The luxury goods market is booming. New brands are popping up and profits continue to rise.
McKinsey’s Global Powers of Luxury Goods report found that the industry generates $252 billion in sales every year.
In the report, McKinsey lists the top 100 companies succeeding in the industry. Some of the key success factors for luxury brands are their positive mindsets and forward-thinking approaches to changes in consumer behavior.
Like most industries, the luxury goods market is changing. A move to digital operations is essential for growth, according to the report.
However, this is not the only factor driving success in the luxury goods industry. Some brands like Louis Vuitton continue to use value-based pricing as a strategy to increase revenues.
The brand’s personality changed over the years with new mergers and acquisitions, but at its core, they remain hyper-focused on providing positive shopping experiences for all its luxury items.
Never content, another one of the key success factors of Louis Vuitton is hosting the yearly LVMH Innovation Awards. The brand receives more than 950 applications from startups, and winners become part of their accelerator program. This strategy keeps Louis Vuitton at the forefront of technology and luxury.
Let’s look at 11 other key success factors that luxury brands use to attract more customers.
We don’t want to hark on about Louis Vuitton, but they are great at what they do. By providing custom-made items and made-to-order products, they continue to appeal to more customers, and can charge higher premiums for their goods.
Combining product customization with value-based pricing lets Louis Vuitton continue to strengthen their image as a luxury brand.
Top luxury brands create connections with their customers through experiential events. These events grow the brand's reputation while marketing its luxury goods to new customers. A positive marketing experience increases brand loyalty along with sales.
The growing popularity of Formula 1 with millennials and Gen Z viewers makes their experiential events one of the best luxury brand activations around today. Hugo Boss, Bang & Olufsen, Louis Vuitton (again!), and Tag Heuer all have close relationships with Formula 1 and regularly host experiential events.
Investing in digital doesn’t mean luxury brands can skimp on their flagship stores. Since the days of Steinway Hall in New York, more brands have continued to open flagship stores around the world. Some of the recent openings include Versace, Gucci, Lacoste, Dior, and Hermes.
Tying digital with an impressive physical footprint sets luxury brands apart from their competitors. Brands have to take control of their direct-to-consumer sales strategies. This requires layering brick-and-mortar with ecommerce operations.
Consumers make authenticity judgments about the brands they support. Brand values such as transparency, honesty, and sustainability are increasingly important to consumers. Using existential, indexical, and iconic cues helps luxury brands to demonstrate their values authentically.
Brands that succeed at showing customers their authentic identity outperform those that don’t communicate their credibility effectively.
People who buy luxury products rarely care about the price and instead rely on their perception of value. Luxury brands promote their products by presenting them in appealing, engaging, and sometimes sensuous ways.
The elements that drive the perception of value include personalization, visualization, and product appeal. Luxury brands rely on increasing the relative perceived value of every product.
Somewhat ironically, the luxury brands that continue to grow are selling exclusive products to more and more aspirational customers. Unique and privileged experiences are the cornerstone of a luxury brand.
State-of-the-art product personalization is how luxury brands can keep their air of exclusivity while balancing the need for growth.
Apart from having desirable products, the shopping experience should come with great customer service. Luxury brands rely on a relationship of trust between the company and the customer. Nothing demonstrates this trust more than investing heavily in customer satisfaction.
The main rule for luxury customer service is to treat every customer like royalty during the shopping experience. Every interaction with a customer should show the pride, artistry, and attention to detail of the brand.
Ultimately, the products themselves set luxury brands apart from other retailers. Each item will have a lot of time and effort invested in its design and creation. Where other retailers will often copy their products, luxury brands offer innovative, ultra-stylish products that create a trend.
Luxury products often become heirlooms in their own right. Brands like Prada, Hermes, and Dior make the most stylish products in the world, and they can price their items to match their beauty.
When a customer thinks of buying a luxury product, they will already have a positive brand image in mind. Creating a luxury brand image starts by understanding your ideal customer. All of your marketing material should speak to that person’s aspirations.
The brand image should play on your potential customer’s emotional appeal, economic aspirations, and social standing.
Luxury brand equity depends on a solid pricing strategy. Brands that change product prices based on market signals in times of slow growth may attract one-time buyers – but the act will erode the confidence of their long-term, loyal customers.
Like Louis Vuitton, luxury brands should use a value-based pricing strategy and stick to it through good times and bad. The perceived value of a brand will diminish if the pricing strategy changes even slightly.
Another key success factor of luxury brands is the quality of the materials used in their products. Using only the highest quality materials and construction makes products last, and that adds to their value. A cursory search for vintage Louis Vuitton bags will show that the resale of luxury items is a thriving business.
Luxury items made from the highest quality materials may even appreciate in time. One example is the Hermes Birkin bag. It’s 500% more valuable today than when it first appeared on the market 35 years ago.
With ConfigureID, you can let your customers personalize their luxury products on your site. Personalization makes items more exclusive and unique while creating engaging shopping experiences for your discerning shoppers. Trusted by brands like Louis Vuitton, ConfigureID helps you deliver rich visual experiences including 3D renderings, customization, and augmented reality.
For luxury brands that want to drive growth and provide unique shopping experiences, get in touch with ConfigureID today.