2012: WILL IT BE HAPPILY EVER AFTER FOR LUXURY BRANDS?

-FOR THE LOVE OF LUXURY

Next year is set to be a challenging, but rewarding, time as the battle for market share continues.

In a struggling economy, discounting may seem like the obvious way to boost sales. But for prestige brands, slashing prices could undermine their reputation. Instead, luxury brands will look to add value through other areas. From targeted communications through to bespoke products designed to suit the individual, theyll be taking a more personal approach.

The mobile movement

The smart phone has opened up new opportunities for brands. Fashion labels Gucci and D&G have both developed immersive mobile applications, while others have used Augmented Reality to bring their campaigns to life. Companies will be using technology more wisely. Were looking forward to seeing fewer gimmicky mobile apps and QR codes on posters in the underground (where they are unusable with no phone reception) and a more considered use of mobile. Geo-location technology, for example, will have a big impact in helping brands target consumers by location.

Switching to social media

Many luxury brands were initially wary of using social media an unpredictable medium that was perceived as mainstream but recent statistics suggest that 80% of high net worth individuals (with an income of at least $240k pa) have one or more social network profiles,
1 Unity Marketing, How the Affluent Luxury Consumer Uses the Internet and SocialMedia: An In-Depth, Feb 2010

the most common being Facebook1 , and activity in this area is set to increase. BMW and Louis Vuitton are already creating video and rich media campaigns to establish themselves in the online worlds of art, culture and fashion. Other luxury brands are following suit, with an emphasis on interesting content that reinforces their brand values and engages customers and aspirants alike.

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FOR THE LOVE OF LUXURY tangent snowball 2011

With creativity and a considered strategy, luxury brands can get good results from social media. And there are options beyond Facebook and LinkedIn. Luxury social media sites like aSmallWorld, LuxuryRatings.com and Squa.re, feature an invitation-only, subscription based service targeted specifically at wealthy audiences. As these niche networks grow, so will the involvement of luxury brands.

Guilt-free shopping
Eco-friendly, sustainable products are another trend in the luxury sector. According to WWFs Deeper Luxury report, increasingly, successful people want to show that they care
2 Deeper Luxury, Quality & Style When the World Matters, WWF, http://wwf.org. uk/deeperluxury/report_download.html

about environmental and social issues.2 In the automotive industry, theres Teslas range of luxury electric-powered sports cars and Lexus luxury hybrid vehicles. In fashion, Chanel have launched a software package called Winted to help packaging designers minimise the carbon footprint of their designs.3 And Giorgio Armani have put an environmental strategy in place to help cut waste and are sponsoring World Water Day 2011. As more companies outsource production to Asia to cut costs, a backlash demand for ethically made goods is likely to increase. As a result, all brands should be prepared to answer questions about their social and environmental policies in 2012.

3 http://luxurysociety.com/ articles/2011/03/luxury-sustainabilityppr-chanel

New frontiers
Emerging markets, in particular China and India, will continue to grow. HSBC predicts that China will overtake Japan to become the biggest consumer of luxury goods in the world and Hermes has already launched its own China-specific sub-brand, Shang Xia.
4 Hurun Wealth Report 2011

With 960,000 millionaires4 among its inhabitants, the Chinese edition of Vogue is so oversubscribed with advertisers that they have considered splitting the publication into two parts. In India, 46.7 million out of 188 million households are estimated to be in the high income bracket. As a country with an economic growth potential of 120-150%, India represents a huge opportunity for luxury brands. However, local complexities make it a tougher market to crack than China. Its price sensitive and purchase is still based around necessity, so a localised message combined with a masstige pricing approach is likely to deliver the best results.

Retailers as publishers
Sharp content is vital to any brand looking to influence consumers online. Net-A-Porter have introduced magazine-style articles, tips and trends as part of their e-commerce offering. President of Hearst Magazines, David Carey, said, theyre increasingly a commerce company moving into content publishing. Other luxury fashion brands like Dunhill are adding rich-media content including videos, interviews and review to their sites, and using social media to spread the message.

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84-86 Great Portland Street London W1W 7NR

FOR THE LOVE OF LUXURY tangent snowball 2011

The trend works in the other direction too content publishers are also supporting retailers. Conde Nast confirms that links to retailers from mainstream media outlets are on the rise in luxury publications. Ralph Laurens planned takeover of the New York Times iPad app is one example of this shift.

A commitment to data
In the course of championing a more personal approach to customer service, luxury brands will be developing considered, data-led CRM strategies, taking their lead from savvy mainstream brands like Tesco and Amazon. The shift is already evident. Bang & Olufsen are investing heavily in customer understanding, data cleansing and segmentation. And retailers like Net-A-Porter are segmenting their customers according to spending habits. Innovative customer loyalty programmes are also springing up, like Neiman-Marcus InCircle programme which rewards customers with luxury experiences rather than discounts.

What the future holds

Overall, 2012 will be the year of data collecting it, maintaining it and using it well as luxury brands look beyond price reductions to focus on building a loyal customer base.

If you would like to know more about how Tangent Snowball can help you communicate more effectively with your customers contact us on 0207462 6100 or via luxury@tangentsnowball.com.

t: 020 7462 6100 e: luxury@tangentsnowball.com w: fortheloveofluxury.com

84-86 Great Portland Street London W1W 7NR

FOR THE LOVE OF LUXURY tangent snowball 2011