Luxury Loyalty: A Comprehensive Guide

For decades, loyalty programs have remained a distant cousin to luxury brands. An often-debated argument is luxury brands’ willingness to take the loyalty route. As if COVID-19 wasn’t enough, 2022 started with an unexpected turn of events with a raging war leading to economic downturn across the globe. Despite this, the luxury market is expected growth was up by 21% from 2021. And by 2030, the luxury market value is expected to climb around €540-580 billion, a rise of 60% or more compared to 2022. The market is booming and marketers are now warming up to the idea of instilling brand loyalty in the luxury goods segment. 

This guide captures the intricate detailing of the luxury goods market in 2022 & beyond to see how the digital progression is fostering a loyalty-first environment globally, even in the luxury retail market. 

Challenges of the glitterati world of luxury loyalty   

2020 & beyond presented extreme challenges – with every industry taking a hit, every sector retreating, and every luxury shopper changing once and for all. The luxury goods market saw its imminent slowdown. Globally, both brands and designers struggled to overcome the newly self-conscious behaviour of more mindful consumers. For legacy brands it was, then, about finding new ways of recreating the brands’ physical universe online. But are all the brands ready to ride along? Let’s look at 3 major challenges that stand upfront for marketers: 

1. 1. Brand Stature: Luxury goods are products that nobody really wants but everybody needs. The predicament for marketers selling luxury products is to determine whether loyalty programs would devalue or enhance a premium brand’s image. Many brand marketers often feel that rewarding freebies like discounts and other related offers might downsize their otherwise high-end products or services. 

1. 1. Low Frequency: You own a Louis Vuitton and that stays with you. You wear a Prada and well, that too lasts forever. Most luxury retailers do not interact with the customer for a year or so after having sold a high-priced item to them. This leads to a lower shopping frequency and poses a huge challenge for marketers. 

1.  Impeccable service: Knowing that luxury brands already offer a high-end experience to their customers, understanding the next-level of experiential benefits in this category is no child’s play. The challenge is then to think of rewards that are beyond the unthinkable for their customer groups. 

The anatomy of creating a luxury loyalty program

Luxury loyalty is all about capturing the brand’s cultural ethos, and creating a space for creativity and innovation. Let’s look at what we term as the 4Es of creating a luxury loyalty program.

1. 1. Exclusivity: Shoppers don’t come to a brand for mere discounts and rewards; they look for exclusivity. An exclusive preview of the celebrity collection, signed merchandise, offering coalition loyalty benefits by partnering with high-end partners like five-star diners, and travel escapades could uplift the positive persona of a luxury brand. Luxury shoppers look for a world beyond discounts and rewards. Your brand must clearly reflect why your premium shoppers are offered a set of privileges that are exclusive only to a specific number of shoppers.
      

1. 1. Experiential: The biggest premise for any luxury loyalty program is to customize experiences for their shoppers by creating surprise and delight. Dolce and Gabbana reframed the majestic architecture of their stores through the virtual boutique experience project.

1. 1. Ecosystem: Loyalty is about building an entire rewards portfolio and diversifying it. The American cosmetic luxury retailer, BlueMercury, has partnered with high-end cosmetic and skincare brands like Bobbi Brown, La Mer, Jo Malone, Yves Saint Laurent, and many others to offer an exclusive and fulfilling rewards experience. For their most loyal customers, the glam retailer offers an annual gift package to its members.
      

       

      Singapore’s Kris Flyer Program allows flyers to redeem their points not only on air tickets or travel-related offerings but other premium partners like five-star dining and shopping with other luxury fashion brands.

1. Essence: Similarly, if your brand focuses on using sustainable products, your loyalty program must resonate with how sustainability is core to your brand values and larger organizational purpose. Moncler has a dedicated sustainability tab on their webshop, while UK’s Stella McCartney created new labels that encouraged taking better care of clothing for longer lifespans.

5 luxury brands that are innovating in the loyalty space

1. 1. Burberry– The brand also launched its first global game to enchant young luxury consumers on their website. With “b Bounce”, a new puffer collection was launched with the objective of using gamification as an effective engagement strategy. All products are tagged with QR codes for scanning to receive a social currency. The same currency can be traded for rewards and discounts. Further, customer interaction is captured on social channels by building a tangible digital dimension to traditional retail channels. Through a dedicated WeChat mini program, customers can unlock exclusive content and personalized experiences and share them with their communities.

1. 1. Le Bon Marché– The LVMH-owned store in Paris opened an in-store digital customization segment for the hyper-personalization of its product offerings. Customers have access to over 80+ international brands, and can customize clothes, shoes, and other accessories, or even draw their own t-shirts.

1. 1. Saks Fifth Avenue also offers an option to shop a look from its New York store through a video chat feature. This seamless plugin of web chat capabilities paired with in-store or appointments before or after hours – packs an impactful customer engagement strategy for its loyal fan brigade.

1. 1. Sephora Beauty Program – Since makeup is an industry which is largely driven by recommendations and referrals, Sephora’s Beauty Insider Community program personalized its experience for its loyal customers perfectly. Their live community allows customers to join exclusive beauty community meetups based on their individual beauty interests, and offers credible product recommendations, tutorials, and expert opinions. 

                               

1. Louis Vuitton has portrayed an excellent example by setting up an equally promising website that offers the provision to book in-store as well as virtual appointments. It also offers a collect-in-store option to some of its exclusive loyal members at different locations, thereby abiding by global safety norms. 

Fashionistas tête-à-tête with technology

The priorities have been reset across luxury fashion brands, and five strategies clearly stood out for every retailer. As the world is dominated by Generation Y and Z, these generations are expected to account for 55% of the overall luxury sales market by 2025.

1. Lights, Camera and Live E-commerce: Did you know that Gucci livestreamed a 12 hour-long digital fashion show? Now is the time for brands to switch to live streaming platforms. Here, luxury shoppers can not only see but experience how suitable or relevant a product is for them.

800 Mn+ people watch live videos daily across Instagram and Facebook, resulting in a new roll out of features to enable brands to get the most out of their live broadcasts. In addition to Instagram Live Shopping, users now have the option to view the broadcasts live on desktop computers along with their smartphones.

2. Omnichannel now in vogue: There is now a pressing need for brands to catch hold of a customer’s attention across the right channels. Luxury fashion brands have, thus, shifted their focus to analyzing and acting upon omnichannel shopping behavior. For the prediction and capitalization of present and future luxury shopper analytics, an omnichannel integration is a key expectation for luxury retail digitization.

Amongst all, GUCCI tops the list of omnichannel digital presence. The brand remains one of the industry’s best-in-class digital performers, by leveraging digital storytelling, omnichannel experiences, eCommerce, and, of course, a constant drive to innovate online. From digital gifting with split payments to AR-powered try-on features on Snapchat and the Gucci App, the brand is constantly experimenting like there’s no tomorrow.

3. Luxuriously phygital: An everyday example of phygital retail would be a typical consumer who always shops with a smartphone in hand, often checking product details to help them choose offline. In the retail sense, the term has gained prominence recently, referring to the blending of the best online and offline features of the shopping experience. Nordstrom is a U.S. luxury fashion retailer which recognizes that the foundation of a phygital strategy is the seamless ease and convenience of the customer experience.

     A. The brand’s Neighbourhood Stores allow the customer to touch and feel the products they browse online. 

     B. The integrated-app experience with the stores offer a seamless shopping experience to shoppers by using a combination of both physical and digital stores. 

    C. Their Instagram and Pinterest accounts allow users to click on a posted photo and take them straight to the Nordstrom online shop where they can order online or reserve the item in-store.

4. The Fashion Subscription Model: Subscriptions not only ensure that your consumers are updated about the latest offerings for but also promises consumer loyalty upon delivering the brand promise. 

Ralph Lauren introduced The Lauren Look – the company’s first subscription apparel rental initiative. Starting at $125 a month, subscribers are able to access a constantly changing range of Lauren Ralph apparel: including dresses, pants and tops. Pieces are accompanied by suggestions from personal stylists on how to wear them.

5. Appointment shopping: Aptly shared by John Federman (CEO of JRNI), “Appointments allow you to keep the lights on and effectively schedule staff. It also keeps the staff more productive. If an associate can spend time with someone with a high propensity to buy, they can use their time more effectively.”

Lululemon leads the frontier to allow consumers to book appointments to browse before, during or after regular store hours. Giorgio Armani too opened around 100 of his stores with a new system of booking appointments online. This practice was immediately adopted post-pandemic, ensuring social distancing practiced as the new norm.

How Capillary enables luxury brands to benefit from loyalty programs

When we also look at how online luxury sales are broken down, we see that the multibrand marketplaces are expanding to reveal how the digital luxury customer is seeking an ecosystem offering more value than points. Luxury brands, thus, need to overhaul their loyalty game for the luxuriously affable Generation Z, and barge out of their closets to offer experiences building an element of exclusivity in their offerings. The conventional earn and burn won’t fit into the high-end luxury world.

Given the many trends that have shifted in the last eighteen months, the key to design a loyalty program for a luxury brand has completely been revamped. Therefore, luxury loyalty is not just about rewards, it is how brands leverage data to understand the customer buying patterns and build memorable customer experiences. However, for luxury brands to deliver this benefit, they must invest in extracting and analyzing customer data to derive meaningful insights. This is where many luxury brands show resistance today but as the field of data science progresses and more luxury brands come on board, there will be significant improvement in the times to come. Many brands have already begun to evolve their existing loyalty programs to cater to the changes in the luxury industry.

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Writer, traveler, and a cold coffee addict, precisely in that order, Aditi Jindal is a storyteller. Whether it is slicing brands and their content marketing strategies or dabbling different genres of book writing; her keen interest in finding the unique idea for brands to deliver compelling stories keeps her on her toes.