Do YOU know your customers?

If mainstream companies like Proctor & Gamble spend millions every year on consumer research to develop new products and appeal to new consumers, and brands such as Hilton have large, rolling customer satisfaction studies to monitor their guests’ opinions of their stays, why is it that so few luxury brands undertake regular consumer or customer research? It would seem logical that, if giving your customers a chance to tell you what they want and establishing how good you are at delivering it, is essential to good retailing, then the highest end brands should excel in such areas.

There are some brands who really believe that research is unnecessary, that they are doing such a great job anyway that research would tell them nothing. The recent downturn, with luxury demand down over 15% this year, should awaken some of these brands to the idea that they have been lulled into a slightly false sense of success during 5 years of market buoyancy. For those that are still not convinced, I would point them to Coach who, in just a short few years has risen to be the largest high-end leather goods brand in the US, with around 30% market share amongst upscale shoppers – they spend over $5m a year on research, and their CEO points at this as being the most critical factor in their success.

There are also brands who say that they ‘already know their customer’. This may be true in part – though actually only conceivable for brands with a handful of stores – but ignores the fact that the make-up of wealth in the UK and internationally has changed dramatically in the last few years. Until 5 years ago the Russians, the Chinese and Middle Eastern consumers were virtually irrelevant to the luxury sector, now they are the mainstay. In terms of UK residents, in just ten years the richest 1,000 people in the country have gone from being largely landed gentry and inherited wealth, to now being 80% self made. So wealth, and thus disposable spend on luxury, is now in the hands of totally different consumers to just a few years ago; these consumers have totally different needs, attitudes and preferences. The brands who claim to already know their customer may well simply know a customer who is now not spending much, or indeed who is now beyond the age at which they are actively consuming luxury products.

Finally, there are brands who want to do research, but are put off when they meet potential research agencies: the research team they meet tries to apply mass-market procedures and analyses best placed to determine strategies for selling washing up liquid to a £5,000 watch. Or the interviewers from the research team who are meant to be speaking with high net worth individuals have no understanding of wealth or this consumer group, and are unfamiliar with other luxury brands that compete with the brand in question. Some research agencies will also decline to pitch for work because they simply cannot access affluent consumers to participate in the project. The simple answer to these issues is to turn to a specialist research agency, who knows the sector and the high-end consumer well.

There have been many broader changes to consumer attitude and behaviour over the past few years – the rise of social networking and blogging, greater scrutiny of pricing and value for money, brands collaborating and co-creating with their customers – all of which means that transparency and two-way communication between brand and customer is now the norm. If high-end brands are different from mass brands because they are superior in quality and service-levels, then surely luxury brands must excel and lead the way in their communication and engagement with customers, and understand their customers needs better than any mainstream brand would.