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'Luxury brands lose half of their top customers every year'

By Vivian Hendriksz


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Whilst most luxury brands are associated with high quality merchandise, a unique retail experience and excellent customer service, a new joint study from the Luxury Institute and marketing firm Epsilon, has found that many labels may be missing out on sales by not understanding who their top customers are. By failing to connect with key consumers, many luxury labels lose their chance to win over their best consumers.

Although luxury brands tend to have a higher price point and average order value by definition, the study that a large majority of luxury labels lose between 80 and 90 percent of their customers. These luxury labels are also known to struggle to keep the top 50 percent of their clientèle, with only 10 to 15 percent of luxury consumers having a first-names basis relationship with a luxury brand sales associate. The lack of attention to customer relationship is one of the main opportunities luxury labels are missing out on.

Main reason consumers won't make a return purchase: 'rude or inattentive sales person'

"Luxury brands lose half their top customers every year," confirms Milton Pedraza, Chief Executive Officer of the Luxury Institute. "The biggest reason why a consumer won't come back is not the product - it's a rude or inattentive sales person." Therefore in order to retain a larger percentage of loyal customers, the study argues it is crucial for luxury labels to understand their consumers from "a high marco level" which can be part of the label's marketing and advertising campaign as well as improving sales associates customer engagement skills.

With the majority of the general public associating luxury with having the financial means to afford goods set at a higher-price point, the luxury market remains vast. According to American Express and the Harrison Group, luxury is defined by wealthy consumers by the following thee elements; superior quality, with 73 percent saying it is the most important attribute of luxury, brand's design, with 54 percent considering it the most important aspect and 47 percent citing customer service as the most important quality of luxury, an area many brands could improve on.

The study also found that luxury customers prefer to shop in stores that are elegant, as they expect the experience of purchasing a luxury item to be as pleasant as actually owing the item itself. To them, luxury is a feeling as well as a state of mind and having the proper sales associate help deliver the experience is important, as these customers believe it is worth to pay more for items that are of superior quality with the added value of exclusivity.

However, the study also found that there are four different types of shoppers who tend to purchase goods within the luxury market and in order for luxury labels to improve their customer relationships they need to understand under what type the consumer falls under. The four types of luxury shoppers are as followed:

Aspirational Shopper: The Aspirational Shopper desires to own pieces from a brand, but does not have the means to do so on a regular level. This customer shops mostly from outlets or online members-only discount boutiques or purchases low-ticket designer brand items such as cosmetics.

Moments of Wealth: The Moments of Wealth shopper may save for a specific piece, such as a handbag from a particular luxury brand, but does not purchase from the brand frequently. This shopper tends to make one-off purchases over a long span of time.

Dressed for the Part: This shopper purchases luxury items to give off the appearance of being someone who lives a luxury lifestyle, but the Dressed for the Part shopper does not have the financial resources to be a true luxury buyer. This fashionista shopper devotes most of her spend to fashion, accessories, or a car rather than an expensive home.

True Luxe: The True Luxe shopper has the means to purchase luxury items at will without concern for finances. This shopper purchases from luxury retailers frequently throughout the year.

In order to retain the best percentage of customers, the study argues it is vital to see under which category luxury shoppers falls and see how they may shift from one to another. For example, a Aspirational Shopper may finish a college degree and obtain a well paying job, therefore moving up to a Moments of Wealth or even Dressed for the Part category. By being aware of the luxury shoppers spending habits and cultivating a more personal relationship with them, luxury brands will be able to retain more satisfied consumers and focus on the correct customers for acceleration.

Luxury brands
Luxury Institute