: % who say they mainly purchase luxury items

Tech upgrade:

Although Luxury has been very slow to adopt eCommerce and embrace the digital wave. It’s obvious that most brands are making up for the time lost pretty fast. Even well established luxury brands that firmly opposed eCommerce operations and said will never sell online, have all launched their online stores with the exception of Chanel. Not only that but also invested deeply in the digital industry such as eCommerce, social media, and digital marketing. Brands are also partnering with luxury-specific technology tools (augmented reality mirrors, AI-based counterfeit-spotting) and mobile apps along with their traditional in-store business.

The above mentioned digital tools are not separate from the core brand positioning. The online experience should be complementary to that in-store reflecting the brand values. This concern has driven luxury brands to handle their digital activities internally instead of relying on third party websites which they have little control on.

How can Luxury brands be data driven

A successful case would be that of Versace. Their objective was to increase sales by identifying among their current and potential customers, the high end segment. This segment would be more likely to make a “big/high ticket product” (items having high selling prices & profit margins). Their data driven marketing campaigns resulted in a 35% increase in sales, 400% increase in ROI, & 3.3K increase in in-store visits. Below are few tips inspired by this campaign:

First Party Data:

The starting point for any data driven campaign is always using the first-party data. This allows you to leverage the valuable data of your current customers, website visitors, and ad results. Ensure data is stored in a useful format & then identify the most useful metrics.

Customer Data:

Analyze transactional & customer data to identify best customers (spending more, purchasing more frequent..), and understand their buying journey. Then used this data & algorithms to create a ‘lookalike modeling‘. A method that allows you to find more people (prospective customers) similar to the existing ideal customers. Both audiences (existing & potential) will share close behavioral characteristics and specific attributes; preferences, interests (more detailed, the better).

Launch targeted campaigns:

Targeted campaigns with an incentive/offer that is based on the LTV (lifetime value of existing customers). This states the expected revenue to be generated over time or what is a customer worth. LTV helps in determining profitability and how far can a company can go when giving special offers/discounts. Note that targeted campaigns are always more expensive than broad campaigns but higher in conversion rate.

Geo-Fencing:

Use Geo-fencing to target your in-store visits, competitors or any other location. Once a consumer (app installed & opt-in for location sharing) walks within the geographical fence, a push notification is sent that can even be laser targeted. Otherwise brands can run ads targeting unknown users in this geographical fence that could even be a competitors location, a method that incentives in-store visits.

Right Traffic

Luxury brands can easily drive traffic online unlike regular fashion. However driving the right traffic that will lead to potential sales has been the ultimate challenge for luxury brands. Brands should transform visits into experience that fit Luxury of being exclusive, emotional, quality & rare,

Deep Analysis & Improvement

Therefore, it is significant that brands have outcomes that will automatically require a certain ‘metric’ to measure, such as purchases, consumer behavior, channel responsiveness, or campaign ROI. Analysts should present deep data insights to apply campaign enhancement & improvement before investing a higher budget.

Privacy & GDPR

With the rise of privacy regulations worldwide & GDPR, luxury brands must persuade its consumers to share their data. This can be done in exchange for a value such as a special offer and data must be well protected.

In 2025, online sales will account to 18% of the total luxury sales and in the next ten years online sales of luxury goods will triple!

McKinsey & Company

No brand is able to withstand the potential growth possibilities. It is expected that luxury brands will pull money out of print and move it to digital next year. The difficulties of undergoing digital transformation should not be underestimated. Powered with customer data & tech, luxury brands will be able to easily embrace online selling and adopt a data driven marketing strategy.

Even when marketers prefer to rely on their experiences rather than research, that is too, the usage of data collected through years of experience.

The future of luxury brands online: Looking to into the leading French Luxury Groups

Kering‘s success through Gucci’s digital strategy helped the brand generate 50% of it’s sales from millennial. 35 year olds and younger, which is a segment that has been a concern for luxury brands. Gucci became the best performing digital luxury brand according L2 Research, a company that specializes in data driven analysis.

In 2017, LVMH launched 24s.com. A multi brand ecommerce platform / marketplace that offers products from over 200 luxury brands & is not limited to LVMH’s owned-brands. The website is successfully growing and providing a new luxury shopping experience similar to that of physical store.

How many of the luxury products purchases take place in a physical store, online from a computer or mobile device: