Four Ways Luxury Brands Build Customer Loyalty Through Digital Channels

Luxury retailers typically do not offer loyalty programs, with regular point-based price reduction programs running counter to the high-end, ambitious branding style the luxury industry is known for.

However, for brands striving to be competitive, reputation alone is no longer enough to inspire loyalty, and with the growing demand for omnichannel, a focus on in-store customer service is no longer enough.

So how can luxury brands inspire loyalty?

Investment in digital client tools

The Covid-19 pandemic has seen many luxury retailers invest in omnichannel capabilities, as businesses struggle to connect with customers who can no longer shop in-store. Virtual consultations are a popular trend, with technology allowing salespeople to connect with customers in real time.

For luxury brands, digital clienteling tools also add a more exclusive element to the customer experience, allowing sellers to offer personalized communication as well as a range of personalized shopping services. Some major retailers have invested in their own technology to offer this. Last year, for example, Neiman Marcus launched NM Connect, a section of its app that allows store associates to access a personalized view of each customer, and customers to complete a “stylist match” exercise. which will connect them with a dedicated style advisor.

According to a Press release, Connect generated $60 million in sales in the first 90 days of launch. Katie Mullen, Chief Digital Officer of Neiman Marcus Group, explained that the platform “has been designed to inspire customers, from offering personalized lookbooks to completing transactions remotely and instantly.” With 40% of Neiman Marcus business coming from customers who spend more than $10,000 per year, this personalized communication strategy is now a key part of how the brand fosters relationships with repeat customers.

Elsewhere, a number of new technology platforms are helping retail brands build 360-degree customer profiles (based on omnichannel data) and improve brands’ customer services. Seer is a company that is gaining momentum; the platform helps sellers create shoppable product suggestions that look like magazine layouts, as well as deliver the content across all channels, such as email or video chat. Alpha is another tool, which aims to differentiate itself with its notion of “connected clienteling”, ie to offer a single platform that can be used by both brands and customers, bringing together previously disjointed data.

While these digital tools can contribute to naturally building customer loyalty, the luxury brand Farfetch uses the opposite tactic by only offering its clienteling and personal styling service, via its partner Wishi, to Platinum and Gold members of its program. Access loyalty program (as well as to its Private Clients). According to Fashion United, Farfetch says the service – which offers a personalized virtual style tailored to customers – is “proven to ensure customers make more purchases they’re happy with”, ultimately enabling them to shop “smarter and with great intent”. .

Encourage interaction and engagement

While tier-based systems like Farfetch are popular in luxury, brands are thinking outside the box when it comes to how customers can earn rewards (and what kind of rewards they receive). Experiential methods are essential, as evidenced by The North Face and its XPLR Pass.

Instead of earning points through purchases, XPLR Pass members can earn points through activities like checking in to a national park or national monument with the mobile app, as well as sustainability initiatives like bring a reusable bag when shopping at The North Face store. Locations. Both feed into The North Face’s ethos, which is centered around nature and exploration. In turn, members can redeem points for similarly-themed rewards, such as unique adventure experiences like rock climbing with professionals. Plus, members get access to exclusive new items (which they can test and return if they don’t like them).

Speaking to Retail Week, Michael Horsch, president of product and marketing EMEA, explains that the loyalty program aims to balance “emotional and functional benefits, combining simple elements like free delivery with more emotive elements such as exclusive access”. As stated in the company’s report Call for fourth quarter 2021 results, throughout 2021, “The North Face’s digital business grew 63%, including 49% growth in new paying customers with the addition of 1.6 million new loyal members in the Americas” .

Use NFTs to improve exclusivity and drive engagement

NFTs, or non-fungible tokens, are a growing trend across all industries, but particularly in luxury retail where exclusivity and individuality are of high importance.

NFTs, which are unique crypto assets on the blockchain that represent digital files (usually art or collectibles), fuel this notion of exclusivity – hence why some have sold for millions of dollars. In turn, luxury retail brands are recognizing how NFTs can act as inducements for customers and are increasingly integrating them into products, as well as loyalty programs.

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Cinique was one of the first brands to do the latter, giving Clinique Smart Rewards members the chance to win free products for 10 years as well as one of three editions of an NFT artwork. By offering an NFT to an already loyal customer, the brand both rewards loyalty (which will serve to enhance it) and encourages other customers to register. Additionally, Clinique automatically making its logo a collector’s item, positioning the brand as something worth investing in (NFT theoretically increasing in value over time), creating an exchange of value for loyal customers. .

Hugo Boss is another example of a brand using NFTs as a reward for customers – and their social content. The brand gave away five unique Boss x Russell Athletic NFT varsity jackets, along with a physical twin for each, as prizes for a TikTok challenge. The social media challenge continued to win some of the largest social media coverage in Fashion Week history, generating a total of 3.9 billion impressions in just four days.

In order to improve loyalty, luxury brands also have the ability to add additional benefits to NFT owners, turning the collectible into its own form of brand membership and essentially turning NFT owners into brand ambassadors. As Vogue Business explains, the animation-based merchandise and entertainment company Superplastic, which is partnering with Gucci, has added benefits for NFT owners, such as exclusive access to online and physical stores and restaurants.

Offering rewards based on value and the democratization of luxury

One of the consequences of the adoption of NFTs and digital products by luxury brands is that the sector becomes more attractive to the younger generation of consumers for whom these products are intended. This does not necessarily mean that physical luxury goods become cheaper or exclusive, but rather that retailers find ways to make luxury brands more accessible to a wider audience (for example, by targeting games or social media ).

Additionally, many luxury brands go out of their way to ensure that loyalty programs represent more than pure commercialism. Take Sephora, for example, which launched Charity Rewards as part of its Beauty Insider loyalty program in 2020 to allow loyal customers to redeem points for charitable donations, creating a more meaningful and emotional connection with the brand.

As concerns about sustainability become more prevalent, especially among younger generations, luxury brands are also looking for ways to foster circularity. One way is through mystery boxes, which help luxury brands sell unsold or leftover inventory to customers who don’t know what they might receive.

LVMH Luxury Ventures recently contributed to a £5m investment round for mystery box startup Heat, which targets Gen Z through a combination of personalization, gaming and sustainability benefits based on the AI. Julie Bercovy, founder and head of LVMH Luxury Ventures told Vogue Business that this combination is already generating repeat purchases from customers, fueled by social media interest. “We are very impressed with Joe and the team’s ability to build such a strong and large fan base in such a short time,” she said. “The loyalty and enthusiasm of the Heat community demonstrates the relevance of this approach and the timeliness of Heat’s curation.”

In other words, this example shows that with even younger consumers buying into luxury, retailers need to rethink the value of their loyalty programs in order to stay relevant.

Joseph P. Harris