Premium and Luxury: Who’s buying and why?
As a baby boomer, I sometimes forget about the buying power of Millennial consumers. That’s a big mistake because this cohort is gliding into their peak earning years, and like many cashed up baby boomers, they’re demanding higher quality, premium products. Millennials are the fastest growing segment in the luxury goods segment. In 2015, they increased their spending by 31% compared to a 19% increase for Boomers and a 23% increase for Gen X, according to American Express Business Insight. They also come complete with a fully informed, well researched, socially connected, omni-channel mind-set. And, it’s one that devours authenticity.
The problem facing marketers now is the demand for premium and luxury has grown so much, many products have become commoditized responding to demand. Along the way, the authenticity of many offerings has been over-leveraged, damaging consumer trust.
The impact from this commodification process is being amplified as more and more companies head for the same space, chasing the same customers, with essentially the same products. The credibility of the narrative behind many companies and their products has maxed out. This trend is emerging in all sorts of sectors including food and beverage, high-end clothing and tourism. Watching wine businesses struggle with the wine wall is a real-life example. Differentiating wine isn’t easy and standing out from the crowd is becoming a real challenge for wine marketers. Prices are essentially flat, and the larger wine companies are using their production efficiencies and scale to steadily win more and more market share.
There is even more pressure on a company’s storyline when millennials scrutinize the provenance and authenticity of an offering and comment immediately and widely on social media. There is nowhere to hide anymore. Their requirement for ‘realness’ is game-changing. On the bright side, this phenomenon has created an opportunity for savvy marketers to satisfy millennial’s demands for extra specialness with new approaches that make their impossible dream, possible. Leveraging the emotional and experiential side of your product makes excellent commercial sense when engaging this market. Two great examples of premium businesses connecting narrative and heritage to authenticity is Best Made and Uncrate. Both companies have developed business models, value propositions, and product offerings capable of engaging customers in new ways. Both companies deliver stellar performance. Both companies successfully appeal to a wide audience.
In Asian markets, times have changed too. Asian consumers, particularly millennial Asian consumers, are incredibly tuned into digital and social media channels. This puts pressure on traditional approaches, which are now struggling to consistently reach these new elite consumers. In Asia, connecting with premium consumers is all about screens. Hong Kong and many other parts of Asia have over 100% adoption rate of mobile devices-meaning most users have more than one device. The public buses in Hong Kong are wired for Wi-Fi. As a result, a detailed digital branding strategy is essential (not optional) for success in Asian markets. It doesn’t hurt that digital/social media is also an effective, low-cost, and highly efficient marketing tool. And don’t forget, these markets have enormous momentum and potential. For example, Hong Kong brags that 1 in 7 are millionaires and their average age is 48. The top 50 richest in Hong Kong have a combined net worth of USD $ 242.3 Billion. Singapore has 188,000 millionaires and Shanghai has 370,000 millionaires and 90 Billionaires. Reaching these consumers is going to be well worth the effort.
Marketing approaches are not the only thing changing either. Tastes are changing in places like China now too. The emphasis is coming off ‘bling’. There is a shift towards cultural confidence, sophistication, minimalism, natural appreciation and more worrying for some, a shift away from western provenance and tradition. Instead, they are developing their own identity. Chinese consumers are looking for brands that understand their key cultural drivers. The strategy that championed taking westernized products to Asia and hoping for a premium by showing up is coming to an end. Customization is just beginning and the opportunities are enormous for those who can rise to the challenge. The good news is, tapping into these markets isn’t impossible. For example, 81% of Chinese millionaires tap into WeChat more than five times a day so there are some obvious roads into their world. Exporters with a passion for premium matched with a passion for learning just need to work out how to drive on the new silk road.
By Jim Wilkes