Decoding Luxury Business’s Customer Growth Priorities (Part I)
Although most luxury businesses are affected by the macroeconomy's headwinds, each business has its own challenges, which present different customer growth priorities.
2024 has been a gloom year for the luxury industry.
Last week, LVMH announced that the fashion and leather goods division's Q3 sales had fallen by around 5% YoY, missing analyst expectations of 0% to 2% growth. Overall group revenue fell 3% to 19.1 billion euros in the three months to September 30 compared with last year's period, falling short of analyst predictions of a 1% increase.
While the market is still watching out for Kering and Hermès earnings results this week, Bain & Company predicts this year will be the weakest for the global luxury market since the height of the pandemic.
Does this mean that if your business is on a negative trend, all customer engagements, clienteling initiatives and talent investments should be put on hold? Not necessary.
In my consultancy with luxury businesses of all sectors, I realise that although most luxury businesses are affected by the macroeconomy's headwinds, each business has its own challenges, which present different customer growth priorities.
I will present to you the three most missed opportunities by luxury businesses from a customer growth perspective and the recommended actions:
Challenge one: Relying heavily on top 1% of customers
Some luxury businesses clearly understand their top 1% of clientele and have been focusing their client engagement budget and effort solely on them.
The challenge is that Client Advisors only know their top 1% of customers, and they are unable to engage with the rest of the 99%, hence missing significant retention spending potential.
Depending on the store's client book size, this type of business needs to expand its clienteling focus from the top 1% to the top 5-10%.
By starting to focus on the next customer segment and creating relevant clienteling initiatives to engage them, your customer retention dollar could easily be doubled in time.
Top three priorities to consider in engaging a wider customer segmentation are:
Redefine Company and Retail Organisation’s Measure of Success
You get what you focus on.
If your business is serious about creating a clienteling culture, start by reviewing your key performance indicators across all departments and seniorities.
You want to ensure the business rewards client appointments, the next segment of customer number growth, and a holistic client data capture effort.
Upskill your Client-Facing Team
Clienteling is about effective communication and relationship building. Have you ever noticed that most of us have never learnt about communication in school or life in general?
Equip your Client-Facing team with a comprehensive Clienteling 101 curriculum. This should include:
The Foundations of Clienteling
The Art of Holistic Personal Branding: This includes everything from mindset and etiquette to expertise, communication skills, appearance and style, and social media engagement.
How to build instant rapport with clients
Mastering Small Talk and Powerful Questioning
Create In-store Events Relevant to brand DNA and Individual Customer Preference
Create occasions and reasons for your Client-Facing team to invite customers back beyond asking them to buy another product.
This could be a pairing of exclusive fabrics and product viewing with a wine appreciation selection or a craftsmanship demonstration with a storytelling experience.
For many loyal clients, being heard is often more important than receiving gifts. Initiating occasions where senior management meets top clients to listen to their perspectives and feedback on your business can be incredibly impactful.
With the right customer growth strategy, clienteling training support and a laser focus on building authentic relationships with every customer, your business can overcome its current hurdles and emerge stronger than ever, even in challenging economic times.
I will discuss the other two missed customer growth opportunities in next week’s newsletter.
