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June 2008

INTRODUCTION

While most marketers acknowledge their target consumers' reliance upon digital media, what remains challenging is identifying which of the many forms are effective in engaging consumers. This is no less difficult for luxury goods marketers who remain perplexed by the varying options available and the possible synergies across various ad-supported media.

Qualitative techniques are extremely valuable in uncovering the relative influence of various media – perhaps more so than quantitative approaches. Moreover, this type of research is best at establishing the relationship between consumer and brand, identifying the critical touchpoints for the brand and then the channels which best enable those connections. Only in this manner can we understand how digital platforms such as social media, search and display exert influence in branding and purchase.

We discuss the context of luxury consumption looking at the many ways in which people relate to luxury goods and how our heavy luxury goods shoppers currently make use of digital media and technology. From the research we developed a luxury brand engagement model which helps make sense of the multi-faceted relationship between consumers and luxury brands and the digital marketing opportunities at every stage of engagement. Finally, this paper outlines some strategic and executional recommendations on how digital media may be used to effectively market luxury brands.

OBJECTIVES

We set out to answer some fairly ambitious questions in this research, not least:

• Is it appropriate for luxury brands to use digital marketing to communicate with luxury consumers? And, if so:

• What exactly should digital marketing be used for?

• Which forms of digital marketing should be used?

METHODOLOGY

The complexity of the task lent itself to a multistage research methodology in which we could: (1) explore people's relationship with luxury brands; (2) understand their relationship with digital media and technology; (3) identify digital marketing opportunities for luxury brands; and (4) test specific digital marketing executions.

All fieldwork was conducted in October and November 2007 in Paris, London, Tokyo and New York. Fieldwork was primarily designed, managed and conducted by Essential Research Ltd (UK) with local moderation and analysis support from JMI (Tokyo) and Zed Marketing (Paris).

In total, 38 luxury consumers took part in the research with 8–12 respondents recruited per region, as follows:

• 50/50 split between male + female

• 50/50 split between 18–34/35+

• All respondents from affluent households (household income $100k+ p.a.)

• All respondents to spend $3,000+ on luxury goods per year

A four day pre-task media diary allowed us to understand the individual's usage and attitudes towards new media and technology within the context of their life-style and traditional media consumption, and to help identify/validate different digital marketing opportunities.

Next, 38 60-minute individual depth interviews focused on unravelling the individual's behaviour and attitudes towards luxury goods, and exploring expectations and perceptions of luxury advertising across different media. The majority of interviews were conducted in-home to put respondents at ease and to get a better sense of their lifestyle and habitat.

Finally, fourteen 60-minute friendship pair interviews allowed us to explore the social role of luxury brands (including how peers discuss and share related information and marketing communications) and to test specific digital marketing concepts. Please note we did not conduct this stage of research in Tokyo out of consideration for the cultural barriers that prohibit open discussion of income and luxury spend.

UNDERSTANDING CONSUMERS' RELATIONSHIP WITH LUXURY

Across our qualitative sample of 38 luxury consumers, respondents had wildly different behaviours and attitudes with respect to luxury goods. Purchasing ranged from $20 lip glosses to $20,000 items of jewellery.

These differences primarily broke down into the following areas (and, indeed, an individual might exhibit different behaviours and attitudes within different contexts):

• Spend levels

• Spend frequency

• Fashion focus vs. product category focus (e.g. fashionistas vs. watch connoisseurs)

• Inwardly vs. outwardly directed purchasing (personal indulgence vs. making an impression)

• Brand loyalties (narrow portfolio vs. wide portfolio, traditional vs. emerging)

• Online vs. offline behaviours (e.g. researching, purchasing)

That said, our respondents were ultimately united by the values they associated with luxury goods and by how these values made them feel about themselves (see Figure 1).

Figure 1

The promise of such a cocktail of benefits ultimately explains the fascination with luxury brands, and ultimately explains why the best luxury advertising implies both rational and emotional value. In addition, the heightened level of engagement with luxury brands means they have permission to be more abstract with messaging and, ultimately, more creative in execution than brands within other sectors.

Tunneling even further into the psyche of the luxury consumer, our qualitative research validates (and expands upon) existing quantitative work, which identified three key purchase motivations at the core of luxury consumption:

1. Indulgence

• Treating oneself to something special

• Luxury brands evoke a sensory experience

• They often promote a sense of wellbeing in the owner/wearer

• The premium price tags are intrinsic to the guilty pleasure of 'spoiling' oneself

2. Exclusivity

• To own/wear a luxury brand is to be part of 'the Club'

• Members take satisfaction in being more successful and knowledgeable than the general public (which extends to being able to decode abstract luxury advertising)

• Members signal to and recognise each other through the brands they wear/own; yet the more exclusive the club, the more inaccessible the communication

• But, there is also an onus on members to keep abreast of brand developments/new collections/product launches

3. Status

• Luxury goods are often used to communicate status to those around us in both business and social contexts

• In certain professional contexts, the use of such goods to convey status is expected and, in this respect, the luxury consumer may be a reluctant participant

• The ownership of luxury goods can also be used as a personal affirmation of one's own progress through life (and status relative to a previous self)

Our research highlighted just how important these three core purchase motivations are. Luxury marketing communications must consistently appeal to one or more of them and never do anything to undermine any of them. We must be sure to remember this as we investigate new, digital marketing opportunities for luxury brands.

DIGITAL MEDIA AND TECHNOLOGY

The media diaries and depth interviews allowed us to build a detailed picture of our respondents' relationships with media and technology. As one might expect, digital media and technology have begun to play an increasingly important part in their lives often cannibalising more traditional media consumption, e.g. TV viewing (see Figure 2).

Figure 2: Personal media diary

Among our respondents, PC internet usage ranged from an average of 30 minutes per day to around five hours per day. Needless to say, the role of the internet mirrors the user's situation, mood and mode over the course of the day. Usage is a combination of returning to familiar sites (often bookmarked) and exploring the new.

Within our sample, the most obvious behavioural differences correlated with age with younger luxury consumers being much more inclined to use the internet in a playful way and older consumers restricting their usage to more functional purposes.

It will be important for us to remember this as we go on to consider the appeal of different digital marketing formats.

Interestingly, we uncovered a lot of evidence of luxury consumers using digital media and technology to both engage with and talk about luxury brands. These behaviours fell into three main areas:

1. Researching or Sourcing Products and Brands

• Finding out where to buy a desired product

• Establishing a brand's heritage and 'authenticity' via its website

• Browsing luxury goods online

2. Receiving Communications from Brands and Retailers

• Receiving email newsletters or event invitations from prestige retailers

• Receiving email newsletters or event invitations from luxury brands

3. Communicating with Others about Products and Brands

• Forwarding newsletters, product links and images to friends

• Speaking with friends about luxury products via instant messenger

• Sending SMS/MMS messages while in-store via mobile phones

Key Regional Differences

Naturally, our research encountered local market nuances in people's relationship with luxury goods, media and technology usage and attitudes, and perceptions of digital advertising. The main differences are as follows:

New York: Luxury brands are followed with great enthusiasm. We found the highest level of use of digital media to research and talk about luxury products. Digital media can be used to capitalize on the buzz surrounding luxury. Other characteristics of consumers in this city are:

• Strong consumer relationship with a handful of upscale department stores (Saks, Nieman Marcus).

• Incredible amount of buzz and media consumption around luxury goods through magazines, websites, newsletters.

• Large amount of social networking around fashion and luxury goods.

• A lot of usage of luxury brand/store websites – despite the presence of numerous upscale luxury brand stores (brick and mortar).

London: Luxury goods can represent both tradition and 'la nouvelle richesse' particularly among younger consumers. There is strong reliance on digital marketing by luxury brands. Other notable observations were:

• There is a strong heritage around older/traditional UK luxury brands particularly with men's tailoring.

• Luxury brands are icons of the upper echelons of society: democratisation of wealth now means anyone can have access.

• Netaporter.com and asos.com are very popular sites amongst females, with no obvious male equivalent.

• There is relatively advanced usage of digital social networking tools (particularly among the older and more affluent) and mobile platforms.

• They are very open to digital luxury advertising in general (within certain parameters).

Paris: Luxury goods are considered almost “national treasures.” While there is strong use of digital media it is not as high as we observed among New York respondents. However, French consumers were most vocal about expecting exceptional marketing standards and special executions when it comes to luxury brands' use of digital media.

• Luxury goods are seen as totally opposed to mainstream values by many and especially among older consumers.

• The major French fashion houses are part of the culture, part of the national identity, and consumers take pride in this heritage and are careful to protect it.

• Younger consumers are more willing to experiment with Americana, and more open to the opportunities for digital advertising around luxury brands.

• Relatively less IM / social networking was found within our sample – but we know that blogging is popular, particularly amongst the young.

Tokyo: Luxury goods are often displayed overtly to indicate status. Digital marketing must reinforce status but respect consumer privacy, a major barrier to some forms of online behavior. Other notable differences in this market are:

• Socially, status is at the forefront of people's consciousness and luxury brands are used conspicuously as a shortcut to status.

• Luxury brands are seen as a necessity amongst white collar professionals, and many will sacrifice spend in other areas to acquire them.

• There is a fascination with brands from overseas – more emphasis placed on duty free and holiday shopping.

• There is little evidence of digital social networking around luxury brands, and consumers are protective of their personal details.

• Cultural aversion to anything intrusive – impacts use of certain digital communications like instant messaging.

LUXURY BRAND ENGAGEMENT MODEL

The luxury brand experience extends far beyond the physical purchase. Consumers actively engage with luxury brands on many levels:

1. While out and about: people watching, billboard advertisements, passing and being in luxury shopping environments, shopping with friends, discussing products with work colleagues, etc.

2. Via magazines and TV: product reviews, fashion tips, photo-graphs and entertainment news about the showbiz and celebrity culture; luxury print advertising is appreciated as content in its own right – and likened to 'art' by many (some even claim to tear out and keep particularly relevant/impactful ads).

3. Via new media: visiting retail, fashion and luxury brand web-sites, receiving emails from stores and brands, and just talking about luxury goods via email and IM.

With so many facets in the relationship between consumer and luxury brand, it was necessary to develop a model that helped us make sense of what was going on, so that ultimately, we could fully understand the role that digital marketing could play.

Furthermore, the model had to be brand-centric in order to smooth out behavioural differences between luxury consumer types and ultimately, to allow luxury brand managers and their marketing agencies to ally the model with their existing brand strategy (see Figure 3).

Figure 3: Luxury brand engagement model

The model describes the six fundamental ways in which consumers engage with luxury brands:

• Awareness: Consumers actively seek out information about luxury brands.

• Admiration: Luxury goods represent an idealistic set of aesthetic and qualitative standards, and luxury brand advertising represents a glimpse into a more seductive, exciting world.

• Exploration: After the initial allure, consumers seek to explore, understand and authenticate the brand.

• Consideration: The act of researching, choosing and 'trying on' a specific product.

• Purchase: Offline or online purchasing

• Ownership: Membership of the brand club: purchase represents a higher level of relationship with the brand.

DIGITAL OPPORTUNITIES

Our research revealed that digital marketing can play an influential role at every stage of the engagement model. As such, we were able to identify a series of insight-based digital opportunities around the model.

Awareness

Be there: This addresses one of the fundamental questions we set out to answer through this research: Is it appropriate for luxury brands to use digital marketing to communicate with luxury consumers?

The answer from every single one of the 38 affluent luxury consumers we spoke to across the world was a resounding: 'yes'. Their response was simply that their lives, habits and media pat-terns have changed – and they expect their favourite brands to change the way they interact with them.

This of course comes with certain caveats, but at a basic level – consumers are giving permission for luxury brands to make use of digital marketing tools – and, in fact, they are wondering why luxury brands seem to be so 'behind the times' when it comes to online!

Target: Advertising context matters online just as it does offline. After all, luxury goods are supposed to be exclusive, not available to all.

Luxury brands should seek to target sites and platforms frequented by upmarket consumers based on their demographics and/or online purchasing behaviours.

Our research indicates that most luxury consumers would welcome being targeted by luxury brand communications. It would even be a virtue to do this overtly, i.e. to make them feel they have special/privileged access to the brand.

Use location and time-based targeting to reach them with communications in the most effective media context.

Reinforce and build-on the offline creative: The most impactful online campaigns will use imagery from the offline campaign and make full use of what is naturally a dynamic/interactive medium.

Digital media and technology allow the consumer to explore the aesthetic qualities of the original print campaign in more detail.

Added to which, consumers often admire luxury print advertising because it seems to capture a moment in a story. Now you can use digital media and technology to extend that moment a little further – to bring the story to life.

The Armani Exchange execution (see Figure 4) was cited as a good example of a print campaign being transferred online.

Figure 4

Keep consumers ahead of the game: Consumers want to be in the know and have their finger on the brand pulse to:

• Stay abreast of their favourite brand.

• Know the latest collections before they go mainstream.

• Be among the first to spot emerging trends (often from other markets).

Permission-based email newsletters represent an excellent way of keeping consumers in touch with their favourite luxury brands:

• For many consumers (especially females), these emails form part of a daily ritual of 'online window shopping' from their place of work.

• The very act of reading the newsletter and looking at images of luxury products online can feel indulgent and pleasurable.

• Can be a good place to provide exclusive content/promotions/access to the brand – provide advance notice/information around new seasons, collections and product launches.

Facilitate word of mouth: Consumers often gain kudos by demonstrating to their friends they are 'in the know' – or simply enjoy the act of communicating with their peers around areas of common interest. This is evident in some consumers' desire to share luxury product links and images via email and instant messaging applications.

Facilitating these behaviours should be encouraged, as should giving consumers luxury brand-related downloadable assets such as desktop gadgets and pdf brochures of new collections, etc.

Admiration

Raise the digital advertising bar: Consumers expect luxury brands to replicate the high aesthetic standards of their offline communications in the digital world.

• Luxury consumers want and expect luxury brands to set the gold standard for online advertising.

• The most engaging display ads will feature animation that comes to rest and sound that can be toggled on/off at the user's discretion.

• Luxury brands should consider new digital advertising formats (e.g. expandable banners), to allow the user to fully appreciate the advertising creative – but should avoid pop-ups (which are seen as trying too hard).

• Warning: digital advertising should captivate, not irritate.

Don't just focus on rational product benefits:

Luxury brands have the opportunity to take online advertising further, just as they do offline. However, the product shot is still important, especially in the more task-focused online environment for males; added to which the style of execution should be sympathetic to the online environment, e.g. consider different executions for informative vs. entertaining environments.

The screenshot in Figure 5 refers to two flash ads tested during the research. While both executions work for different reasons (males drawn to the quality of the watch movement, females drawn into the love story), the Cartier ad ultimately limits its likely cut-through and appeal by failing to show enough product.

Figure 5

Entertain them: Luxury consumers actually enjoy watching/looking at luxury brand advertising – which creates an immediate com-petitive advantage in a medium that is typically characterised by multiple content areas and advertising executions competing for the user's attention.

Good online communications work by immediately involving the consumer, e.g. via animation and beautiful imagery. The Coco Chanel video was spontaneously cited as a good example of online advertising:

• Keira Knightley as Coco Mademoiselle

• High production values

• Captures an aspirational lifestyle

• A vignette of the brand

Give them something to talk about and share: Luxury consumers love to talk about luxury brands, and we know that consumers will talk about (and even tear out) the best luxury brand advertisements from magazines.

There is a great opportunity to encourage consumers to download/share digital advertising communications and, better still, to allow them to interact with and/or personalise the creative, so that it is more relevant/appealing to the sender/receiver especially among younger buyers.

Exploration

Build the brand's mythology, expertise and credibility: Digital media can play a valid role in allowing consumers to more fully explore a brand, e.g. exploring the brand's design and manufacturing history, watching catwalk shows, etc.

• Reinforce the brand credentials and mythology

• Use advertorials and microsites to confirm the brand's expertise

• Take consumers behind the scenes.

The Dior advertorial (see Figure 6) tested very positively in terms of helping position Dior as an expert brand within the cosmetics sector and, ultimately, influencing respondents to trial Dior make-up in future shopping trips.

Figure 6

Bring the brand to life: Digital marketing communications have a few obvious advantages over print – something that emerged quite strongly during the research. Luxury brands should harness the latest online advertising technology to bring their brands to life:

Intense visuals

• Stunning close ups of stitching, fabrics, tailoring

• 360 degree views

• Different styles of product image, e.g. on model vs. on hanger

Sound

• Fasteners open and close (zips, poppers)

• Watches tick

Body morph

• Able to create virtual self and try on different items

• Advice as to what will best suit body type/occasion, etc.

Replicate the in-store experience: Consumers frequently describe luxury stores using very sensual language. They are places of escapism and fantasy, and are an important part of the luxury band experience.

Note that our respondents live in some of the world's major fashion capitals and have relatively easy access to flagship luxury stores. However, even they said it was not always convenient or possible to go to such stores.

The online environment provides an excellent platform in which to take the in-store experience to people who aren't fortunate enough to live in close proximity to such places.

Consideration

Make the intangible, tangible: As our research has already revealed, luxury goods are prized for being highly experiential, so it is only natural that consumers want to explore items with all their senses before committing to a purchase, e.g.:

• See the shoes from every angle

• Touch the fabric, admire the stitching

• Feel the weight of the watch on ones wrist

• Smell the leather

• Hear the 'silent' zipper.

With this in mind, luxury advertisers should seek to translate as much of this as possible to the online environment which, for many, represents an important point in the decision making process.

Online executions that manage to achieve this are currently perceived as being few and far between, but those that do are likely to have real impact:

“Alright then, back to that Jaguar ad ... what comes out of the computer is the sound of the car revving up ... and then it goes into a film of the car... that was a very interactive ad for that product, I found that very, very sexy.” Male, 45–54, London

Provide expert advice and flatter the consumer:

Consumers value the superior service and personal attention they receive in the physical luxury retail environment. There is real opportunity to translate this to the online retail environment – as demonstrated by the Saks NYC website which allows shoppers to contact the store and have queries answered in real time. Figure 7 demonstrates how a simple addition to the store's website can build rich engagements with their highest-spending customers.

Figure 7

The opportunity for direct communication between consumers and brands could even extend to adding brands as 'messenger buddies' within instant messaging applications.

Facilitate peer-to-peer consultation: Many consumers already use digital media and technology to consult others prior to a luxury goods purchase:

• Emailing product links and images

• Taking photos in-store using mobile devices

• Sending SMS communications to friends

There is a genuine opportunity to facilitate and capitalise on this natural social networking around luxury brands and potentially to draw-in other members of the social network.

Purchase

Direct people to appropriate retail locations: Most consumers prefer to buy big-ticket items in the physical retail environment, but will 'pre-shop' using the internet to reduce the time and hassle associated with a high street shopping trip. As such, luxury brands should consider using their online presence to:

• Recommending physical retail sites where specified items are in stock

• Reserving items in specified physical retail stores (for a limited period of time)

• Making postcode/location based recommendations

• Recommending airport stores for business travelers.

Provide online purchasing functionality: Few luxury brand sites feature purchase functionality – which would be of interest to many consumers.

Additional functionality should also be considered to optimise the online shopping experience, e.g. remembering previous purchases, making recommendations, etc.

Ownership

Welcome them to 'the Club': Luxury brand owners like to feel they are part of an exclusive club. However, the club has different levels of membership – from bronze (generally younger and less affluent) to platinum (generally older and more affluent). Digital media can provide a virtual club house.

Target them with exclusive offers: Club members should be awarded privileged access to the brand, exclusive offers, events and products, etc.

Facilitate word of mouth recommendation: Club members should be encouraged to communicate membership benefits to their existing offline/online networks.

Create digital manifestations of the brand: The greatest advocates of luxury brands are likely to seek ownership in other ways. Luxury brand owners can extend the act of 'ownership' to digital manifestations of the brand and brand communications, e.g.

• Advertising

• Desktop accessories, gadgets, etc.

However, luxury brands will need to make a decision about how much control they wish to retain over such digital manifestations, both in terms of the creative and the context in which such manifestations can appear.

Key Recommendations

• Capitalize on consumer desire to have a deeper relationship with luxury brands.

• Create a seamless integration of the physical and digital brand experience.

• Use digital marketing to reinforce and build-on the offline campaign.

• Set the gold standard for digital advertising, just as you do for traditional advertising.

• Always remain true to the core drivers of luxury consumption – indulgence, exclusivity and status.

CONCLUSION

There are three key business implications which came out of our study.

First, as the media market becomes more and more complex and because it is constantly in flux, qualitative studies and the types of insights they generate are becoming even more useful. This is all the more true as we try and cross rare consumer targets like luxury goods buyers and their new behaviors with media – especially with emerging digital platforms. By understanding the way people live through observation and in-depth conversations we are able to understand their needs, expectations and aspirations.

Secondly, we found many complementary ways to incorporate digital channels in media plans. Although print does dominate luxury marketing, digital media are offering new opportunities for brands to connect with luxury buyers. During the 2007 French Grand Prix du luxe Strategies – CondeNast, the brand Louis Vuitton was awarded for its website and not for its print advertising despite their creative success. This is a very interesting illustration of an advertiser's remarkable transition from print to digital.

Indeed, one of this research's main goals is to identify which functions of digital media best serve a luxury brand's engagement points. Thus, if search and display are indeed the most efficient tools at purchase, their effect on brand image may be weaker in comparison to more compelling videos, microsites and screen-savers and wallpaper applications.

And thirdly, an unexpected learning of that survey is its ability to show to what extent high technology and luxury goods are linked in the minds of wealthy and influential people. These two industries indeed share know-how, stories, consumers and supply chains that are becoming increasingly similar. Phones like Vertu or Prada, the Apple store concept, “Swarovski-Philips” USB keys or Bang & Olufsen are great examples of this.

As a light of these insights, a new segment that can be called “technoluxe” has emerged in the phone market and will probably soon propagate over all over the digital marketplace.

Figure 8: Digital solutions for luxury goods marketing

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