Should Luxury Brands Use Offers?

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Affiliate marketing
Article source: Performancein.com

Mention the word ‘voucher’ or ‘deals’ in front of a luxury brand and be prepared to face the consequences.

While this wouldn’t be expected of anyone with knowledge of this side of the retail industry, we’ve heard plenty of horror stories from people who have accidentally dropped the ‘v-word’ into one of their pitches.

In short, there are a few valid reasons why Louis Vuitton and Mulberry do not pair up to flash sales, Black Friday bonanzas and the like.

As an introduction to my background, I had a great view of the scenario by helping luxury brands like Anya Hindmarch, Loake Shoes and Lulu Guinness achieve success with e-commerce on a global scale.

My name is Ryan Kliszat and as co-founder of RevLifter, a deal personalisation solution that works with companies of all backgrounds, I’m afforded an ideal vantage point of the situation concerning luxury brands and incentivisation. We’re fresh from winning ‘Best Use of Data’ at the CJ You Awards for our work with Clarks Shoes USA and our accomplishments have derived from knowing businesses inside out.

In terms of luxury brands, their eschewing of discounts is based on reasons which we’ll briefly explore.

The context

When conversing with these groups, one of the biggest talking points is around the incrementality of their promotions, especially among those who feel they can drive sales and customer lifetime value through activities centred around their product and brand.

Some of these groups have also been devalued by open discounting, which has only lowered their customers’ perception of value and revised the expectation of price. Suddenly, the brand’s vision of short-term gain carries long-term damage.

That perception of value is a key thing to remember here. Only months ago the world was up in arms over Burberry’s burning of £28.6 million worth of stock in an effort to prevent it being sold cheaply. Maria Malone, principal lecturer on fashion at Manchester Metropolitan University, attributed the event to a fear over products going to “anyone who can sell them at a discount and devalue the brand”.

It’s not all doom and gloom, though. Our conversations with luxury brands steer towards a need to personalise each offer – a quality which is equally if not more important than the volume and scale it achieves. These companies operate in an artful way to capture a customer’s emotion. Their marketing needs to be surgical, limited and precise to achieve success on strict criteria.

That being said, these brands are under the same pressure as any retailer. They still need to drive sales and that’s particularly the case for new entrants to the market. It takes years to develop an audience of loyal customers and controlled incentivisation can help these brands outscore their more prominent, established and respected peers.

RevLifter has used its technology to launch very considered campaigns for a number of luxury brands. Our solution delivers personalised offers, based on a combination of the retailer’s goals and the individual on their site, which helps to control the ‘what’ and ‘to whom’ regarding each incentive. Think of it as a way of using a customer’s on-site signals to understand and predict their value in real time.

You can discover a bit more about our technology and approach by heading over to the RevLifter site. In the meantime, here are some of the ways it can be used to drive goals for a luxury brand:

Pair slow-moving with fast-moving

One demand we hear frequently is to drive more full-price sales and fewer discounted ones. A way of satisfying this demand is to adjust the criteria of the incentive to encourage the purchase of a low-selling product with one at full price. This can be presented as a bundling opportunity where the retailer’s technology makes a suggestion on a possible look (e.g. matching belts with trousers).

We know from Burberry’s case that unsold stock represents a headache for luxury brands. However, some good can come from its selling.

Make promotions discreet and personal

Luxury brands don’t always match up to the offering of voucher sites, whose promotion of generic codes leaves little in the way of a personal touch.

RevLifter has been working with luxury brands on campaigns that only show an incentive when their goals dictate that one should be offered. For example, if someone is either a new customer or spending above a certain threshold in a specific territory, the technology can issue an on-site incentive when the user comes in contact with it, all in real time.

This also helps the brands that manage complex global agreements – packing in a mixture of franchises, partners and their own channels – who need full control of their promotions to harmonise with each territory or region.

Personalised offers should come in the form of a one-time use code, which controls its circulation while encouraging the purchase. We’ve trialled delivery by retailer-branded coupon pages, designed with client’s input on UX, which target people searching for vouchers on Google.

This also provides a future platform to personalise the customer experience by examining the behavioural patterns of people looking for offers. At the same time, the brand is kept happy by having full control over their one-to-one promotions.

Use gifting to create a second basket

Another initiative we’ve trialled involves the use of gift cards to generate incentives and create a second basket. In this instance, a VIP customer spending over £200 might receive a £20 gift card, delivered following a cooling off period. That provides an avenue to suggest items related to the previous order both online and in-store, thus keeping the brand on the customer’s mind.

Other baskets might qualify for a smaller gift; perhaps a limited-run tote bag or branded gift box.

But let’s pause for a second. These retailers invest millions in ensuring their brand can stand up to the vigours of price pressure and competition. Branding exercises help build and foster a community; a solid core of people that have a genuine interest in the products they buy and the companies they buy from.

The truth is, not every brand will feel that discounting or gifting is necessary. However, for those that need a competitive edge in a highly saturated market, there are some benefits that cannot be ignored. Here is our case for their inclusion:

Incentives can… acquire customers in new markets

You could be the biggest brand in the UK but relatively unknown in growth markets like Asia and the Middle East. We’ve been altering deals which offer more precise targeting on people within specific areas, based on data signals from their on-site behaviour. Again, everything is controlled and designed to be limited.

Incentives can… the approach goes in a targeted way

In a similar vein, brands can use incentives to target customers in the more affluent areas of a city. Opportunities to drive US customers in-store from online are more prevalent in places like Boston, LA and New York, where brands with the makings of a US footprint and multichannel pulling power will search for a specific type of buyer. It’s the same for streetwear vendors that want to reach out to urban communities or outdoor sellers tapping into a rural base.

There is a wealth of real-time data on customers who buy luxury items, so when they’re on a site or migrate from it, the brand is able to allocate more budget towards their conversions.

Incentives can… lay out the red carpet

We’ve all heard stories of the special treatment laid on by brands that are trying to attract celebrities; the full-shop closures, the freebies on offer. Well, it’s now possible to convert VIPs online via personalised incentives.

There is a whole hoard of data generated in each session that, with the help of machine learning, can predict how valuable a customer is. Using these signals to dynamically inform messaging and offers in real time will stop the best customers from leaving.

Brands can even tailor the in-store message for people using click and collect, which seeks to inform the customer that their business is welcomed.

Incentives can… launch gender-based offers (or similar)

It’s very rare a brand is bought 50% by males and 50% by females, or 20% around each age segment. Through a brand’s unique DNA they end up with an audience they’re very strong in, and we often hear about a need to shift the targeting due to the brand signalling a new audience direction.

The key is in using offers in a way that attracts more buyers of specific types of clothing. That way, on launching a new kids’ range or venturing into male lines, there is justification for tactical incentives.

Should luxury brands offer incentives?

There is no one answer to the question of whether luxury brands should use offers. Some will argue that they don’t need the extra push. For others, it’s about maintaining the stable, prolonged growth that they’re already seeing. They should not be pushed into unnecessary actions.

In speaking to others that want to test new ideas, explore new markets and target specific customers, we encourage them to look at incentivisation as a changing practice. Tools like RevLifter are using the data at their disposal to make it more conscious and considered than ever before.

Through a tactical approach, even luxury retailers can drive the needle for better performance online. Best of all, a brand can treat everyone discreetly one-to-one, because – like the movie stars that buy their bags – the customer is the star of the show.

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