Brands balance scarcity with need to reach millennials
The luxury market overall is chasing millennials. Some suggest that millennials are more likely to buy technology brands. But to me, tech is functional; luxury is a necessity. We are in danger of neglecting the Gen X shoppers, those who can educate their children about luxury, and get them on the road to appreciating real quality? Scarcity is a related topic. Even Hermès, which has always been very exclusive, sometimes unavailable and focused on high-level craftsmanship, recognizes the need to reach new audiences. Hermès seems to have gone more into fragrance. How does the scarcity model change if brands like Hermès become more accessible?
Changing views of ownership open access to luxury
The sharing economy is well established in the luxury sector, where highly affluent people understand the costs and benefits of owning an asset vs simply using one when they like. To add to the rational financial arguments, there are other reasons behind changing attitudes to ownership, such as the desire for luxury experiences that are unique and shareable, over possessions. For the luxury automotive sector, leasing and financing offer better flexibility than owning the vehicle and allow high-net-worth individuals to invest capital elsewhere. Financing also expands access to luxury models, beyond premium, and certain automotive brands cover both segments within the same model range with substantially different price points.
Brands use data to personalize luxury experience
Personalized experience is key for reaching consumers, especially millennials.. The data available to luxury brands enables them to personalize. The message may not need to be personalized to the customer as an individual, but it needs to be personalized to the customer as a mindset. And without personalization, the experience won’t resonate, especially with millennials. Many brands are entering travel, and personalizing the experience, in part to appeal to millennials.
Luxury message may disconnect from youth values
Amidst the broader challenges that the luxury market faces, particularly with Millennials, my sense is that there is a disconnect, or an undercurrent of tension, between the values important to millennials and those of luxury brands.
Luxury brands, as the original badge brand category, have always connoted wealth, prestige, and to some degree, materialism upon their users. Our research shows that millennials want to be perceived as social, friendly, and altruistic. What strikes me is that if luxury brands are displaying the badges or traits that millennials are trying to distance themselves from – it stands to reason there would be a softening of adoption of those types of brands with Millennial consumers. To combat this dissonance, luxury brands need to adapt to the changing value structure of the younger generation, and consider how to present the brand in line with those values.