The HNWI and their expectations from luxury
As a consumer group, few are more important to luxury brands than high-net-worth individuals for either the revenue they bring in or the cache they lend. HNWI’s number 15 million worldwide, according to the Global Citizens Report by Henley & Partners and are the very definition of luxury consumers.
In this article and to accompany the launch of our latest State of Luxe report, we cover:
- How high net worth is defined
- The three brand experience characteristics HNWs expect luxury companies to deliver
- What luxury brands need to rediscover
Defining high-net-worth individuals
There is no agreed definition of what high net worth means. However, in our experience, many luxury brands define HWNs as individuals who have between $1m and $30m net worth in cash and liquid assets. They consider ultra-high-net-worth individuals as having $30m or more net worth.
The US accounts for around 6 in 10 of the world’s HNW. Between now and 2030, the largest absolute rises are expected in emerging markets like Indonesia, Mexico, Turkey and India.
Three key areas to focus on to deliver a true HNW luxury experience
Luxury purchase intent is stronger than ever. Bain recently predicted that 2022 sales would reach €1.4 trillion, a 21% jump as 95% of luxury brands “generated positive growth“. That’s a 40% increase on pre-pandemic numbers. Online shopping will continue to grow but expect a resurgence in physical store shopping this year too.
The three key characteristics of delivering brand experiences valued by high earners are quality, exclusivity, and authenticity.
1. Quality matters most
“Luxury” is perhaps the most misapplied word in the English language. Marketing teams working for budget and mid-market brands flippantly label corner-cutting products as “luxury”. This presents a danger that, through continued misuse, whatever linguistic import and cache remains in the word will further erode.
But, as Patrick Heiniger, ex-CEO of Rolex reportedly said, “Rolex is not in the watch business. We are in the luxury business.”
In our State of Luxe report of 2021, the most important of the key takeaways we identified was that quality is the key feature an affluent consumer wants from the luxury sector. Fast forward to today and this has not changed.
64% of affluent consumers referenced quality as the key attribute. Its power is so strong that the presence of quality motivates HNW consumers to advocate their favourite brand online.
Luxury has long been and remains synonymous with quality. An admiration of craftsmanship, attention to detail and world-class materials are default expectations.
2. Exclusivity counts
Behind quality is exclusivity, specifically referring to accessibility.
For example, while there may be many HNWs who can afford a Patek 5711, only a select number of HNWs will know the right retailers or know someone in the business will have the access to buy the model. This is also true in the fashion world where limited edition collections are available for narrow windows of time. This approach fosters a sense of cult exclusivity and status around products.
Luxury travel agents use the same approach. They market very exclusive trips to remote, rarely-visited places to HNWs who seek a globetrotting lifestyle and who want to share their adventures on social media channels.
NFTs tap into this phenomenon of restricted access. Communities of brand VIPs are created around the ownership of NFTs, the reward for which is that they are first in line for access to product lines or events.
“Exclusivity now is less about who can buy luxury, but how.”
There is a contradiction here though. Ascendant at the same time is “progressive luxury”, tied with the diversification of the luxury consumer base and the “wokeness” of Gen Zers and Millennials that wants to see social justice.
Progressive luxury seeks to broaden brand connections with a wider group of consumers. We’re seeing brands achieve this with the “drop model ” – elevating brand values while simultaneously creating product lines at a more affordable price.
TELFAR offers a great example of this trend. The brand’s notorious shopper bag retails for $300 but holds inclusiveness at the heart of its identity, “Not for you, for everyone”. But are these really luxury items? TELFAR has successfully used the drop model too and used the campaigns that promote them to tell brand stories highlighting their mission of inclusivity. This is also a recurring theme that they champion 24/7 via their streaming TV channel TELFAR.TV.
TELFAR’s success with their shopper bag showcases how the consumer buys into a brand for its values so much so that they’re now seen as Brooklyn’s answer to the Birkin.
3. Authenticity matters more than ever
So we can see that inclusivity is a value that many luxury goods buyers hold in high esteem. To them, it’s an indicator of authenticity, another brand signal consumers really want to see.
When we asked luxury customers what they want a brand to be, “authentic” came out on top (49%). This is particularly so among Gen Zers, Millennials and the upcoming next generation, Gen Alpha.
What does this mean? According to Dani Reiss, Canada Goose’s CEO, “what constitutes luxury has evolved…to focus on how products are made and what the brand stands for”. Authenticity should be in a brand’s purpose and DNA. It’s not an opportunity to generate favourable publicity by dressing up in activists’ clothing.
TEFLAR, again, do authenticity well. They exude a strong and confident sense of identity in their message which translates well into authenticity. This is important because consumers are now sophisticated enough to spot and call out phoney messaging and forced narratives.
Where brands need to do better
These three areas of luxury advertising perhaps require attention from a talented creative director:
1. Unremarkable creative direction
In March 2022, we called out luxury brands for copying each other with their visuals and messaging. Print ads in your weekend read of How to Spend It are indistinguishable. Creative direction is often similar, even down to the product placement on the page.
In our article, Nader Tavassoli, a branding expert and professor of marketing at the London Business School, argues that luxury brands need to be disruptive in their advertising. This is the only way they can create a lasting impact on consumers and differentiate themselves from their competitors.
Our own creative strategist Amy Butterworth, emphasises the importance of creating distinguishable content for luxury brands. They should aim to be iconic in their self-presentation. She also believes that, as a result of shifting consumer behaviour, the most successful brand advertising focuses on lifestyle and self-expression rather than just the product itself.
2. Avoid greenwashing and other dubious claims
In the past four years, we have seen brand greenwashing become rife. Luxury brands often promote their sustainability programs yet contribute to the creation of great volumes of waste as they create quality products and deliver quality service.
We often think of the fashion sector as the villain of the piece but the hospitality and beauty sectors are coming under increasing scrutiny.
Luxury hotels promote eco-friendly amenities and practices like refillable toiletry bottles or encouraging guests to reuse towels. However, overlooked are larger issues like excessive energy consumption and food waste. Beauty companies promote the use of the presence of a small percentage of natural or organic ingredients in their products while still using excessive packaging or relying on environmentally harmful manufacturing processes.
These factors combined create a great disconnect between what brands say and what they do. And customers notice this.
3. Inauthentic influencer collaborations increasing scepticism
While many influencer partnerships work well, some collaborations seem misaligned resulting in awkward content that seems forced. This breeds both scepticism and mistrust in audiences, negatively impacting both the brand and the influencer.
Influencer marketing relies on the authenticity and credibility of the influencer and the brand. Influencers who seem a natural fit for a brand and its target audience create more impactful, authentic content that resonates with both sets of followers.
The past year has seen an increase of 2.4% in people turning to friends and family for brand recommendations, perhaps in response to many brands getting influencer marketing wrong. Luxury companies should focus both on finding the right influencer partners and finding ways to drive revenues by leveraging organic word-of-mouth promotion.
Catering for HNW consumers in the coming year.
There are many examples of brands generating increased awareness and revenues through clever, innovative and sometimes disruptive advertising. But, at the same time, parts of the brand landscape are scarred by uninspired and flawed promotion.
VERB consider this to be a by-product of brand teams not having a strong hold on their identity and values. This is made harder as they work under constant pressure to continuously create new content for seemingly mushrooming numbers of digital platforms. Taking value-based stances is fair enough but communicating them to a global audience is challenging.
More than ever, VERB is supporting brands to achieve the level of awareness, loyalty, advocacy and revenues they’re targeting in their home country and overseas.
In just over a decade, VERB Brands has worked with international and up-and-coming brands on appealing to HNW consumers. Click here to contact us. We look forward to working with you.
