LUXURY IS A MINDSET

--- A pathway to an unusual customer journey in an unusual time!
by Yuen H Lee, EVP Augmentum, Inc.

LUXURY IS A MINDSET

Imagine this. A well-heeled single woman in China, university educated, has been a white-collar fast rising young executive in a fast-growing Chinese multinational company for years, extremely upwardly mobile. She had her eyes on this Burberry classic trench coat for sometimes. Then COVID-19 outbreak hit. Stores were shuttered and movement was restricted. After home bounded for weeks, and as soon as some normalcy returns, what will she do?

Outcome #1: Her desire for the Burberry trench coat has faded. She has been doing without it for weeks. Her craving for luxury needs has been overcome by the survival experience during the home bounded period, met only with basics.

Outcome #2: She continued to work remotely from home, earning full pay. As soon as she was able to get to Burberry’s flagship store, she went “irrational”. Burberry’s classic trench coat comes in six distinct styles. Instead of buying one, she bought two coats, and their signature shirt and scarves. 

HIGH FASHION IN A GLOBAL LOCKDOWN

The investment firm of Bernstein, in its March note to their clients, saying the first half of 2020 is “likely going to be the worst in the history of the modern luxury goods industry.” 

In this “everything online” world, the luxury goods industry remains apredominately in-store business. The consultancy firm Bain & Company estimated that the online sales in the luxury sector, although growing fast, still makes up only about 12% of all luxury goods purchases.

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COVID-19 pandemic has disrupted and devastated the global societal norm in an unprecedented scale.  In an all-out, full scale attempt to help slowing the spread of COVID-19, major big brands such as Zara, H&M, Adidas, Nike, and 100% of all luxury brands of LVMH Group and Kering Group, have shuttered their retail operations around the world. While China is slowly coming out of the 2 month long self-isolation and quarantine, the pandemic has spread to Europe and the U.S., with no return tonormalcy in sight. Given the gravity of the global pandemic situation, separation of these big brand retailers and luxury goods houses from their customers will likely last until summer.

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At the height of the COVID-19 outbreak in China, over 300 million people were under various degrees of isolation, quarantine and “closed management”.  While China is slowly bringing the epicenter of the COVID-19 outbreak under control, World Health Organization has warned that pandemic “is accelerating” outside of China. Over 1.5 billion people across the globe, more than one-fifth of the world's population have been ordered or urged to stay home amid a deadly pandemic. In China, the Wuhan lockdown endured two months, with the help of applying exceptionally stringent measures. While China is undergoing a gradual and measured loosening up, the global “persuasive approach” to lockdown may prolong the isolation to quarters, not just months.

Businesses and enterprises, such as theme parks, integrated resorts, big brand retailers, luxury goods, have never experienced the disengagement from their fans and customers for days, let alone months. 

IN ISOLATION, QUARANTINE, LOCKDOWN, NO ONE IS REALLY ALONE

Merriam-Webster defines “out of sight, out of mind” to mean that aperson stops thinking about something or someone if he or she does not see that thing or person for a period of time.

In healthcare marketing, many have explored potential intervention methods to address social isolation which is a risk factor for aging population. Studies found that people who engage in meaningful, productive activities with others tend to live longer, boost their mood, and have a sense of purpose. These activities seem to help maintain their well-being and may improve their cognitive function.

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When in effect, in isolation, no one is really alone. Enter Social, Mobile, Internet. Gao Feng Advisory Company has shown that at the height of COVID-19 outbreak in February, China’s online demand surged to an unprecedented level. In isolation, hundreds of million people flocked to online activities, everything from working remotely, online learning, remote medicine, mobile games, online entertainment, to product deliveries. The stake and opportunity are obvious. While hundreds of millions of people are glued to their mobile phones, businesses are capable to continue to engage their customers without skipping a beat.

Mobile Social Engagement (“MSE”) is the process of communicating (engaging) in an online community through a mobile device. The conversation can take place on individual social media platforms such as WeChat, WhatsApp, Twitter, Facebook and LinkedIn, or in blogs, forums and third-party review sites. MSE is related to participation in collective activities, which businesses can reinforce brand capital. Key elements of MSE include activity (doing something), reward (getting something), robotic interaction (interactingwith an AI/bot) and social exchange (giving or receiving something from others).

For example, Mobile Social Engagement may include enhanced online social engagement such as:
Online social loyalty program to incentivize offline visit and reward redemption.
Interactive social game to enhance brand recognition and loyalty.

These MSEs can be used to promote competitiveness and rewards for instant gratification to entice customers to visit brand regularly, provide opportunities for customer self-boasting or self-promotion and more importantly, encourage existing customers to bring in their friends to thebrand’s ecosystem.

There are several enabling technologies that can make this happen. The smart and appropriate use of Progressive Web Apps (PWAs) and WeChat mini program can help businesses to stay loyalty to their customersand in return, customers will stay loyal to the businesses when they emerge from the crisis.

CUSTOMER JOURNEY IN LOCKDOWN, ISOLATION AND QURANTINE

Customer journey consists of many mini journeys. Customer experienceis often not a single event, but a set of interconnected moments, and the many experiences from these many mini journeys. Studies after studies, the followingis widely accepted:
The cost of acquiring new customers is much higher than the cost of retaining existing customers.
A quarter to one third of people will walk away from a brand they love, after just one bad experience. Not all the interconnected customer “moments” are equal. 20% of the “bad moments” may undo 80% of the “good moments”, resulting in a bad overall experience.
“Out of sight! Out of Mind!” is one of the most important existential threat to customer relationship in this moment of unprecedented isolation. How much communication is not too much communication? To engage or not to engage at a time of crisis?

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Many luxury houses such as Louis Vuitton, Chanel and Burberry have special fans. These are not average fans. They don’t just go to the retail stores. They strategize how to get the optimal experience out of their visits, what distinct styles of handbag, luggage, and fashions to try on in advance of the visit. In this global pandemic lockdown, these loyal fans are more important than ever, because they are the ones keeping the brand alive through this period of self-isolation and self-quarantine. Mobile Social Engagement with the smart and appropriate use of PWA and WeChat mini program, will present a potential pathway to an uninterrupted engagement.

Crisis such as this pandemic, sharpened people’s perception. Memory functions become precise and memory lasting longer. Therefore, keep in mind:

1. Engage the customers in their own terms

People are isolated andquarantined. Some may have been infected and recovering. Some may have evenlost love ones. Some may have lost wages. Mobile Social Engagement in thesetimes must exhibit the highest level of sensitivity and compassion. Compassionate and cringe worthiness must be proportional to the cultural appropriateness. Something that is viewed as compassionate in Shanghai, may be taken as cringeworthy or tone-deaf in San Francisco, and vice vera.

2. Activate your customer data

If you cannot measure, you cannot improve. The technology of Mobile Social Engagement allows businesses to collect massive amount of interaction data from customer engagements, in addition to customary feedbacks after the interactions. By providing marketing staff with access to relevant and timely interaction data and customer feedback can help them understand how their actions contribute to a customer’s experience, in order to improve future interactions.

3. Provide a clear and frictionless pathway to reward the activities

The internet has trained many customers on “do something, get something”. Often, doing something is much easier than getting something. The primary goal of Mobile Social Engagement is to continue brand awareness, brand loyalty and brand mindshare. During and after the crisis is over, the rewarding system for the activities must be frictionless and without condition.

URGENT QUESTIONS ABOUT THE TIME ‘WHEN THIS IS OVER’

What will be the shape of the recovery? Will it be V-shaped rebound, or U-shaped, or L-shaped?

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As China is coming out of the months of lockdown, there has been a lot of talking in the market on the phenomenon of “revenge consumption” or “payback spending”. After months of isolation, the pent-up demand, like a pressure cooker, will likely explode into irrational spending. While many people are still talking of "revenge consumption", some have already put it into practice. In China, a man walked into Starbucks for the first time in the last two months. He ordered three cups of Starbucks coffees, more than he normally drinks. Once able to come out, a woman ordered every single item from the menu of her favorite restaurant. Irrational consumption behavior is happening right now in China as the grip of the lockdown loosens.

The travel industry in general, is already in the loyalty and retention mode. They are doing everything they can to make their customers to remember good things about them while travel restrictions were in place. When travel movement is lifted, the industry hopes that the pleasant memories prevail, and they will go back to them business as usual. Better yet, they will hope for the “revenge traveling” - people making unnecessary trips on the airlines to make up for lost time and mileage accrual, “revenge hotel stay” - waking up to fresh linen, buffet breakfasts, dip in the swimming pools, etc.  It is gradually happening in China now. It is likely it will happen in the rest of the world.

The luxury market will continue to remain to be a predominately in-store business. Customers who spend tens of thousands of dollars on a piece of luggage, a handbag or a high fashion, would savor the admiring glow of thestore clerks and other shoppers while trying them in stores.  This is part of the customer journey for the luxury goods buyers. Some luxury brands started online engagements such as Catwalk streaming, virtual concierge, augmented reality custom fitting, etc. However, none have customer engagement capabilities during this unprecedented disruption and disengagement such as this pandemic crisis.

Back to the well-heeled single woman in China who had her eyes onthe Burberry classic trench coat. What will she do when the crisis end? While there may be little the luxury brand can do to change to impact their online sales beyond the 12%, Mobile Social Engagement during the isolation and lockdown is a potential pathway forward to brand loyalty and brand mindshare. Burberry may be in a much better position to influence the outcome, or even provide a catalyst to the potential rebound with “irrational spent”.
 
ENGAGE!

The need to continue to engage customers as the COVID-9 global pandemic unfolds is more than ever. The engagements must be simple, fun, rewarding and most importantly compassionate. Mobile Social Engagement, enablingby technologies such as PWA and WeChat mini program, is one of the waysforward. It is critical to customer retentionand stay ahead of the competitions as the world emerges from the crisis. Mobile Social Engagement is an integral piece of a digital transformation strategy from the highest executive levels in the enterprise. Luxury brands should seize the opportunity and embrace it, initiate probable use cases and execute them with a clear measurement of outcomes. A wait-and-see attitude can end up being quite costly. In a global crisis such as this pandemic, a natural tendency of the many is to just stay alive, only the few innovators will thrive! After all, luxury is a mindset!

Augmentum creates products, consults, and performs software services for enterprise digital transformation.  Since our founding in 2003, we have co-innovated with our world-class clients to employ human centered strategies and leading-edge technologies to produce mission critical, award winning, transformational digital experiences for their customers, employees, and partners.

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