The retail apparel world is more competitive than ever. Consumers are inundated with choice and the competition for mindshare is tougher than ever. Sadly, luxury is not keeping up with the rest of the fashion industry. According to a new study by the Boston Consulting Group and Italy’s Fondazione Altagamma, the compound annual growth rate of global personal luxury sales was just 3.8 percent from 2013 to 2016, down from 8.3 percent for the four years previous — and the GACR is projected to hover around 2 to 3 percent from now through 2023. It’s not that luxury consumers are spending less. It’s that they have so many options, and all but the largest of luxury brands are not using data to cater to these customers.
The data is out there
Consumers in today’s world leave a trail of data wherever they go. Location data from mobile phones can let you know if a specific consumer has visited your store or even if they’ve been to your competitor’s store. Online behavioral data allows for a deep understanding of browsing history and other specific lifestyle interests.
Even more valuable is the treasure trove of information that current customers will tell you by simply being a customer. Leveraging all of this data together will give luxury brands a competitive advantage and allow them to target their marketing dollars more effectively.
The starting point every luxury brand should adopt is leveraging their customer database — in marketing terminology, their first-party data. If your brand hasn’t been keeping its customer database in a usable format or doesn’t ensure customer data is collected accurately, it’s time to start your customer-data overhaul.
Reaching ideal prospective customers
Once your customer data is in working order and you are gathering more data from your transactions, it is time to form the description of who your “ideal customer” is. For a brand to flourish and survive, it needs to be marketing to and winning over consumers who look just like its best customers. Well-known luxury brands have no trouble driving traffic through their digital channels, but what they fail to do is ensure they are driving the right traffic, which is traffic that leads to active and loyal customers. This is where most digital marketing strategies fall apart.
Effective digital marketing must be driven by the off-line modeling of a brand’s best customers. Without this highly focused modeling, there’s no way to measure the type of prospect being marketed to, which can lead to wasted money and effort. Who would your brand rather market to, a consumer who may or may not buy one accessory, or one who’ll make repeated purchases from your most expensive line?
Using customer data to determine ideal repeat-buyer targets allows brands to then choose media with the highest value prospects. This media will almost always cost more than less focused media options, but it should yield better returns on investment. Without a data driven strategy and a willingness to budget for appropriate media, brands have no choice but to cast a wide net and hope for the best.
How Versace leveraged customer data for better sales and ROI
Versace gives us a strong example of the sales growth a luxury brand can win by using customer data and media buys wisely. As a well-known and well-established luxury brand, Versace has customer groups at different price points for different lines. Although Versace’s in-store and online sales were strong, entry-level items such as wallets and sunglasses made up a large proportion of purchases. To reach customers who buy larger-ticket items like clothing and handbags, Versace fine-tuned its digital marketing approach.
By analyzing and segmenting its current customers, Versace was able to identify its most valuable existing customers and create a prospect model of look-alike best consumers. This model served as the basis for off- and online campaigns to drive high-end shoppers into Versace’s stores and to its online shop. Targeted prospects who visited the web site were scored in real time based on their purchases to help refine the prospect model.
The results were positive. The campaigns delivered a 35 percent increase in online sales, a 300 percent average order value increase, more traffic to Versace’s brick-and-mortar shops, and an incremental marketing ROI of more than 400 percent.
The time to adopt a data-driven strategy is now
Versace’s case shows that by being specific and deliberate about who they are speaking to and why, luxury brands can grow sales and add high-value long-term customers. The good news is that luxury retailers can quickly adopt this kind of consumer-based, data-driven strategy, because technology has made customer data more accessible than ever.
For most brands the keys to stronger sales and high-value customer acquisition already exist. It’s just a matter of using the right strategies to unlock the power of that customer data.