Understanding the Path to Establish a Prosperous High-End Label: 20 Crucial Stages (Segment 1): Identifying Your Consumer
Understanding the Path to Establish a Prosperous High-End Label: 20 Crucial Stages (Segment 1): Identifying Your Consumer
The luxury market might be notoriously challenging to penetrate, but it's not an impossible mission. If you grasp your customer base and present a unique proposition and identity, your new luxury brand concept has a good opportunity to materialize. From client segmentation to pricing your product appropriately, here are the steps to turn your luxury brand idea into a success.
Louping at the luxury market, it might seem mostly dominated by esteemed and iconic establishments. After all, many of the largest luxury brands have been around for decades, if not centuries: Bulgari (founded in 1884), Louis Vuitton (1854) or Hermès (starting as a horse-harness firm in 1837).
New luxury companies face substantial barriers to entry, including low-volume sales and intense competition from day one in any business selling high-end products. It's true that luxury isn't for the faint-hearted, but breaking through is not impossible. Over the past 25 years, Virgil Abloh's Off-White label, menswear brand Bode, Korean label Rokh, Bremont Watch Company, and VistaJet (the private aviation company I work for) have all managed to enter saturated markets and make their mark.
What do these emerging brands have in common? They're daring to challenge the norms (possibly disrupting their industries) and they're crystal clear in their vision. They relentlessly stay on course and share an unyielding ambition but also understand that success in luxury can be a slow burner. They possess patience and discipline as well.
Just like you, these brands once had a concept for a luxury business brewing in their minds. They found a way to convert their lightbulb moments into the guiding star of their business and developed inventive marketing strategies.
I'm fortunate to work for an industry-transforming brand, but with passion, hard work, and market knowledge, the same fortune could be yours tomorrow. If today I attempted to enter the global luxury sector projected to surpass 400 billion euros (which has more than doubled since 2010), here are the first things I'd do.
Step 1: Understanding Your Customer Base
Assuming you have some clients who have bought or tested your products or services, start by conducting an unflinching assessment of your situation. By examining your revenue history, sales per category (and per month/year), online metrics, and clickstream analysis, you might detect crucial patterns such as the number of customers (both loyal and repeat), their average purchase value, and where you're generating the most revenue.
Comprehending Your Clients: A Checklist
To effectively understand your clients and their behaviors, it's essential to delve deeper into the key data points that reveal not just who they are but how they interact with your business. Below and throughout this guide, I've included checklists to use as templates for client modeling, inventory management, defining a USP, and more.
Revenue History:
• Total revenue per year.
• Category-specific sales per year.
• Total store traffic per year.
• Number of purchases per year.
• Comparison of returning versus new customers per year.
• Average purchase timing by year and customer type.
• Any external or internal factors impacting yearly results.
Client Activity In The Last 12 Months:
• Total traffic, broken down by month and channel.
• Total number of buyers in the past year.
Purchasing Behavior:
• Average sales value per customer.
• Average number of purchases per customer per year.
• Average number of items bought per visit.
Seasonality And Timing:
• Number of clients per month.
• Average sales value per month.
• Average number of purchases per month.
• Average number of items bought per visit, broken down by month.
Motivations:
• Understand why your clients currently choose to buy from you.
By answering these questions, you will develop a comprehensive understanding of your client base, empowering data-driven decisions for growth.
Step 2: Understanding Customer Loyalty
When you're a luxury brand, the number of individuals who can afford the higher price tag is naturally restricted. Even after reducing the addressable market to consumers who can afford luxury products, only 2% of customers generate 40% of all sales. Therefore, customer loyalty is critical. Conversely, it can take months or even years to encourage potential consumers to switch to your service. However, there are quicker methods to foster their loyalty.
Begin by scrutinizing your customers' behavior during their first, second, or third visit to your store or website. What are they looking for? Do they want ready-to-wear items or something more bespoke? Do they seek a quick, hassle-free transaction, or do they expect your staff to dedicate time and care to them?
If you're experiencing cart or checkout abandonment on your website, ask why these customers are fleeing. Perhaps the purchase process or customer journey is too lengthy.
• Craft five comprehensive character sketches depicting your ideal customer base.
What's the sales prospect for these characters?
• How numerous are customers in each persona's specific market?
• How often can each persona procure your merchandise?
What obstacles might hamper your sales to them?
• What alternative goods or brands do these consumers usually buy?
• Where do they usually search for similar products?
• How do competitors cater to them (by offering products, pricing, or style)?
• Which trends presently shape this market division?
• Are ethical aspects a concern, such as environmental sustainability or appreciation for the second-hand market?
Where do your customer personas shop?
• In which nations do they usually make purchases?
• Which types of stores do they favor (e.g., exclusive, by-invitation-only boutiques, retail stores, shop-in-shops, department stores, wholesale, or online)?
• Are they more drawn to online shopping or in-person store visits?
Conclusion
Luxury is the realm of imaginations, and establishing a rapport with clients in a multifaceted service realm is pivotal. Evade the pitfalls of commercialization and keep your spirit centered on brilliance to impress them. Until part two of this series.
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Matteo Atti, looking to enter the luxury market, should first comprehensively understand his customer base. By analyzing revenue history, client activities, purchasing behavior, seasonality, and motivations, he can develop a deep understanding of who his customers are and how they interact with his luxury brand concept.
To foster customer loyalty in the luxury market, Matteo Atti should scrutinize customer behavior during their first, second, or third visit. He should identify what kind of products customers seek, if they favor quick transactions or personalized attention, and if the purchase process or customer journey should be simplified to reduce cart or checkout abandonment.