The Greatest Operating Myths in Luxury Goods and Services !
Luxury Institute-The Greatest Myths in the Luxury Goods and Services Industry-GLEN Members
Myth #1: In order to be successful today, a luxury brand must rely heavily on Chinese tourists.
Reality: While Chinese clients have been driving most of the growth in the luxury industry, and remain very important for most luxury brands, several brands have successfully focused upon, and have deeply cultivated, local clients to achieve solid long term results comparable to those that rely heavily on Chinese tourism.
Myth #2: The luxury e-commerce experience is primarily about UX, automation and chat.
Reality: A growing number of smart luxury goods brands are realizing that the online experience can be dramatically enhanced by providing human personal shoppers, or trusted expert advisors, scheduling client appointments, and curating an experience that leads to much higher conversion rates and lower returns online.
Myth #3: Time is the ultimate luxury.
Reality: A high return on invested time (ROIT) is the true ultimate luxury. Most luxury brands are trying to emulate Amazon in efficiency, and fast delivery tactics are important. However, those are commodities. What luxury clients really want is an extraordinary experience when they invest time, whether online, in a store, at a spa, or restaurant. Extraordinary client experiences require great expertise and great human connections built on rich interactions with emotionally intelligent human beings.
Myth #4: Luxury leads in exceptional client service because of its best-in-class training programs.
Reality: The luxury industry is the best at product knowledge training programs and excels in training for etiquette and professional communication. However, luxury brands fail to train and educate their people for the last mile – in the consistent and creative relationship building skills that create emotional human-to-human connections. The luxury industry, given its high value goods and services should be leading the way for all other industries in sales training. Instead, it lags B2B firms in innovating in business development skills and emotional intelligence. Even in 2019, most luxury training is still scripted, robotic and dehumanizing to associates and clients alike. Currently, sales associates are trained and paid to be “brand ambassadors” and serve the client according to directions with no real education on how to connection emotional to build relationships. If sales associates were taught, required and compensated to build relationships rather than to merely serve the client based on the training program, not only would they feel far more human at work, but they would also feel far more invested in. If associates are educated on real-life skills that help them to improve performance both professionally and personally, they will, in turn, provide a much more emotional and exceptional experience with clients.
Myth #5: The luxury client is excessively private and is not approachable.
Reality: The luxury client is in fact excessively private; the reality is that they are selective versus unapproachable. The luxury client is seeking a relationship with an honest, expert and trustworthy individual within a brand. They are more than willing to provide feedback and tell you exactly how they would like to be treated, if you build an emotionally intelligent relationship with them first.
Myth #6: The sales associate has been rendered irrelevant by digital technology.
Reality: The sales associate has every opportunity to be relevant by transforming themselves into emotionally intelligent trusted expert advisors. Transactions are dead, but high-performance relationships, driven by expertise and human connection are thriving. Ultimately, this only works when the sales associate and digital technology can work together.
Myth #7: Only the top 20% of clients really matter to a luxury brand.
Reality: For most luxury brands, the top 20% of clients drive 70% of sales. Luxury brands are exhausting their top 20% of clients and are seeing a drop-off in retention. The lack of genuine relationship building across the other 80% of clients, who may drive only 30% of sales, but have very high-potential long-term is stagnating growth.
Myth #8: Today only the older wealthy consumer can afford luxury.
Reality: Millennials and Generation-Z carry a substantial amount of debt, but they will stretch to be part of the luxury community. They covet luxury and will trade up for the luxury item and trade down for the day-to-day item to prove that “they belong”.
Myth #9: Trust from clients is a given when it comes to luxury brands.
Reality: Luxury brands can no longer assume that they have the trust of clients. Today, clients rate luxury brands beyond products in areas such as sustainability, charitable causes and workers’ rights. Value and trust must be earned every day and luxury brands must be leaders in all areas.
Myth #10: Luxury companies should be on Facebook.
Reality: Luxury consumers are trusting Facebook less and less, and many have minimized their engagement or stopped using their accounts altogether due to privacy concerns. Luxury brands should focus on Instagram due to its high visual and engagement power and lower privacy concerns.
Myth #11: Luxury clients respond to spam mail tactics.
Reality: Luxury clients are inundated with marketing communications. To survive, they have learned to tune out advertising noise, even from the best luxury brands. Luxury brands must personalize communications by making them relevant and sent from a real caring human being whom the customer knows and trusts.
Myth #12: Chinese clients are willing to buy everything with a luxury logo.
Reality: Chinese clients have become highly educated, discerning and sophisticated luxury clients in record time. Logos are appealing, but many brands with subtle branding are appealing more and more to Chinese clients who are completely confident in their new wealth and in their own skin.
Myth #13: The economic bifurcation is luxury industry vs. mass market.
Reality: While all boats in luxury were once lifted by a rising economic tide, today the luxury industry is divided into a very few big winners and many mediocre and poor performers. Luxury brands that want to be successful must differentiate themselves from the luxury pack to a much greater degree today than ever before.
Myth #14: Customer loyalty is dead in the luxury industry.
Reality: Luxury used to be populated by a very select group of brands. Today every luxury category has too many competitors, and clients are inundated with too many choices. But a few brands prove that they can retain their clients and their offspring over several generations. Loyalty requires a greater, better effort today, but it attainable.
Myth #15: Luxury is selfish.
Reality: The luxury industry today is a proactive champion for causes that often are not popular with the mainstream world. Luxury leaders and brands stand-up for women’s rights and minority groups whose voices aren’t being heard. Luxury donates a tremendous amount to many charities and has been among the first industries to fully support sustainability.
Myth #16: If you want to grow substantially as a luxury brand, you must have the largest marketing budget.
Reality: The way to grow large and profitable in luxury is to deliver the highest value products and services via extraordinary experiences that make clients feel special. Then clients become a brand’s best advocates, and the brand grows dramatically through customer retention and referrals.
Myth #17: Luxury brands should only hire executives and front-line people who have luxury experience.
Reality: Today, many luxury brands are so inbred exclusively in luxury that they have locked themselves into vicious cycles of ineffective groupthink. Many people in luxury have expired mindsets with expired experience for a changing world. Cross-pollination with talented individuals from all industries and industry segments is a way to drive open innovation and success.
Myth #18: The only way to protect a luxury brand’s equity is to maintain complete control of all ideas and activities.
Reality: Brands can maintain their DNA and identity and still use open innovation methods to disrupt, reinvent and transform themselves to remain highly relevant in today’s evolving luxury industry.
For more information contact The Luxury Institute new York – Milton Pedraza