“I received special treatment in my reference boutique, but abroad I had to queue to get into the shop.” “In eight months, I haven’t received an email from a label I’ve spent a lot of money with, so I won’t be going there again.” These comments, collected from Very Important Clients (VICs) as part of a study published by the consultancy Boston Consulting Group (BCG) with the Italian association of luxury companies Altagamma, give an idea of the surprising shortcomings of the sector when it comes to this increasingly courted category of customer, whose spending potential is growing rapidly.
In recent years, luxury brands have rethought their strategies, focusing on the wealthiest customers, abandoning aspirational customers in the process, as evidenced by the soaring prices of bags and leather goods accessories from the biggest labels. But to attract this very special clientele, it is necessary to understand them, as this BCG study deciphers, drawing up an unexpected profile of VICs, or ‘Beyond Money’ consumers, as it calls them. This category, at the very top of the pyramid, accounts for almost 30% of the revenues of some major brands.
The authors of the survey looked at consumers spending more than 50,000 euros a year on luxury goods, with an average spend of around 350,000 euros, interviewing a panel ranging from the “least spenders”, with annual purchases of between 50,000 and 300,000 euros, to those spending more than a million euros a year. While VICs represent a tiny share of the market, less than 1% of all luxury customers over the last ten years, they have seen their weight soar in terms of spending, rising from 12% to 88 billion euros in 2013 to 21% in 2023, or 213 billion. In terms of spending, each of them is now worth 200 to 250 times more than the average luxury customer.
Operation seduction
“For VICs, the luxury spectrum is total, covering luxury goods, wellbeing, travel, but also financial services. Serving this customer means battling with enormous competition, since they are invited to exclusive events by fashion houses, hotel chains, car manufacturers, bankers and insurers,” emphasised Filippo Bianchi, one of the authors of the study entitled “How to win the heart of very important customers,” which was presented on Tuesday in Milan.
Two-thirds of these consumers are also UHNWIs (Ultra High Net Worth Individuals), or ultra-rich customers, who represent 3% of the population but hold 40% of financial assets and are growing at an average rate of 10% a year. Another interesting fact is that VIC spending is five times less volatile than that of aspirational customers, as it is not linked to the GDP curve or economic cycles. “The only real constancy is the growth in their spending,” says Filippo Bianchi.
With such a profile, it is surprising that VICs are so poorly identified by the labels. According to these very special customers, “only two of the nine brands they frequent, or 20%, recognise them as VICs.” “Often, they are recognised in the boutique they visit, but not by its foreign branch. To identify them, brands only take into account what these customers have spent with them, and over a limited period of no more than 18 months. They should use multivariate models to understand what their customers are spending elsewhere, by analysing their entire journey and not just part of it,” suggests Guia Ricci, also Managing Director & Partner of BCG and author of the report.
According to the study, 89% of VICs value products for their craftsmanship and quality, and 85% value exclusivity and recognition. Finally, they are weary of traditional shops, whereas they are looking for personalised experiences. However, according to the testimonies gathered, the desires of VICs “are evolving faster than brands’ ability to fulfil them.” “The four key points – a unique and exceptional product, remarkable experiences, exclusivity and impeccable service – are well known to brands. However, the people we questioned told us that they were completely satisfied with these points in only 70% of cases,” continues the researcher.
Avoiding dissatisfaction
The study goes on to give a few examples of the reasons for this dissatisfaction. VIC customers want hyper-local customisation, while at the same time being recognised in all the brand’s boutiques, which is not always the case. They are prepared to wait for an exclusive, personalised product, but want to be involved and informed about the production process throughout the wait. Finally, while they consider themselves very special, they would like to be involved in a community. Creating this feeling requires different strategies, depending on the type of product and the customer profile. Here again, we need to differentiate between Western customers, who place the emphasis on impeccable service and a relationship of trust with the company, and Asian customers, who rely more on a unique product and customisation.
The study also highlights a final key element: the role of the client advisor, which is becoming increasingly important. In the report, 64% of the VICs surveyed said that the relationship with their sales advisor was a key factor in their decision to return to a brand. Above all, 68% of them would be prepared to follow their sales advisor if he or she moved to a competitor. However, the younger generations are less and less attracted to this profession, and transferring from one company to another is very common. Hence the importance of capturing and attracting the best talent – increasingly to be found in the hotel sector – and motivating them to stay, while creating dedicated training courses.
To sum up, to keep their most affluent customers, luxury companies will not only have to perfect the four key points (unique product, experiences, exclusivity and impeccable service), but also know how to differentiate themselves through greater personalisation to show their VICs that they know them well, offer them tailor-made products and experiences, make them feel part of a community, without forgetting to pay particular attention to their sales consultants.
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