NEW YORK, NY--(Marketwired - March 06, 2018) - Luxury Institute recently conducted an internal review of its database of client projects throughout its 15-year history, during which it has conducted hundreds of quantitative and qualitative studies. The Institute has served more than one thousand brands in dozens of global luxury and premium goods and services categories. The key objective of the review was to identify the critical tools that successful brands use to remain adaptive and agile over long periods of time despite the volatility and complexity of the markets.
One of the most value-enhancing tools used by brand management teams in luxury and premium goods and services is the Brand Health Assessment, which is performed every 24-36 months. Highly inquisitive brand leaders who undertake the assessment do so boldly and objectively. This assessment is done strictly from the customer's point of view in order to overcome many biases and false assumptions held by management teams. This statistically valid and reliable survey on how prospects and customers view their brand dynamics is often followed up with focus groups to dig deeper into specific insights that the quantitative research has identified.
Brands must be completely thorough in their assessment, using both qualitative and quantitative data, with the guidance of a skilled, independent expert. Often a quantitative study with insightful open-ended questions will suffice for brand teams with limited budgets seeking to understand what customers believe about their market and their brand's value proposition. It takes pure courage, and can be emotionally wrenching, for executives to hear the independent voice of their customers and prospects. However, by embracing, even craving, evidence-based customer feedback, a brand management team can ensure brand and career longevity.
In the Digital Age, brand executives are led to believe that by listening to the noise of social media and analyzing online and internal database data, they can determine the current health of their brand. Nothing could be further from the objective and independent truth. Social media has demonstrated empirically that it is a biased channel where your followers and your influencers' followers are often fake fans, or bots. Extreme views are often expressed by large numbers of people trying to get attention who may be aspirational fans, but not actual buyers. Digital agency teams are comprised primarily of coders and quants. They are proficient in their craft, but they lack domain expertise in your business. Digital footprints and transactions will only reveal limited, superficial information. Digital noise often obscures critical facts, the way that tracking a runner's distance, heartbeat, and blood pressure on an iPhone app may miss detection of a rapidly developing illness.
A brand executive related a story to the Luxury Institute about an experience with a well-known digital agency. According to the executive, the agency developed his brand's digital campaigns in ways that distorted the reality of the outcomes. He discovered to his dismay, that agency staff was required to rally their colleagues, friends and families to post reviews and likes about the brand, products, and campaigns, regardless of whether they were consumers and target prospects, or not. Whatever the campaign could not generate in its initial approach, the agency supplemented by buying likes and reviews from companies overseas that specialize in fake human and bot followers and reviewers. The campaign was a resounding success from an agency and digital metrics point of view. By conducting a Brand Health Assessment, the brand realized that its core customers, many of whom had busy, rich, successful lives, and had little time for Facebook and Instagram, were abandoning the brand.
There is no substitute for a quantitative Brand Health Assessment. While brands cannot 'boil the ocean' or include the kitchen sink in a quantitative Brand Health Assessment, a skilled expert can guide the brand regarding the essential topics to include with pinpoint accuracy. How you ask the questions, and to whom, matters just as much as the topics you select. Here are some critical research topics to include, and some case study examples of the kinds of actionable insights they generate:
Customer demographics, psychographics and lifestyle choices
Many brands believe that simply because they aim to appeal to a particular type of consumer, that this is what the customer database looks like. One Luxury Institute client with a multi-channel business discovered to its shock that the brand did not resonate with affluent millennials, even though the company's branding had been targeted in that direction. While most aspirational prospects were affluent millennials, and most of its social media followers were as such, the brand's online and store customers were in fact multi-generational, with women between the ages of 40-55 comprising its most loyal group. Millennials were, at best, infrequent, low-value buyers who loved the brand, and required long-term nurturing. The brand was ignoring its loyal customers. Management adapted immediately to address its communications and offerings to core loyal customers' incomes, mindsets and lifestyle. Sales and average transaction value rose, driven by this super-affluent group.
Customer brand knowledge and rational and emotional connections to the brand
Brands and their agencies assume that because they are sending out a specific message, consumers are hearing it, and finding it relevant. In one case study, a Luxury Institute client assumed that the customer was buying because the story about the two founders resonated deeply. The Brand Health Assessment discovered that most clients had a completely different perception of how the company was founded, and they cared far more about how using the products made them feel confident and special. The company began communicating differently, addressing clearly the humanistic reasons why the founders created the brand, and why they were inspired to produce the products in such a way that led the customers to feel confident and special. Sales rose accordingly.
Competitive set by category and product
Executives often assume that they confront only certain specific and logical competitors. Through a Brand Health Assessment, one premium brand discovered that its customers and prospects found its new category offering, a pet project of the CEO's, neither desirable nor competitive. In that category the comparative set was always low-end brands and offerings that complemented the customer's mix-and-match approach to purchase choices. Given that it was so successful in its core categories, and recognizing little chance of success, the brand discontinued its new category investment and doubled down on innovation in its bread and butter categories. Sales and margins increased.
Channel preferences
Myths abound that today's affluent consumers are, and will be, conducting more purchases online, and many stores will soon be forced to close. That may be true as a general statement, but the optimal channel mix is specific to each brand. In a Brand Health Assessment with a wholesale brand, consumers clearly stated that enhancing the brand's own website, and its presence on its wholesale partners' websites should be their top priorities. They also told the brand that stores would be welcome, but only in specific locations. The brand focused on making its online business a priority, instead of a hobby, dramatically improved its presence on partner sites, achieved huge success, and is now planning to open stores on a limited basis.
Influencers and bloggers
Social media marketing is all the rage, and brands are paying influencers and bloggers huge sums of money, simply because they expect sales to rise if they associate the brand with the right influencer. In one Brand Health Assessment study, consumers told the brand that the influencers chosen by the agency were not good ambassadors for the brand due to a lack of perceived authenticity and trust. They perceived the influencers as arrogant phonies. Consumers told the brand which influencers they respected and trusted. The brand changed their investments and began to see sales increase.
Customer interactions with people and technology
Many brands neglect the optimization of front-line interactions that customers are experiencing. They focus on products and channels and assume that consumers will accept whatever experiences brands impose on them simply because management is certain this is the best practice. Individual brand experiences spark both positive and negative client emotions, thoughts and behaviors. In one recent Luxury Institute quantitative research project, clients told the brand that they desire certain specific behaviors in an online, or store, personal stylist. In another project, clients were given a chance to design the client experience from scratch in a qualitative setting, and delivered a long list of simple, low-cost, practical recommendations. The brand implemented most of these, and customer retention and average transaction value rose.
Successful management teams have learned that a Brand Health Assessment is the best vehicle for understanding the current state of their brand, and the exact barriers and drivers to purchase. While many brands, especially smaller brands, feel they can't afford the cost of the assessment, the Luxury Institute's review of failed vs. successful brands demonstrates that making uninformed, instinctual decisions, or failing to identify and make necessary changes during early stages, costs small brands millions in lost sales and profits. There is even more at stake for larger brands. Think of a Brand Health Assessment as personal job security and brand life insurance. CEOs who most often fail in their careers rely on gut instinct and biased judgment. In the 21
To learn more about conducting your Brand Health Assessment, contact us or Milton Pedraza directly with questions. This paper was written by Milton Pedraza, Luxury Institute CEO.
Katherine Sousa
ksousa@luxuryinstitute.com
