Among the topics most suggested by the International Luxury Business Association’s member companies in 2016 was a reflection on the ‘Millennials’. With a considerable number of publications, conferences, etc. dealing with this topic, the question became: how to contribute meaningfully, going further into the subject? After a lot of reading, having sought out sociology, offered some leads to potentially interesting speakers, no new angle had appeared and nothing seemed to justify to take up time from already overbooked professionals.
Interested, in particular, by a remark heard on this occasion, which stated that being a ‘Millennial’ is more decisive in a consumer’s behavior than his/her country of origin, I took the time at the beginning of 2017 to question the ‘World Luxury Tracking’ * on this. Given the mass of data provided by this study, I have chosen to limit this first analysis to general questions which answers allow to apprehend the vision of luxury that consumers have in different countries, the benefits and values they attach to it, the brands that correspond to this fancy, and finally what influences them.
Although global aggregation does not necessarily make much sense, an initial assessment has emerged immediately: it seems that in emerging markets, age is not really a discriminating factor regarding projections and values attached to luxury while it seems to be a little more the case in mature markets.
Looking at the results by market, one quickly realizes that the Millennials issue is a bit more complex than we would like to believe: indeed, on some issues or in some countries Millennials are very close to the preceding generation, in other cases they are closer to the older one, and sometimes they really have specific characteristics. To simplify the reading, only the results of 5 flagship markets (USA, China, Russia, France, Japan) are presented here.
In what kind of luxury do consumers project themselves, and is age the key entry point?
The objective of the question is to understand to which products/services the word luxury immediately refers to and if age impacts the answer. On the diagram below are the answers by major markets and by age group. It shows that there is a model of projection into luxury specific to each country, and then the age introduces nuances. They are fairly minor in 3 of the 5 markets shown in this example, and there seems to be an American specificity, with the Millennials projecting themselves far more in a statutory luxury or experiential luxury than their elders, while in China, there is a somewhat similar result, albeit less marked, on the 35-49 age bracket.
Projection: Which of the following categories of products and services most bring to mind the idea of luxury for you?
How does this impact brands that are spontaneously associated with Luxury?
The overall ranking of spontaneous brand awareness in emerging / mature markets suggests that age is not a truly discriminating criterion for brand awareness, with very similar top 10 in each market, The top 3 hierarchies may vary a little depending upon age.
Awareness: 3 brands spontaneously associated with the word luxury
But if the American Millennials share 8 brands with the 35-49 in the top 10, what might, at first sight, seem to be only a minor difference deserves further attention. Indeed, what is striking in this market is the very strong presence of car brands in the top 10 brands associated spontaneously with luxury, and it seems here that the American Millennials are breaking with their elders as they put only 3 car brands in the top 10 (in favor of European luxury brands that rise in the ranking), while people aged between 35-49 and the ones aged over 50 years put respectively 5 and 6 car brands in their top 10.
What are the benefits expected from luxury? What are the values attached to luxury?
The ‘World Luxury Tracking’ asks a question to consumers in order to better understand their vision of luxury from a list of criteria that define luxury around two axes, the first one consisting in personal benefits expected from luxury, the other one in values attributed to luxury. As for the first axis, the benefits can be grouped into six poles: showing one’s social success, experiencing emotion/pleasure, aesthetic benefits (beauty/style for oneself and around oneself), enhancing one’s personality, being at the forefront of fashion trends, marking one’s belonging to a group. The diagram below shows the relative importance of these benefits for consumers in 5 major markets, according to their age group:
Perceptions of Luxury
This scheme clearly indicates that in three major markets, age is not fundamentally discriminating in the benefits expected from luxury, while Americans stand out once again, with Millennials having much higher expectations than older generations and particularly a stronger appetite for fashion and for a luxury that signs the group belonging (the end of American individualism?). The Japanese Millennials show, to a lesser extent, the same type of singularity.
Regarding the values expected from luxury, if everyone unanimously emphasizes quality, once again, in most markets, age introduces small nuances into values scales that are specific to each market. There again the American Millennials show a strong difference with their elders, expecting a lot more from luxury to be at the forefront of innovation, to demonstrate an ethical and ecological commitment (of much less interest to the oldest) and to represent a sure value, an investment, while the Japanese Millennials differ less from their elders on these points.
What are the main sources of information influencing luxury goods purchase?
Not surprisingly, in most markets, except for China, Millennials are more influenced by digital sources than preceding generations. On this either, there is no such thing as a ‘Millennials pattern’, but once again a true specificity of American Millennials, who seem to be much more open to all influences than older generations, even more so if these sources are digital. For the Japanese, who also differ somewhat on this criterion, the digital makes a difference to the younger ones if the sources are not controlled by the brands.
BRAND CONTROLLED TRADITIONAL SOURCES: Retail outlets, TV ads, print ads, printed catalogues, poster, outdoor ads, cinema ads, radio adsNON BRAND CONTROLLED TRADITIONAL SOURCES: Trends in the street, people close to me, articles and reports in the media, international stars, national starsBRAND CONTROLLED DIGITAL SOURCES: Websites, internet ads, online newsletter, mobile applications, ads on smartphonesNON BRAND CONTROLLED DIGITAL SOURCES: Blogs, newsgroups, forums, social networks
WHAT CAN BE DRAWN FROM THE PRECEDING ANALYSIS?
– – The Millennials discourse, born in the United States, and which is ‘sold’ to us as universal, is undoubtedly relevant to America, but what applies there may not apply everywhere, and definitely not for luxury.
– For luxury, the key to analyzing consumers’ expectations and behaviors remains the local culture and context, the age introducing nuances on certain dimensions, or sometimes as in the United States or Japan some real differences and these are to be interpreted according to the sociology of the country.
Obviously, this article’s objective is not to state that the Millennials have no specificity except in the USA and Japan, but rather to question a discourse that is too often simplistic and does not necessarily apply to luxury. There are indeed some more or less significant dissimilarities between younger generations and their elders, the ‘World Luxury Tracking’ * makes it possible to go much further in their analysis and to propose a more accurate understanding of these differences in order to lead to operational conclusions that will be adapted to each of the major markets.
* Created in 2007 upon the initiative of the International Luxury Business Association, the ‘World Luxury Tracking’ is a partnership between Ipsos and the latter. It is the first global quantitative study that has exploring and analyzing contemporary and forward-looking trends for the past ten years. Thanks to the power of its historical data, it allows to follow the evolution of the main indicators of luxury consumption by the wealthiest populations in 13 markets. A group of markets is studied each year by alternating the mature markets (USA, Japan, France, Italy, Spain, Germany, UK) with so-called emerging markets (Brazil, China, Russia, HK, South Korea, Thailand – addition 2016). Each year about 8000 individuals are interviewed..
The WLT covers the major segments of luxury watchmaking, jewelry, fashion, leather goods, wines, spirits, cosmetics, fragrances …
Many dimensions of luxury are tackled within a single sample:
– Values and behaviors associated with luxury
– Expectations from a luxury brand
– Expectations from on and offline retail.
– Touch points and purchase funnel
– Focus on each product category.
The 2017 wave of ‘World Luxury Tracking’ will be launched in the spring of this year. For its ten years’ anniversary, updates on the project have been planned that will allow to better take into account the evolution of markets, technologies and needs of professionals, while preserving the history that is one of the major strength of the WLT. The 2017 wave will feature modules on the United States, Europe and the Middle East.
The‘World Luxury Tracking’ Contacts :
– The International Luxury Business Association: Catherine Jubin – firstname.lastname@example.org
– Ipsos : Françoise Hernaez-Fourrier – Francoise.Hernaez@ipsos.com
As every year, the Association’s small team took a tour in Paris in order to discover the newly opened or renovated luxury stores.
The first shop we visited is the one of La Perla, rue du Faubourg Saint-Honoré. The current shop, opened in November 2014, was refurbished according to the new style by Roberto Baciocchi (Prada, Miu Miu, …).
In the store window, a La Perla “couture” piece unusual and delicate design catches the eye… and makes you want to see more. The shop, all in length and additions, is not an easy space to structure and this hurdle seems to have not totally been overcome. First, the flooring seems unchanged and contrasts with the rest of the store. The second part of the shop ground floor is a little confusing, circulation is not obvious. The way products are displayed does not stand-out very much; however the brand has designed a concept of folding screens made of gilded metal braces that allows it to isolate some styles display, thus giving them a great impact. Overall, the Faubourg Saint-Honoré La Perla store is less attractive than its flagship store in London.
Echoing our first event of the year, but in a non-luxury specific framework, Sciences Po organized on 2 July a round table on the theme ‘Communication Director: what future?’. Considering the success of our meeting in February, it seemed interesting to post a brief summary of the discussion.
The roundtable gathered
Louise Beveridge, Director of Communication at Kering and member of the Group Executive Committee,
Elisabeth Coutureau (CRH 00), President of the Corporate Delegation of the AACC and Co-President of CLAI,
Béatrice Mandine, Executive Director in charge of brand & communication – Orange Group
Laurent Sacchi (SP 87), Deputy Director at the Presidency in charge of communications, public affairs and crisis management for Danone.
The BCG Observatory – Science-Po-Stratégies magazine
Prior to the debate there was a short presentation by Olivier Abtan – Partner at Boston Consulting Group who shared with the audience the results of a barometer conducted by the BCG for Sciences-Po in partnership with Stratégies magazine (based on interviews with 400 directors of communication).
This study highlights the strategic importance of the function with 70% of respondents who are on the executive Comittee. If the strategic importance of the function appears to be essential and will be most probably be further enhanced, it doesn’t mean that the operational side of it is absent. Quite the contrary, priorities of the communication directors such as they describe them are rather operational (control of communication activities, design of communication tools come first), and the balance between these two poles seems to be hard to reach. Moreover, they are the front line on digital issues, with a specificity for the current generation: they are mostly not ‘digital natives’, and therefore they need to rely on their team’s competence or, in many cases, bring in external expertise. Digital is also the only budget that is on the rise, even if the majority of communication directors have doubts about the effectiveness of their strategy with an average score of 6/10.
This digital transformation changes the job’s tempo which is accelerating, posing three major challenges to the industry players: the need to be always informed about the latest technologies, innovations, media, etc …, to have the right skills on board, and finally the necessity to define the metrics that will allow to evaluate the effectiveness of communication campaigns in a fast moving environment.
The tension strategy/operational
The discussion initially focused on the tension between strategy and operational and the three speakers agreed on the fact that there is not necessary a conflict between strategic vision and operational actions. The strategy sets the course (so it is a medium/long term timeframe) then one has to manage the day to day. Having set an objective allows to sometimes seize the opportunities arising from unexpected events.
For Béatrice Mandine who recently had to manage Orange crisis communication, communication directors have to love the unexpected, it’s part of their job: it is then necessary for them to follow the roadmap while adapting to exceptional circumstances. By detailing the recent crisis with Israel, she has shown how great the challenge is when the information that is nowadays spreading very quickly is not consistent with the reality of the situation and of the message originally issued. Obviously she loves this kind of challenge!
Did the digital change the Communication Director’s job?
It is emphasized that what changed the digital is that tow third of the contents in relation with corporations are produced by outsiders and, what could be perceived as a loss of power by communication directors, strengthens their role in the end.
For Louise Beveridge, For Louise Beveridge, digital is not responsible for the evolution of the job that is the result of greater openness, a reinforced dialog between the company and its customers and other parties. Digital can greatly enrich the content of this dialog, and if the issue of ‘contents’ is laid it is because the role of communication is to find the balance between what can be published and what cannot. Indeed, we have moved from a ‘shareholder’ to a ‘stakeholder’ economy; this means that it is but success needs to be found in other areas such as social, cultural, environmental,… areas as well.
In this context, the communications director acts as the warrantor of the meaning of corporate communications and plays role of the orchestra conductor with all concerned parties, and this has strengthened its power. Louise Beveridge used the sports metaphor to say that the communication director is a midfielder who can be both offensive and defensive, but in all cases is the one who passes the ball.
What about the structures?
For Beatrice Mandine, digital destroyed silos, it has raised awareness of the need to change organizations. Regarding Orange, the ‘Division of Digital’ has been abandoned in favor of two defined units according to the time dimension attached to them:
The “warm” time, concerning immediacy, typically press relations unit, the service also manages everything related to social media.
The “lukewarm” or “cold” time, longer time, which manages the image, website, etc …
Kering also formed two poles so quite similar:
Information: Press, journalists, social networks like LinkedIn, Twitter
Image: branding, events, website, ‘image’ social networks (Facebook, Instagram, …)
Louise Beveridge insists on the fact that if the structure is vertical, intelligence is played horizontally, and the teams meet on projects that they manage jointly.
The management of the CEO image
For Louise Beveridge, François-Henri Pinault is the spokesperson, the flag bearer of Kering group. The question is to assess the relevance of an intervention (media, conference …)and its interest in the context of limited time resource. It is therefore the management of scarcity, a concept very much in line with luxury …
Laurent Sacchi, for Danone, also evokes the question of dosage. With three leaders in 50 years, the group demonstrated a great stability, and the image of its leader is built in the long run. So for him the question is to assess the context in which the CEO is lead to speak, what may be said, and the choice is to speak only when the leader can avoid jargon (but he confesses that is sometimes necessary to speak even if in a constrained framework).
Finally at Orange, no one ignores that Stephane Richard has a strong personality, the communication director has to manage the positive of this personality and what is less positive. But the company policy is to avoid too much personalization by regularly putting forward other executives to promote the image of a managerial team, and more globally of team work that is very much at the heart of the company’s strategy.
Measuring the performance
From the outset, Laurent Sacchi declares himself strongly opposed to the ROI obsession. He explains that communication has the ultimate goal to change attitudes and behaviors and that these changes are not instantaneous, therefore the success of communication cannot be measured in the short term, but over time.
Beatrice Mandine is more nuanced. For her, the virtue of KPIs is to provide facts in order to discuss actions that can otherwise give way to irrational judgments. Louise Beveridge has actually some doubts about the usefulness of KPIs, but emphasizes that social networks may allow to assess the relevance of an action in real time.
Elisabeth Coutureau evokes traditional indicators (including the valuation of the space equivalent) that have become completely obsolete in the digital context; for her there exists some indicators to be kept, specifically those measuring engagement, but the question of indicators is above all the one of the objectives assigned to communication and this is why they cannot be totally overlooked.
For download the BCG presentation, click on “read more”
3 questions to Emmanuelle Delanoe, Value Retail, Managing Director France, Group Director of Strategy
1 – 20 years ago, Value Retail launched a concept tailored for luxury brands, wishing to optimize their inventory management. Today, Value Retail manages 10 villages following this model in Europe and more recently in China, including “La Vallée Village” near Paris. Do these villages host very different customers’ origin and profiles according to countries? Does the selection of brands differ from one country to another?
Since its creation, Value Retail’ mission has always been to be servicing luxury brands and to create prime international touristic locations in Europe, and more recently in China.
The sociologist Gabriel Tarde (1842-1904) observed as early as the 19th century that «the social destiny of inventions insofar as they address the regular needs of humanity is thus to begin as luxuries, meaning that they are imitated by a restricted group prior to continued imitation which leads them to be distributed in forms that are commonplace, or even necessities, to increasingly large groups of people».
If the phone was a luxury for many until the turn of the 60s, then the mobile phone in the 80/90 years, today it is no longer the case and the battle raging in the smartphone market illustrates the luxury paradigm shift. With the first device launched by Motorola, the mobile phone segment is 30 years old; in three decades it has experienced an exponential pace of innovation to integrate more and more functions into increasingly lightweight devices. Its historical brands, Motorola and Nokia, have missed the shift toward smartphones, and have given way to market leaders Apple and Samsung in the late 2000s.
In the meantime, many initiatives have emerged to occupy the segment of “premium” telephony. Nokia had based its strategy on launching a specific brand: Vertu. The phone borrows luxury codes, combining fine materials and design while adding to the device an exclusive services offer, including a luxury concierge service. The result: a high quality product, but rather heavy, and which claimed sustainability does not necessarily match the permanent technological changes taking place on this segment. Other business models also appeared such as the ‘Atelier de Haute Communication’ signing partnerships with Luxury brands (Dior, Versace and Tag Heuer) in order to offer branded phones, as others are creating branded sun glasses. But if the phone is certainly an accessory, it is primarily a technological product and the legitimacy of a luxury brand appears slim on that territory where technical characteristics dictate the client’s choice. So it seems that this model was doomed to remain marginal.
In the early 2010, Samsung and Apple (new on this segment in 2007), which are waging a fierce war, including in the legal field, embarked on a strategy of ‘premiumization’: growing attention to design, higher price positioning of their new products (over € 1,000.00 per unit) and work on the brand image. The latest Samsung campaign allows understanding the brand strategy to those who would not have noticed it; the brand which gained a technological legitimacy long ago, claims a fashion and glamour positioning. Meanwhile, Apple is regularly hiring luxury experienced leaders (Angela Ahrendts, Paul Denève …).
In short, the mobile phone market, which has not kept its exclusivity for very long, is structured today around two axes: technology and price level. The “Premium segment” is for Apple and Samsung and the “access segment” for Chinese brands such as Huawei and Xiaomi. For those who are attached to owning a unique object, another offer appears, replacing licenses, allowing the consumer to customize its latest toy. This offer is also segmented: some play on the mass and offer ‘covers’ which designs go from the most basic to the most sophisticated collaborations with premium brands (Swarovski, Jean-Paul Gaultier, …) and finally the founder of Atelier Haute Communication has opted for a much more upscale offer, with a “craft” customization applying to Samsung and Apple brands: fine leathers, noble materials …It allows his clients to benefit from a unique product while enjoying the best of technology.
What can we learn from the history of this segment, briefly summarized here?
Brand stretching has its limits, those imposed by the legitimacy of the brand in a sector other than its original one. Traditional luxury/fashion brands did not have much legitimacy on the telephony segment.
In 30 years, we have witnessed the emergence of a new market going through different phases, and today it tends to look like any consumer goods segment: the entry-level (mostly made in China) occupying the field of accessibility; middle-range brands and products struggling to emerge with a clear identity (Sony, HTC,…); a top-range occupied by brands with strong identities.
Unlike the traditional luxury segment, the brand’s seniority in the segment is not necessarily an advantage to claim the highest position, but it is its ability to offer technological breakthrough that has made a brand such as Apple able to take the leadership even if it was new to the segment.
However, as indicated by Bruno Remaury*, to become and remain a luxury brand, you need a rich brand story telling. With this regard, Apple has an advantage that no other technology brand possesses: the legend of Steve Jobs, his creative genius, his famous ‘Keynotes, … Furthermore, Apple understood early on the importance of the distribution and service issues and created a standard from which many of the luxury brands should learn. It has become an iconic brand, which for many is also a luxury brand. Indeed, in quite a few countries Apple appears in the top 10 brands spontaneously associated with luxury (India: Apple ranks 8th for 18-29; UK: Apple ranks 9th for 18-34 years; Brazil: Apple ranks 10th; Hong Kong: Apple ranks 10th) – (Source World Luxury Tracking 2013-2014)
Samsung, which does not have this narrative wealth and appears to be a veteran on this segment where it operates since 1991 (Apple since 2007), seems to have understood it had to claim a different positioning. The brand draws on the Korean dynamics and its undeniable talent in the design field a different kind of legitimacy and its strategy is to increasingly position itself as a “glamour” and fashion brand (presence at the Oscars in 2014, advertising campaigns, product placement in movies, …). It may become ‘premium’ in the consumers’ mind, but it would probably be harder to claim itself as luxury brand, especially as Samsung does not seem very interested in developing high quality retail and service, so dear to Apple.
To sum up, if it is innovation that has allowed Apple to such a special position on this segment, the perpetual race for novelty between its players leads to very ephemeral products. This raises the question of price elasticity, because even if the latest smartphone is an accessory, in the consumer’s mind it will probably never be equivalent to a Hermes bag or a Patek Philippe watch. In the long run, will brands today occupying the high-end of this market be able to impose price levels disconnected from the real added-value of the device? And the question becomes to know whether mobile telephony will durably remain a player of the luxury segment …