The luxury industry has to create memorable experiences for its clients, connect with them on an emotional level, and start focusing on the smartphone channel, which will be a key market in the future.
At the recent Mobile World Congress in Barcelona people talked about 5G – which provides mobile internet speeds that are up to 200 times better than the current 4G, the Internet of Things, and the single identification system. All these things are key for management practices in the luxury sector.
Smartphones and the luxury industry are very closely linked and the luxury sector still has a long way to go in order to leverage everything smartphones have to offer. Online sales in the fashion industry moved some 20 billion euros in Europe in 2015 according to a study of the digital transformation of Spanish companies. Levels of online purchases through mobile phones is already growing faster than revenues derived from physical shops.
All these issues were also discussed in Madrid during the presentation of the “IE Luxury Barometer 2015”, a leading gauge for what is happening in the luxury sector, prepared by the IE Business School and MasterCard Observatory on the Premium Market and Prestige Products. Experts selected ten key issues as being of the greatest importance within the sector of luxury products and services in 2015. Said issues are those that will impact changes set to take place in the future, coupled with those that are key for success at present. They were all focused on the kind of service that must be offered in a digitalized world, on innovation, and especially on products. All this in an industry that is expected to move 299 billion euros in 2016, according to forecasts by Euromonitor International.
The IE Luxury Barometer 2015 provides some very good lessons, and here’s the first: experience takes priority over the product. Today the relation luxury firms have with their clients or consumers is all about managing their emotions, connecting with the client on an emotional level. These emotions make for the memorable experiences that every luxury and premium market firm has to create. This is corroborated by the fact that 80% of the experts consulted for the survey selected creating memorable experiences as being a priority for all companies in the sector, placing it once again at the head of the top ten factors cited by the Barometer. Restoring or strengthening the way luxury firms manage emotions is now a must, because anything we do is simply not the same without emotion. Our limbic systems make us buy what we buy.
Doctor MacLean says that the limbic part of the brain deals with our emotions on a subconscious level. It is the part of the brain that plays a key role in the purchasing process, because the consumer will store any type of information there for a long time, along with the emotions that he/ she feels as a result. Emotions invite action. Neuromarketing (the combination of neuroscience, marketing and technology) is playing an increasingly important role in finding out how our brain makes purchasing decisions.
In addition to building memorable experiences for clients, the disruption of new digital platforms like Farfetch and NET-A-PORTER, and the importance of creativity, coupled with social and environmental responsibility (which are among the top five factors for successful decisionmaking in the luxury sector) are some of the key issues currently under examination by experts in luxury.
The role of digital advances is particularly important, being a subject that requires greater exploration in order to maximize profit and optimize business practices for the vast majority of companies in the sector. We should all be very aware that in less than five years over 60% of sales will take place online and we will see an increase in apps offering unique functions for firms, because consumer’s habits have changed and they now demand a unique experience, regardless of the channel they use to interact with the company.
The need for consumer and brands to be connected, and for firms have conversations with their clients is now a fait accompli in the luxury business. But there is still a great deal left to do and everyone should be aware of how operating in real time brings competitive advantages. The way luxury firms manage the evolution of customer and accompaniment strategy requires a shift toward the preferences and demands of the consumer, and is key for a successful experience.
Take note firms in the luxury industry and premium sector. Here you have the elements that luxury experts who participated in the Luxury Barometer 2015 agreed had impacted the sector in 2015 and would be priorities for 2016:
- Luxury brands create memorable experiences;
- The disruption caused by digital platforms;
- The role of talent and creativity;
- Product personalization;
- Social and environmental responsibility;
- Protecting exclusivity, aspiring to a position of absolute luxury;
- The need to balance management and creativity;
- The role of digital platforms: communication and forging links with the client;
- The continuation dilemma: the arrival of new generations;
- The growth challenge.
Above all, make a commitment to and invest in building a digital culture among the people who work for your company, because it is forecast that in 2020 there will be 600 million smartphones compared to 97 million last year, according to the Visual Networking Index. And don’t forget to craft emotional reward programs that make clients feel happy – and always remember the importance of the purchasing experience.
Yolanda Regodón. Associate Director of Communications. IE Business School,