How programmatic marketing can help luxury brands in challenging times

programmatic marketing for luxury brands

In these uncertain times, luxury goods companies are amongst the hardest hit. Year-on-year sales for Q1 2020 are expected to be down 25-35%. Despite the current gloom, companies can still emerge stronger if they take a digital first approach to marketing activity.

Summary Points

  • The luxury goods market has bounced back from crises in the past, so there is room for optimism
  • Overly discounting inventory can have a negative impact on brand equity
  • Brands need to accelerate digital investment and shift media spend to online channels
  • The current situation provides marketing teams with an opportunity to run low-cost marketing testing models, to inform wider strategy

Luxury brands were some of the first to feel the impact of Covid-19, and the massive ramifications it would have on both business and consumer spending. China accounts for some 35% of the global luxury market, and was the first nation hit, while Italy which was one of the early European countries impacted, is a core part of the luxury supply chain.

The sector is vulnerable on numerous fronts. With consumer confidence and the financial markets diving at an alarming rate, domestic spend is scarce. A halt on tourism, means that luxury purchases from tourism are currently non-existent.

What should luxury leaders in marketing do in the short term?

In general the luxury market has demonstrated diligent leadership during the crisis so far. They’ve prioritised the safety of employees and customers, and been proactive in communicating about their crisis response activity to keep things operational. Some brands have been able to pivot to address public-health and help the wider cause. Some luxury goods manufacturers are making face masks, hand sanitizer and other PPE for the NHS and care-workers.

That has been an amazing achievement, but at the same time, the luxury goods market must bounce back and produce luxury goods again. To do that industry marketing leaders must now plan ahead with strategic answers to complex problems to ensure they survive.

1. Learn from the past

The luxury goods market has bounced back from crises in the past, so there is room for optimism. The impact of the SARS outbreak in the early 00s was not as harsh as it could have been. Similarly, after the 2008 financial crisis, Chinese customers kept spending on luxury goods when demand in the west decreased.  

The big difference this time around, is that Chinese consumers are more affected by Covid-19. It’s unlikely they’ll be able to keep spending, and there is no untapped market of luxury customers to target. 

The key learning is that marketing output needs to be agile. Campaigns need to be able to adapt, and be ready to be switched on instantly when post-crisis opportunities arise.

2. Review Merchandising Plans

While not strictly the sole domain of the marketing department, merchandising has never needed to be more aligned to marketing. In high-end fashion, sales of this year’s spring season are as much as 70% down. This is unsurprising as people didn’t have the opportunity to explore collections in store. This presents an immediate stock dilemma. The most obvious tactic for unsold inventory is to heavily discount. In the luxury sector, this might not be appropriate, as it has a negative impact on brand equity. A more pragmatic solution, could be to adapt an added value and rewards approach, whereby loyal customers are gifted extra inventory to surprise and delight them, and increase brand satisfaction and lifetime value.

An eCommerce site will be the key sales channel, but luxury brands should also consider partnering with other online-retailers and channels. With the average age of luxury shoppers falling from 48 to 34, they now engage with brands and goods online before making purchases. That is regardless of whether the transaction occurs online or in-store. Digital marketing activity, is essential for luxury brands right now, and will help not only boost online sales but also entice consumers to visit shops when they reopen.

3. Increase Digital Presence

As physical stores are closed across most of the world, eCommerce is the key driver for sales. Luxury brands need to accelerate digital investment and shift media spending to online channels. With more eyeballs on screens than ever before, digital channels are the best way to communicate with customers, and to develop a sense of community around your brand. People are seeing the caring, more human side of brands rather than just seeing them as profit-driven companies. 

Usage across the Facebook family of apps has gone up by 70% since the lockdown began, and opportunities on paid social media have never been more cost effective. Advertising rates on the platform have decreased with low CPMs in most sectors, and CPC reportedly decreased by 19% on average.

Brands that are doing everything to help in the current situation are the ones that people will remember once this is over. This time should be about brand salience for luxury goods, and winning the loyalty of  customers through genuine empathy. With many in the sector doing the right thing, and helping the wider cause, some simple amplification on social media could go a long way in growing brand awareness. Much of the increased activity on Facebook is on unmonetized services, as people share content they think will help others.

Creating well-crafted messaging which speaks to what real people are going through and showing them that they genuinely care, is key to all digital activity at this time. Increasing digital marketing post-crisis is expected to involve a rush on inventory causing  a surge in auction prices and competitiveness.

Looking ahead to the Future

The shift to online ordering during the pandemic, has shown the need for luxury brands to focus on omnichannel retail. Marketing activity must become digital first to ensure activation can be scaled both during and post lockdown.

The current situation provides marketing teams with an opportunity to run some low-cost marketing testing models, to inform their wider strategy. Teams who have this informed data, will be those empowered to hit the ground running. With the right lessons learned, a touch of brand resilience, and an intuitive programmatic marketing strategy, luxury brands could even emerge from this crisis stronger.

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