2024-07-13 10:21:29
“I was honored in my reference store, but abroad, I had to queue to access the store.” “In eight months, I haven’t received a single email from a label I’ve spent big on, I’ll never go there again.” These comments collected from Very Important Clients (VIC) as part of a study published by the consulting firm Boston Consulting Group (BCG) with the Italian association of luxury companies Altagamma, give a small idea of the surprising shortcomings of the sector in front of them . this category of customers, although they are becoming more common, whose spending power is growing strongly.
VICs do not feel recognized and pampered completely at the houses – ph Gabrielle Henderson – Unsplash
In recent years, luxury houses have refocused their strategy, focusing especially on the wealthiest clients, and in the process abandoning the more ambitious clients, as evidenced by the rising prices of bags and leather goods accessories from the most brands. But to capture this very particular client, you have to know them well and understand them in the right way, as shown in this BCG study, which provides an unexpected profile of VICs, these consumers. “Beyond Money” (located over money), as she calls them. A category, located at the very top of the pyramid, which represents for some brands almost 30% of their income.
The authors of the survey were interested in consumers spending more than 50,000 euros per year on luxury goods, with an average spend of around 350,000 euros, asking a panel ranging from the category of “least spenders” with annual purchases between 50,000 and 300,000 euros, to those who spend more than a million euros per year. Although VICs represent a small share of the market, less than 1% of all luxury customers in the last decade, their weight in terms of spending has increased significantly, with this share increasing from 12% to 88 billion euros in 2013 21% in 2023, or 213 billion. In terms of spending, each now weighs 200 to 250 times more than the average luxury customer.
The operation of seduction
“For VICs, the luxury spectrum is complete, covering luxury goods, fitness, travel, but also financial services. Serving this customer means fighting with huge competition, since fashion houses invite them to exclusive events, as well like three hotel chains, a car manufacturer or even by their banker or insurer”, emphasizes Filippo Bianchi, one of the authors of the study entitled “How to win the hearts of very important customers” (How to win the hearts of the VIC), during his presentation this Tuesday in Milan.
Two-thirds of these consumers are also UHNWI (Ultra High Net Worth Individuals), i.e. super-affluent customers, who represent 3% of the population, but hold 40% of the financial wealth and are increasing at an average growth rate of 10% per annum. . Another interesting feature is that VIC costs are five times less volatile than those of these aspirational clients, as they have no connection to the GDP curve or economic cycles. “The only real consistency is the growth of their expenses,” said Filippo Bianchi.
The many sectors visited by VICs – Boston Consulting Group
With such a profile, it is surprising that the VICs are so poorly recognized by the labels. According to the testimonials of these very special customers, “only two of the nine brands they frequent, or 20%, recognize them as VIC”. “Often, they are recognized in the store they frequent, but not at their branch abroad. To recognize them, brands only take into account the spending of these customers made at home, and in addition over a limited period of 18 month at most They should rely on multivariate models to understand their spending elsewhere, by analyzing their entire trip and not just a part of it,” Guia Ricci also suggests. Managing Director & BCG Partner and author of the report.
According to the study, 89% of the VICs value products because of their professional aspect and quality, 85% favor exclusivity and being recognized. Finally, they are tired of traditional stores and are primarily looking for personalized experiences. However, according to the testimonies collected, the wishes of the VIC evolve “faster than the ability of the brands to achieve them”. “Brands know the four key points of a unique and exceptional product, great experiences, exclusivity and excellent service, but the people we interviewed said they were completely satisfied with these points in 70% of the cases,” which the researcher follows. .
Avoid dissatisfaction
And list some examples of the reasons for this dissatisfaction. The VIC client requires both hyperlocal personalization, recognizing it in all the brand’s stores, which is not systematic. He is willing to wait to receive an exclusive and personal product, but he wants to be engaged and informed about the production process throughout the wait. Finally, considering himself very special, he wants to join a community. Creating this feeling requires different strategies, depending on the type of product and the customer profile. Here again, we must differentiate, depending on whether we are dealing with Western customers, who prioritize impeccable service and a relationship of trust with the house, and the Asian client who focuses more on a unique product and personalization.
VIC’s weight in terms of spending has more than doubled in 10 years in the luxury market – Boston Consulting Group
The study also highlights one last critical element: the increasingly important role of the sales consultant (Client Advisor). In the report, 64% of VICs surveyed say the relationship with their sales advisor is a key factor in choosing to return to a brand. Above all, 68% of them would be ready to follow their sales consultant if they switched to the competition. However, the younger generations are less and less attracted to this profession and moving from one house to another is very common. Hence the importance of capturing and attracting the best talents – they are more to be found in the hotel sector -, to encourage them to stay, while creating dedicated training.
In summary, to retain their wealthiest customers, luxury companies must not only perfectly achieve the four key points (unique product, experiences, exclusivity and great service), but also know how to differentiate themselves through show more personalization for their VICs that. they know them well, offer them customized products and experiences, make them feel part of a community, not forgetting to take special care of their sales consultants.
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