Having driven transformational change across the luxury market for the likes of De Beers, Harrods, Harvey Nichols and the Lane Crawford Joyce Group, Lisa spoke to La Fosse about her perspective on the place of luxury brands in the modern world, what the future has in store for them, and how (and why) they should connect to the modern generation of consumers.
Engaging Gen Z: Blockchain and Diamonds
The most recent growth-engine of the luxury market is a generational shift, with Bain research 2018 finding “continued rise of online channels, and increasing influence from younger generations of consumers.” The question is clearly not whether luxury will exist, but rather, in what form?
Gen Z have an increasing diversity of needs. They value their freedom, control and independence. They have a 24/7 digital mindset and operate in micro-communities with those who share their interests. They ignore advertising; yet expect outstanding quality in products and services tailored precisely to them. The future belongs to brands that understand this new group.
In some aspects, the luxury model already fits the new consumer. Premium brands care passionately about quality, define themselves by provenance and control their distribution tightly – similar characteristics to the challenger brands which are disrupting the market with a razor-like focus on millennials.
Sustainability stories are one crucial way to connect – hence the news that De Beers diamonds have traced 100 diamonds ‘from mine to retail’ using blockchain technology, to provide an unshakeable guarantee that they don’t dabble in so-called “blood diamonds.” We are witnessing a generation reconsider their values, and conscious capitalism seems here to stay.
Brand equity and transformation at pace; the balancing act
It’s hardly a secret that success is always contingent on evolution, though this seems particularly apt with the business world’s current rate of change. It is hard to kill a really good brand, but playing it safe is no guarantee of safety. Already there is a polarisation of success: from 2014 to 2017, 65% of brands managed to grow revenue, but of that group, only 35% also managed to improve their profitability during the same period.
With premium propositions, this necessitates somewhat of a balancing act; we need to innovate, whilst keeping an eagle eye on brand equity. In uncertain times, it has become clear that customers seek the reassurance of trusted brands while also desiring originality; a testament to this is the strong performance of Burberry. Anchored in its British heritage, it assures quality but with individual, changing styles. Intelligent use of technology means that the brand feels fresh while remaining true to its roots.
Regulating the speed of change for premium propositions is crucial to avoid irreversible damage to their brand equity, but a clear mapping of a transformation vision for the business also needs to happen swiftly – increasingly, traditional strategy planning just can’t keep up. Often, this is why the fresh, external perspective of an Interim Consultant proves highly valuable. Even the most experienced leaders overlook significant opportunities for improvement due to habituation, and it might be better to bring in a transformation specialist.
Sell an experience, not a product
A brand is the sum of everything it does, everything it says and how the business does it. As consumers redefine their expectations of luxury, quality is no longer the only arbiter. Now, service interaction, emotional relationships and cutting-edge aesthetics rather than price are the basis for future growth.
Though many have yet to transfer the logic onto a digital landscape, luxury has always been focused around selling an experience – the purchasing process in an up-market department store is a kind of theatre for the consumer.
Focus needs to be on creating an outstanding customer experience and less on showcasing products. Luxury brands are more resistant to integrate this kind of customer interactivity in their business model, but listening to customers and understanding their perceptions of a brand is key to anticipating their needs.
Brand marketing is only one component of customer experience. More critical is to focus on the customer journey – underpinned by data analytics, systems, processes and people capability. It’s crucial to have a solid operation governed by a great supply chain underpinned by integration, logistics and data analytic skills.
This starts with hiring the right people. You’re in competition for those skillsets with other industries, and individuals with expertise in data analytics aren’t always drawn to luxury firms. What’s more, many senior marketing roles have come up through agencies from creative origins and sometimes miss out on hiring data-analytical skillsets because it isn’t what they have experience of, which can lead to a skills deficit. However, professional operating skill is absolutely required when you’re running a luxury brand to optimise cost – which is why we are likely to see the emergence of a lot more Chief Operating Officer roles in luxury, following the example of YNAP.
Luxury, like diamonds, is forever…
We will always want and aspire to possess beautiful things; from the Aston Martin to the iPhone. This means, luxury brands will always have a role in society. But we are witnessing a crucial shift now these same brands are tasked with engaging a new generation – a tech-savvy, hyper-mobile, multi-tasking generation – in an authentic way.
Future-proofing your business means ensuring that you continually surprise their customers, engage them in a distinct way and deliver unique creative experiences, without losing sight of what made them loyal to the brand in the first place.
Lisa Weaver-Lambert | LinkedIn
Jack DenisonDirector - Global Head of Executive Search and Interim Management