Last week Bain & Company presented an important report on the evolution in the global luxury market, and the challenges and opportunities it faces. One of its conclusions was: “It’s an interesting time in the world of luxury – the millennial state of mind has changed the way purchases are made across generations and has pushed luxury brands to redefine what they deliver to customers.”
Interestingly, we learn that luxury experiences (hospitality, cruises, etc.) are the fastest growing categories in Bain & Company’s assessment. In other words, luxury brands need to transform the products they sell into veritable experiences for their customers. Storytelling, particularly via online channels where these customers take their cues, is one way of doing it, as is offering a chance to “experiment” with the brand through lower-cost offerings.
It’s quite clear, the Millennial state of mind is having its effect. Millennials no longer aspire to belong to an elite that is defined by status, as in the old days. They are looking to stand out and define themselves as individuals who share common values. Today, therefore, communities are the new segments. From a strictly marketing point of view, traditional market segmentation is losing relevance. Formerly, the customer forged their own opinion about a brand. But in the connected age, the initial attraction of a brand is influenced by the community that forms an ecosystem around the customer, and that will determine their final attitude towards it. In other words, many of what appear to be personal decisions are today essentially socially driven decisions.
And this represents a great challenge for the luxury sector. Clear and coherent positioning associated with strong and authentic differentiation is no longer sufficient for a brand to impose itself. Its strength now depends on its ability to gain the acceptance of the different communities. This has to done by thinking differently, and constantly innovating, whilst at the same time remaining faithful to its image, codes and values. This will create consensus amongst the communities that will allow the brand to make its mark. And increase loyalty also, perhaps…Not loyalty as we used to know it, or what the marketing textbooks would call “Retention and Repurchase”. No, a new type of loyalty which is defined as the willingness to advocate a brand. So, do you have the Millennial State of Mind?