Affluent consumers in search of an unforgettable customer experience have historically been able to trust well-known luxury brands to provide just that. Luxury icons including the Ritz-Carlton, Four Seasons, Lexus, Porsche, Louis Vuitton, Chanel and Tiffany & Co have consistently been customer service mainstays, along with upscale fashion specialty retailer Nordstrom.
Nordstrom has a reputation for customer service excellence—an urban legend even exists stating that the department store’s liberal return policy once allowed a customer to return a set of snow tires, although Nordstrom has never sold tires in the company’s 100+ year history. Nordstrom’s customers are willing to pay a premium for stellar customer service—which has paid off, as the company’s net earnings have outpaced that of its competitors in the first two quarters of 2011.
Unfortunately, Nordstrom seems to be the exception vs. the rule regarding the current state of the luxury customer experience. Recent research conducted by the Luxury Institute reveals that while 57% of shoppers with an income of at least $150,000 identify superior customer service as a defining quality of luxury goods, 50% have noticed a marked decline in the quality of the customer experience. It is not surprising therefore that customer attrition rates in the luxury industry are hovering between 80-90%.
As is often the case, however, issues around the quality of the customer experience constitute opportunities to re-engage customers with improvements and win a stronger degree of loyalty from them long-term. Three principal ways in which luxury brands can take advantage of this untapped opportunity to reinvent their customer experience stand out: placing the customer experience at the heart of their enterprise, revisiting the power of personal relationships, and embracing the social and mobile revolution.
The heart of the luxury experience = the customer experience
Before it is possible to provide an unforgettable luxury experience, it is important that a holistic view of the customer experience be constructed, according to Kerry Bodine, vice president and principal analyst at Forrester Research. Brands must conduct an audit of sorts—that is, examine all touch-points of the customer journey before determining what needs to be changed in order to provide their customers with a true luxury customer experience.
Most brands look at traditional touch-points such as the in-store experience: dressing rooms, product packaging, register lines, and receipts. However touch-points that can’t be overlooked are the actual use of the product, as well as the support that consumers experience through information and call centers. Bodine also recommends that brands which haven’t done so already develop a loyalty program designed to maintain engagement with previous customers.
As is the case with all aspects of the customer experience, an existing loyalty program must be examined as a touch-point just as important to the customer experience as a dressing room and post-purchase support. If the loyalty program that is currently in place is not an extension of the brand’s values or smoothly integrated into the overall customer experience, it needs to be revisited in the lens of the brand as a whole versus a one-off offering.
Return to a personal relationship
Developing personal relationships with their customers is something that all brands should strive to achieve in 2012. Many brands, including luxury brands who are often late adopters of online technologies, have invested in upgrading their online presence in recent years to the detriment of their offline, personal relationships. Unfortunately, according to the Luxury Institute, this means that only 10-15% of luxury customers state that they have a first-name relationship with a sales professional. This trend could be directly related to the 80-90% customer attrition rates seen in the luxury industry because customers who have a true human relationship with a brand typically buy double from that brand and stay loyal for a longer period of time.
The good news is that there is an opportunity for luxury brands to increase their customer loyalty, starting with a seemingly simple technique: a note. In the era of e-mail, handwritten correspondence can go a long way in developing a bond with a brand. One luxury executive who is a strong believer in a handwritten thank-you note is Fendi’s head of accessories, Silvia Venturini Fendi. Every one of the brand’s made-to-order Peekaboo bags come with a handwritten note from Ms. Fendi. Another brand that is well known for sending handwritten notes to its customers is Montblanc, purveyor of luxury watches, writing instruments, jewelry and leather.
A personal relationship has also proven to go a long way towards customer loyalty in the hospitality industry. Brands ranging from international chains such as Starwood and Hyatt to luxury providers such as Strategic Hotels & Resorts Inc., which owns and manages hotels under the Four Seasons and Intercontinental brands, have realized that it isn’t amenities such as perfumes, shampoos and soaps that matter.
“It’s a smile at reception, calling the guest by their name, serving breakfast on time, not making any mistakes with the bill,” said Bernard Lambert, Chief Executive of Society des Bains de Mer, which runs four hotels and five casinos in Monaco. “It’s about getting to know and then remembering your customers. Guests want to be recognized.”
The social and mobile revolution and its influence on luxury
Research conducted by CTIA—The Wireless Association—revealed that there are now more smartphones and cellular-enabled devices in the United States than there are people—and these devices are in the hands of the affluent. A recent Fidelity Investments survey of millionaires shows that 85% use text-messaging, smartphone applications and social media—proof that this demographic is wired across the spectrum of channels offering online and mobile content and customer interaction.
Luxury brands including Burberry, Coach, Louis Vuitton, Juicy and Kate Spade have recognized this from a product development perspective, developing iPhone, iPad and other smartphone and web-enabled device covers—indicating a clear recognition of the power of these devices in the marketplace. Yet, many luxury brands have not embraced the influence of social media and mobile technology in regards to the customer experience.
One major reason why luxury brands have been slow to embrace social media is that it is hard to maintain brand exclusivity when anyone with an internet connection is now able to develop a connection with your brand. However, luxury brands such as Jimmy Choo, Burberry and Mercedes Benz, and stores including Bergdorf Goodman have found a way to embrace social media because they know that super-affluent consumers are twice as likely as their average counterparts to use Twitter and LinkedIn—36% of those with an average annual income of over $500,000 follow a brand on Twitter, compared with only 14% of the general population.
Reinventing the customer experience
While the current prognosis of the luxury customer experience is not ideal, the time is right for luxury brands to re-engage their customers, securing the level of long-term loyalty that is synonymous with market leaders like Nordstrom. Through a dedication to placing the customer experience at the heart of their enterprise, revisiting the power of personal relationships with their customers, and embracing the social and mobile revolution, luxury brands have the opportunity to reinvent the customer experience, and position themselves once again as the first choice for affluent consumers searching for an unforgettable customer experience. Luxury Institute’s Wealth and Luxury Trends 2012 and Beyond