COVID rocked the luxury market. According to Bain & Company, it lost £55 billion in sales — a 23% decline — in 2020. However, 2022 has shown the durability of the luxury consumers market, which grew by 17-19% in the first quarter compared to 2021.
With the green shoots of recovery emerging, the luxury brands who meaningfully connect with their customers will position themselves as sector leaders for years to come. And, in a landscape somewhat neglected by their peers, ambitious luxury brands need to look outside their sector and take inspiration from global innovators in audience engagement. So it’s time to look at the bigger picture.
To help you do that, we’ve identified five key factors to attracting and keeping luxury buyers in the next 12 months and beyond. But first, let’s take a look at an important, emerging type of luxury buyer. Meet HENRY.
Deloitte’s ‘Global Powers of Luxury Goods 2019’ report identified an important new group of luxury consumers called ‘HENRYs’ — High Earners Not Rich Yet(s).
This new generation of affluent consumers aren’t high net worth individuals yet, but are likely to be one day. As such, luxury brands need to start building connections with them now so they become lifelong customers.
To do so, you need to understand what’s important to your target HENRYs and tailor your proposition accordingly. After all, what matters to your future customers should be what matters to you right now.
Thanks to The Economist and Walpole’s report ‘Luxury in a time of Covid-19: HNWIs, HENRYs, and a Pandemic’, we know that luxury purchase intent is stronger than ever, the desire for a great in-store experience remains strong, and stories of craft and sustainability play a key role.
These factors are crucial when considering the five key areas your brand must put at the heart of its business to win these important high-earners.
There’s also been a fundamental shift in the focus of large sections of the luxury audience. Buying luxury items is no longer about just having possessions, it’s about having experiences. While the need to purchase consciously is a growing consideration amongst younger audiences.
So, through the lens of the HENRY, what five things do luxury brands need to focus on to win round the next generation of luxury customers?
1. Luxury consumers – a more conscious approach
Conscious consumerism is on the rise. In 2018, William Grant & Sons identified the ‘Active-ist Consumer’, a group described as ‘purposeful, connected and empowered’ — and it’s a group that has been getting bigger ever since.
The following statistics show how important sustainability is for your business, your brand reputation, and your marketing communications.
- 30% of affluent and high-net-worth (HNW) UK individuals are showing strong intentions to consume luxury in a more sustainable fashion (Altiant).
- 30% of Millennials and Gen Zs will pay more for sustainable products (McKinsey).
- Sustainability remains a key consideration for consumers in 2021 with 32% of consumers highly engaged with adopting a more sustainable lifestyle (Deloitte, 2021).
- 73% of UK consumers want to be more sustainable in 2021. Nearly half of these respondents said Covid-19 was a ‘wake-up call’ to protect the environment (Garnier).
- Equally important, 28% of consumers have stopped buying certain products due to ethical or environmental concerns (Deloitte, 2021).
- 83% of Brits want companies to better integrate environmental considerations into their products and operations (Boston Consulting Group).
In short, sustainability in an increasingly pertinent part of the buying process, especially amongst Gen Zs and Millennials — an essential audience for luxury and premium brands.
What this means for your brand
Make yourself more attractive to conscious consumers. Can your product be made more efficiently? Can you bring in recycled packaging or reduce your carbon footprint? If not, can you operate a carbon off-setting programme or collaborate with a sustainable organisation and help them do more?
Understand your audience. Conscious consumerism is becoming a growing part of this audience’s buying decision. How can you align your brand and business to what they want to see?
Avoid greenwashing. Don’t pretend to be sustainable if you can’t be. As Altiant’s Sustainability Luxury Brand Index 2021 says, ‘[customers expect a company’s] activities to be authentic and credible, not greenwashed.’
Shout up. Make sure you celebrate your achievements loud and proud. This is your opportunity to be a leader – and to forge a competitive advantage through your sustainability story. So make sure you take it.
2. Tell – and sell – your brand story
Stories are powerful. They connect with our emotions, making us feel as well as think. This is important because, according to Harvard professor Gerald Zaltman, emotion is one of the biggest drivers for purchases.
The other good thing about stories? People share them. So if your brand tells a good story, its advocates will share it with others.
Many brands sell the same thing, but stories are unique. Find yours – and tell it whenever you can.
Storytelling improves your brand experience, too. Whether in-store or online, communicating your brand in ways that resonate with your audience is crucial in building long-term advocacy and a sense of shared community. Global Web Index reports that 77% of luxury consumers prefer to buy a product or service simply for the experience of being a part of the community.
This is especially pertinent for luxury brands, where a focus on brand storytelling offers luxury buyers a stronger perception of value. And the more an audience values a product, the more they’ll be prepared to pay a premium. After all, you can buy a watch for £10, but a watch that makes you feel part of something exclusive and aspirational has such perceived value that when it comes to pricing, the sky’s the limit.
What this means for your brand
Sell your story. People don’t just buy products, they buy stories. Your story can be a huge differentiator and gives you an opportunity to share your values with like-minded customers. And, if it’s intriguing enough, your story will become theirs, as they share the tale behind the product.
Flex your story. You need to mix up your messaging to suit your audiences. A long, beautiful brand video might be great for your website and YouTube, but it might not do so well on Twitter or TikTok. Consider your audience, work out where they consume content, then tell your story in a way that works for them.
3. Use your labour illusion
Customers think more of a product when they see the effort, expertise and time that goes into making it. The greater the understanding of the craft and skill behind a product, the greater the perception of value, which justifies a luxury premium – and sets brands who show their labour illusion apart from those who don’t.
This ties back to the importance of storytelling. How you make what you sell, the history behind your brand, and the investment you’re making into its future are all brand stories that help your customers feel an affinity with you. It’s how you create an emotional connection, not just a transactional one.
The price isn’t just about the product, it’s about showing the process.
Alcohol brands are very good at this. They know that customers like to research the drinks they buy, to spend time reading the packaging, seeing how it’s made, and becoming genuinely engaged. Customers see whiskeys, cognacs and wines as aspirational, and knowing how they’re made gives them a story to tell others. To appeal to that connoisseur mindset, alcohol brands show the craft and care that goes into every bottle, justifying the price in the process.
There’s a clear demand for labour illusion, too. In 2020, almost 40% of HENRYs wanted more information about how products are sourced and produced. This is partially driven by a desire for greater sustainability, but 42% of HENRYs want to see more stories about brand heritage and history, too. (The Economist Group Luxury Survey 2019/20.)
What this means for your brand
Show your workings out. You need to invest in well-crafted copywriting, design and video to showcase the provenance of your products in a way that befits their standing in your audience’s minds. By showing how much work goes into what you do, your customers will be more willing to pay a premium.
Communicate your ‘why’. What gets you out of bed every morning? What fuels the fire that helps you create such an incredible brand and product? Show what drives you, and you’ll grab attention from those who share the same values.
4. Learn about HENRY: The future of luxury consumers
Luxury items are often seen to be the preserve of older audiences, a sentiment backed up by older generations having more spending power. In the US, for example, people over 50 account for over half of consumer spending. Boomers (born between 1946 and 1964) spend the most, not-very-closely followed by Gen Xers and Millennials (Epsilon).
In short, most money lies in mature hands.
However, where things get interesting for luxury brands is that younger people are more likely to treat themselves to high-end products or services. According to Statista, 34% of UK respondents aged 25 to 34 said they were ‘regular treaters’ when buying luxury items. In contrast, only 7% of 55 to 64 year-olds could say the same.
Win a HENRY over, and you don’t just have a customer, you have a lifelong brand advocate with huge potential spending power.
So, who do you target? Older audiences with more spending power or younger audiences with less money – but who are more willing to use it.
This is where our HENRY comes in, because they’re a mix of the two: they have money and they’re not afraid to spend it. In the US, HENRYs make up 18% of the population but account for 40% of its spending.
It’s therefore crucial that you really get to know your HENRY. What inspires them? What excites them? What values do they share with you? What stories do they want – and expect – to hear from you? Over what channels would they hear them?
Understanding these luxury consumers isn’t just important in how you sell to them today, but in how you sell to them in the future. As people get older, buying habits change, as they’re influenced more by what their children put in front of them. And where people spend their time online changes, too – today, 20% of TikTok’s user base are now over 40.
In short, understanding who your audience is, what they love, where they consume content, and whether their buying behaviours are changing is key to giving them what they want.
What this means for your brand
Create a buyer persona for your HENRY. Who is your HENRY? Where do they shop? What do they love? Where do they go online? The more you can flesh out your buyer persona, the better chance you have of resonating with them.
Don’t focus solely on HENRY, though. If you’re in the process of segmenting your target markets, don’t forget that while HENRYs might be the future, it’s the older demographic that has the most money. Find a way to appeal to both.
5. Close your experience debt
Important before the pandemic, a brand’s digital and ecommerce user experience is now vital to attracting the next generation of digitally savvy luxury consumers.
Digital has never been more important. Over a period of just eight months in 2020, ecommerce’s share of fashion sales jumped from 16% to 29% globally, representing six years’ worth of ‘normal’ growth (McKinsey & Co). Digital traffic to the top 100 European brands’ websites surged by 45% in April 2020, compared to March.
This isn’t just a short-term thing, either. Bain & Company state that by 2025, 30% of luxury sales will be online, compared to just 12% in 2019.
Clearly, the need to provide a better, easier-to-use online experience is paramount. Which is why luxury and premium brands have rushed to digitally transform in 2020 and 2021, through CRMs, targeted digital advertising, and e-commerce optimisation.
All good stuff. But design-conscious brands need to do more than provide efficient user experiences for luxury consumers — they need to connect emotionally, just like their brands do offline and in store.
In most instances, however, the online brand translation is often generic, uninspiring, and product-led. Websites are far too skewed and aligned with Amazon’s efficient ‘buy it quick’ philosophy and UX, when luxury brands should be encouraging discovery, learning, and engagement prior to the buying decision being made. They should be using the power of storytelling and elegant design to enchant audiences – just like their offline efforts and collateral do. Then, when a decision to buy is made, make the process efficient and seamless.
Design-conscious brands need to connect emotionally online as much as they do offline.
If their online proposition fails to match their offline one, luxury brands accrue an ‘experience debt’ that leaves customers feeling detached, disappointed, and ready to shop elsewhere.
To compound matters, improving efficiency and accelerating digital change have been two of the top three priorities for CMOs in 2021 according to Deloitte, and this is likely to stay the same in the near future. This means emotive brand building risks being further overlooked, which presents a problem for those who fail to recognise it – but it’s an opportunity for those who do something about it.
The key lies in combining efficiency and emotion to create brand experiences that convince people not just to buy, but to love who they buy from.
What this means for your brand
Don’t rush. Like any other marketing channel, digital should ladder back to your overall strategy. Take the time to work how instead of just posting for posting’s sake. Luxury and premium brands’ reputations have been built over decades; they shouldn’t be undermined with a rushed-to-market website and shoddy digital branding.
Choose your channels wisely. Creating an online environment that’s every bit as luxurious as your offline one takes time and resources. Spend time up front understanding which channels to target so you don’t spread yourself too thin and can more easily attribute where your success is coming from.
Key takeaways in attracting luxury consumers
- Champion your sustainability credentials – but only if your business has any to start with. If your practices aren’t green, change that first, then shout about it.
- Tell your story to sell your brand. Luxury consumers connect emotionally through stories, so unearth yours and make it an integral part of your marketing communications.
- Show your work. People pay more when they understand the thought, skill and toil that went into making the product.
- Become friends with HENRY. These luxury consumers are your most important long-term asset, so get to know them. Inside and out.
- Don’t let your digital marketing downgrade your brand’s reputation. You need to create a luxury experience across every channel, including digital.
We’ll help you find your HENRY
Want to secure the next generation of luxury consumers? Well, after twenty years of building, branding and digitally transforming luxury and premium businesses, we can help you do just that. Get in touch today.