What is the future for integrators and manufacturers in the custom electronics world who run luxury brands? The bad news is that in today’s fast-paced, high-tech world, clients put less value on company heritage. The good news is that technology brands are among the categories of “new luxury” that are growing in influence.
The Luxury Institute, a consulting company for luxury and premium goods and services, recently undertook a study to determine some of the new trends likely to affect the luxury industry in 2019.
The consulting firm used its Global Luxury Expert Network (GLEN) to predict some of the trends that will reshape luxury brands in 2019.
1. Big Luxury Brands Want ‘Alpha Growth’
“Alpha growth” is a Wall Street metric that measures a large company’s ability to grow faster than its competitors, usually in high double digits, for a sustained period of time.
Luxury alpha growth is achieved by executing three bold moves, according to Luxury Institute CEO Milton Pedraza:
- Conduct an honest exercise to confront the harsh reality of the self-inflicted wounds that are choking the brand’s performance. This exercise leads to radical reinvention that helps the brand to permeate a culture that unleashes employee creativity.
- Tear down the stifling insular walls and extend the brand outward to foster collaboration with consumers, influencers, charities, artists and other members of the brand’s global ecosystem.
- Leverage technology, data, analytics, and A.I. to effectively communicate the brand’s story and engage in open dialog with the entire ecosystem. This creates a cycle of positive feedback loops.
In 2019, many more luxury management teams will be breaking the traditional rules of luxury and gear up for alpha growth.
2. Legacy Luxury Brands Will Lose Value
Brand heritage and history are not the key factors that they used to be. Luxury brands used to be able to boast that they had been established over 100 years ago, and beyond. That legacy earned a brand premium status and pricing over less-pedigreed offerings.
Today, Millennials, Generation-X, and even Boomers see brand heritage as a far less valuable luxury brand attribute.
In the Luxury Institute’s annual 2019 State of the Luxury Industry survey, brand heritage and history rank sixth, behind superior quality, superior customer service, superior design, superior craftsmanship, and exclusive products.
A brand’s historical credentials have been ratcheting down in relevancy over recent years. Only 26 percent of affluent U.S. consumers see brand heritage as a defining element of luxury.
The harsh reality is that luxury consumers really only care about the brands that have created value for them in the last 24 hours, says the Institute.
Luxury brands that continue to lean heavily on heritage without radically reinventing themselves for relevancy are destined to be discarded, especially by a rapidly growing global affluent Millennial population.
3. New Luxury Brands Are in Tech Sector
New, radically innovative categories of the future are emerging as the top luxury brands of today, led by start-ups that capture the imagination of “totally bored billionaire and centimillionaire men and women, especially those from Silicon Valley,” says the Luxury Institute.
Its research finds that the wealthiest consumers are intrigued by new categories of luxury such as:
- Life extension biotechnology
- Hyper-experiential home virtual reality devices
- Neuro-scientific performance enhancers
- Health care robotics
- Travel experiences “that defy gravity.”
Wealthy individuals are no longer impressed by what they view as mundane luxury goods and services. They crave far-out solutions and experiences that used to be the lore of science fiction, according to the group.
4. Luxury Brands Will Invest in their People
The luxury goods and services industry historically has invested heavily in product development. Major brands are now pouring billions into data, analytics, A.I. and other technological innovations in an effort to remain relevant.
Unfortunately, most luxury and premium brands are borrowing from the playbook of mass companies and using these enhancements primarily to determine how fast they can automate, and how fast they can eliminate jobs.
The human resources training and development budgets of luxury brands are either minuscule or are completely wasted on Industrial Age training methods led by human resources executives who have been duped by tech companies into transferring outdated, robotic, training methods online, or onto apps, and calling that process disruption.
Simply stroll into the stores, dealerships, and branches of most luxury goods and services brands, reach out to their call centers, or contact them online, to experience the mediocrity and dehumanization of luxury front-line staff.
All the investment in technology efficiency has had zero impact on the relationship building skills that drive effectiveness and lead to dramatic sales growth. A treasure trove of emotional intelligence research is being wasted.
5. Affluent Consumers Will Lose Trust in Social Media
In the Luxury Institute’s 2018 Emotionally Intelligent Brand Index survey on technology brands, Facebook was rated lowest for emotional intelligence, according to affluent consumers. One in five affluent consumers report actively discouraging friends, family or other people they care about from using Facebook.
Adult affluent consumers, who have so much to lose from being hacked or having their privacy violated, are abandoning Facebook. Further, according to Pew research, only about 36 percent of teens in households with incomes of $75,000 or more use Facebook.
Look for consumers to continue to abandon, or curtail participation, in the most egregious social media sites in 2019. Expect the savviest luxury advertisers to follow suit.
6. Local Luxury Consumer-to-Consumer Sales Channel Takes Off
Most luxury goods and services brands think of their distribution channel options as comprised of three choices:
- Wholesale/third party
- Retail/sale force channel
Now, new simple, effective app technologies such as Replika Software and others are facilitating the development of the fourth channel: a network of devoted brand customers who become local influencers and sell directly to friends and family through apps that connect to the brand’s website.
This approach, within ethical boundaries, is far more personal and effective than using celebrity influencers who are being perceived like mercenaries who buy fake followers and are not true brand users or advocates.
Look for this consumer-to-consumer channel to emerge rapidly in several luxury goods and services categories in 2019.
7. Luxury Brands Will Create ‘Omni-Personal’ Interactions
Customers, especially Millennials, who understand what technology enhanced with emotional intelligence can do, think in terms of individualized, seamless brand relationships akin to the relationships they have with friends and family members.
The Doneger Group calls the new emerging way of interacting with consumers “omni-personal.” This means seamless relationships comprised of respectful non-linear touches that make sense to the customer and add measurable value.
Look for enlightened luxury executives to focus diligently on the real-time, adaptive orchestration of data, algorithms, devices, and people to create omni-personal experiences that lead to long-term client relationships and dramatic sales gains.