Retail companies across the globe are struggling in the face of the recession. Layoffs, budget cuts, and in some cases, bankruptcy, abound. It feels like no one is safe. And yet, time after time, historic luxury brands come out on top.
In some ways, it’s obvious why: renowned reputations, global reach, and impressive marketing budgets. But when you dig beneath the surface, there’s a more strategic approach to the success of luxury brands that sets them up for longevity (even in the face of adversity).
This is how luxury companies thrive during an economic recession—and how you can follow suit.
Is luxury recession-proof?
Due to their timeless reputations and exposure to high-income consumers, luxury brands are naturally positioned to succeed under most, if not all, economic climates. According to the Saks Luxury Pulse Survey taken in September 2022, 76% of luxury shoppers expected to spend the same or more on luxury goods this past holiday season than the one prior.
In addition to luxury consumers being in better financial standing than the average consumer, luxury brands also tend to have a solid understanding of their consumers’ values, which is made apparent in their top-notch marketing tactics. Let’s dive in.
4 ways the luxury market scales revenue during a recession
Here are four marketing strategies that luxury brands use to remain relevant and profitable at all times, especially during a recession.
1. Intentional clienteling for elite customer segments
Every luxury brand has a segment of their highest value customers that spend up to a certain threshold with their brand each year (for example, customers who spend over $100,000). These are the crème de la crème of customers, and they should be treated like royalty.
“Identify who your highest value customers are—that top one percent—and give them a very unique, personalized, one-to-one experience,” says Jack Riker, Vice President of Revenue at Wunderkind.
Luxury shoppers care less about price and more about exclusivity and status. The best luxury brands offer their most important customers access to products that aren’t available to the general public, provide complimentary experiences (such as dinners and fashion shows), and give them special treatment with same-day or next-day shipping.
The idea is to make them feel special—and more importantly, make it easy and convenient for them to shop. Follow up your marketing outreach with a phone call from your salesperson or customer success rep to expand on your exclusive offers and even complete the purchase for them over the phone.
2. Tap into timelessness
“In a recession, people want to make purchases that will last them a long time,” Riker explains. “Recently, some high-fashion brands have been leaning more into a timeless luxury product or message to speak to the fact that these purchases will outlast any short-term trend and be a product for life.”
Although luxury shoppers are typically less impacted by economic hardships than others, they still want to shop smart—and they want quality. Fashion house Bottega Veneta recognized this, and in October 2022, announced a new lifetime warranty program on their bags that offers unlimited complimentary maintenance and repairs.
This is the time to lean into (and heavily market) your company’s values. “Know your why,” Riker says. A Harris Poll research study found that 82% of shoppers prefer a consumer brand’s values to align with their own, and 75% would part ways with a brand over a conflict in values.
Ask yourself: What does your company stand for? What does a consumer get when they shop with you compared to anywhere else? Values could be anything from sustainability, to standing out from the crowd, to inclusivity.
3. Build and sustain excellent customer loyalty programs
As the cost of acquiring new customers increases, it’s especially important to retain existing customers and maximize their lifetime value. One of the best ways to do that? Sustain a fully-fledged, excellently integrated loyalty program. “How do you get someone from buying one scarf to spending every quarterly bonus with you?” Riker poses. The answer is data-driven personalization tactics.
Step one: Ensure you have high-quality customer data. This enables you to speak to your customer’s prior behaviors and shopping preferences accurately.
Step two: Provide them with special offers that encourage upsells and cross-sells, ensure a seamless buyer’s journey, and have consistently outstanding customer service. This will create positive brand associations, build trust, and keep them returning for years to come.
“There are different types of loyalty,” says Tom Harris, Chief Revenue Officer at Emarsys. “While brands generally consider building incentivized loyalty through tactics like discounts and private sales, this is not where your loyalty program should end.”
According to the Emarsys Customer Loyalty Index, in addition to incentivized loyalty, there’s also silent loyalty, ethical loyalty, and inherited loyalty. But what brands really want is called true loyalty: that of a customer so delighted by your brand’s customer service, website, and communications that they wouldn’t dream of switching to a competitor.
“Our entire company is a loyalty program,” says a Wunderkind client from a high-end luxury fashion house. Make sure you place emphasis on keeping your highest-spending customers happy, and they’ll remain loyal to you even during tough economic times.
4. Diversify product offerings
Luxury brands have started to diversify their product portfolio with more affordable items in addition to prestigious, expensive items that only the upper class can afford. For example, they may offer lower-priced accessories or entry-level products like perfume, which can attract new customers while maintaining their reputation for quality and exclusivity.
According to Entrepreneur, global luxury goods company LVMH released its fiscal first-half 2022 results, reporting revenue growth of 21% year-over-year to 36.7 billion euros. “Our geographic balance and diversification has proven to be a key asset over the last couple of years. […] We are [not] immune to any external shocks, but it just means that we have the ability to face more adverse conditions and to emerge from them stronger than ever,” says Jean-Jacques Guiony, Chief Financial Officer at LVMH.
This approach can invite in a new wave of customers that may be younger and/or lower income, but willing to spend on certain luxury items. Plus, if these customers like what they see (from both a communications and product standpoint), they’ll be back for more. Play the long game; as these consumers rise in the ranks, they could become some of your highest spending customers down the road.
Want to thrive during the retail recession? Send one-to-one personalized communications to your most important customers and build a killer loyalty program with Wunderkind. Learn more about our one-to-one performance marketing solution for retailers.