As the fourth quarter of 2021 begins, most companies are busy preparing their strategies, budgets, and tactical plans for 2022 and beyond. Last year around this time, most companies were expecting the pandemic to end, hoping for a swift recovery. As we all know, the outcome has been quite different, and brands that were waiting out the pandemic now face a difficult reality.
But some of the largest and best-managed brands pivoted successfully by improving their customer-centricity, creativity, and — as a result — desirability. Consequently, they gained market share. Brands that were more cautious and tried to play it safe by intensifying promotions lost significantly. I had numerous discussions with managers who even started questioning whether their brands should remain luxury brands or reduce prices to become more accessible.
But they forget one thing: If we analyze the last thirty years, the luxury sector has continuously outperformed the more attainable brands. Numerous data sets confirm this truth, which I explain through a conceptual framework in my book “Luxury Marketing and Management.”
Particularly in a crisis, luxury has always proven to be by far more resilient and recovers faster. However, it is crucial to note that this recovery is not automatic; it depends on how brands act in their competitive space and towards consumers. Hence, instead of hoping that a rising tide will lift all boats, brands must own the responsibility to create extreme value. With that said, here are some strategies that are critical for success in 2022.
Shift thinking towards the customer experience
At first glance, luxury should naturally be about the customer experience. Most luxury brands highlight their personal in-store experiences as the pinnacle for this asset. However, our brand and experience audits show that customer experience is, in fact, an Achilles’ heel of most brands.
While there is a lot of staff training, and many brands have adapted metrics like net promoter score (NPS) to measure their in-store performances, the numbers often can trick brands. If a customer does not feel inspired, then a purchase is very unlikely. And if a customer feels like the only interest the store staff has is to make the sale, they may never come back.
In far too many audits worldwide, I see massive issues with customer experience creation — even among the otherwise “best” brands. Focusing on a holistic luxury experience is an action that will lead to competitive advantage if done right.
Rediscover a customer-love relationship
Luxury is love. I have used this analogy in many of my publications, and it reminds us that when we are in the business of luxury, we are in the business of creating so much value that customers fall in love. But with this knowledge comes responsibility.
Brands are responsible for nurturing this love relationship and keeping it alive. If a customer does not feel valued through brand interactions, whether they happen in person or digitally, then a breakup will happen. And don’t forget your youngest Gen-Z customers. They have different expectations (in most cases higher), and they are still dramatically underserved by many luxury brands. In ten years, they will be the number one luxury consumer group, so brands must be relevant in their eyes.
Therefore, brands need to organize all customer-centric activities around the idea of long-term relationship building rather than short-term transactional thinking. In a crisis, this becomes harder, as it may feel enticing to cut corners, make a quick deal, or run a promotion. All these measures will hamper the love that customers give us and will lead to a breakup scenario.
Radically rethink brand-equity building
Brand equity creation (from the perspective of the customer) is most important for luxury brands. In my research, I show that the Added Luxury Value — unique to brands that customers perceive as a luxury — depends a great deal on brand storytelling. Many brands, however, have no story.
They may have a history, or they may have great products. However, when I ask the question: “Why should I buy your brand versus all other brands?” I typically only get answers that describe the brand from a product-function perspective. With deeper probing, there is, in many cases, no perceivable competitive advantage that brands can communicate. Countless ads showing equally pretty faces next to handbags, cars, or resorts all indicate that. Typically, we find a “sea of sameness” where many brands within a category fundamentally do the same thing.
The brand equity aspiration of a brand is, in my view, the most critical task a brand must complete because the definition of the brand story influences all other strategies. Without a story, there is no value. Therefore, all other measures will fail. As it is, 80-95 percent of new products fail, so 80 percent of brands never achieve their potential. If there is one thing brands should do as soon as possible, it is a rigorous brand audit, with a brutally honest assessment of brand equity and storytelling. Then, where indicated, fix it.
Strive for digital competitive advantage
Around 95 percent of all purchase decisions are now initiated digitally, whether the final purchase is online or in a store. Hence, the digital arena becomes where preferences get built and where brands decide whether they will win or lose.
Still, too many brands underestimate digital and see it predominantly as social media fun or a marketplace. The right way to approach it is to think about digital competitive advantage. Therefore, you should be able to answer these questions: Why would someone on their digital journey prefer you over other brands? Does your brand story (assuming your brand has one) come across clearly and in a differentiated way? Do you inspire your audience so that they desire your brand? Is your digital customer journey leading to extreme value in the eyes of your customers?
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