Third party digital commerce driven by Google Shopping and social channels is threatening to take control of the customer experience and lock brands out of crucial customer data.
In response, luxury brands are urgently seeking to engage luxury consumers through loyalty and membership schemes – but here they must compete with multi-brand retailers with well-established and successful schemes of their own.
The good news is that there is a clear sweet spot that luxury brand loyalty and membership schemes can inhabit, if they are shaped by a clear understanding of customers’ emotional needs and directly designed to meet them.
One thing is clear, however – finding that sweet spot does not mean simply aping multi-brand retail loyalty schemes. It means delivering emotionally resonant experiences that neither 3rd party digital commerce, nor multi brand retail can match.
The rise of 3rd party digital commerce
Right now, today, up to half of luxury clients start their digital purchase journeys on Google Shopping. This is not guesswork, these are real numbers drawn from our work with luxury brands – and at the current rate of change, that figure could be north of 80% in just 12 months time.
This is no accident. It is driven by an explicit Google strategy, as explained by Bill Ready, Head of Google Commerce: “Google Shopping will evolve into a platform for retail discovery, where consumers can find and buy products from anywhere.”
To make matters worse, luxury clients love the convenience of Apple Pay, Android Pay and other ewallets. These clients barely interact with any aspect of a brand site beyond the product details page (PDP) – and they certainly have little interest in signing up to anything during that journey.
The challenge for luxury brands is how to hook these clients – 76% of whom will be Gen Z and millennials by 2026 – back into first party commerce, beyond the PDP.
Finding the loyalty sweet spot
The good news is that loyalty and membership schemes work in luxury – 62% of clients are likely to spend more after joining a loyalty scheme.
Perhaps most importantly, building a community halo of engaged clients may be the only way for luxury brands to fight back against the threat from 3rd party digital commerce – retaining control of the customer experience and gathering the intelligence they need to deliver the personalised and omnichannel experiences that demanding luxury clients expect.
So where is the loyalty sweet spot for luxury brands? Our work has revealed that, beyond social status signals, there are four core emotional needs that draw clients to luxury brands:
- The human need to belong.
- To express individuality.
- To feel valued.
- To feel at ease and in control.
This has not escaped the attention of multi-brand retailers like Net-a-Porter, Matches and Farfetch, all of which already operate loyalty schemes that address at least some of these needs.
However, if we translate those needs into specific loyalty ‘rewards’ for luxury clients, it becomes clear that only brands themselves can address the most important needs – and this is where we find the sweet spot for luxury brands:
- The human need to belong - Exclusive brand access.
- To express individuality - Access to exclusive products.
- To feel valued - Status-based rewards.
- To feel at ease and in control - Priority services.
But translating those needs which only luxury brands can address means rethinking loyalty – moving away from transactional approaches to build communities of engaged clients drawn to an amplified luxury experience.
From loyalty to client privilege…
The sweet spot for luxury brands is in offering exclusive brand experiences, products and services. We call this client privilege, and it has the potential to elevate luxury brand offerings well above the tiered, points and reward-based loyalty scheme favoured by multi-brand retail.
Deeper client engagement, more traffic to 1st party digital commerce channels, greater visit frequency and higher conversion rates, the data to shape personalisation, and greater overall spend are all within reach – and, crucially, it is possible to research, design and deliver client privilege schemes in around six weeks.
…in six weeks
We have developed a blueprint for delivering luxury brand client privilege schemes – essentially a three stage process that can be carried out largely using existing tools and technologies – and, as ever, a deep understanding of client needs and motivations is a prerequisite for success.
Overall, this takes around six weeks, spanning strategy definition, programme execution and experience evolution.
Get in touch with us to find out how our blueprint for luxury brand loyalty could help you fight off the threat from 3rd party digital commerce and retain control of the customer experience.