Traditionally, luxury brands have focused on merchandise and the retail experience—and these are unarguably important elements to a luxury brand’s success.
However, research shows that luxury brands may miss huge opportunities by not understanding who their best customers are. When brands do not know their customers, they cannot interact with them in a way that is relevant, personal, and meaningful. In turn, they lose the ability to keep their best customers and gain potential customers who are spending with their competition.
We now know that customers expect communications to speak to them directly. McKinsey & Company states that customers “expect all data stored about them to be targeted to their needs or used to personalize what they experience.” However, if a brand doesn’t have a clear picture of their consumer, they cannot fulfil this expectation.
While luxury brands tend to have a higher price point and AOV by definition, many luxury brands lose 80–90% of their customers in any given year. Those same brands struggle to retain the top 50% of their customers. In addition, only 10–15% of luxury customers state that they have a first-name relationship with a sales professional.
Milton Pedraza, CEO of Luxury Institute confirms, “Luxury brands lose half of their top customers every year. The biggest reason why a consumer won’t come back is not the product—it’s a rude or inattentive salesperson.” Therefore, it is crucial for a luxury brand to understand their customer from a high macro level that can be a part of a brand’s marketing ad advertising down to a granular level that can be leveraged by individual sales associates in the course of clienteling applications for customer engagement, retention, and satisfaction.