How Does Luxury Improve Customer Loyalty?

Leng Yun: Hello everyone, today our theme is to learn from luxury goods how to improve customer loyalty. Our guest today is Ms. Zhou Ting last week. If you want to know more about Ms. Zhou Ting, you can pay attention to Ms. Zhou Ting’s knowledge (account name: Dr. Zhou Ting).

Why talk about “customer loyalty”? Customer loyalty is becoming more and more important in our time. Now is the age of social business, it is becoming more and more difficult to capture the attention and time of customers. Everyone’s attention is very limited. It’s not easy to grab everyone’s attention, and even if he buys your stuff today, it doesn’t mean he’ll continue to be your customer next season or next year. So today we invite Mr. Zhou to share how our brand can improve customer loyalty.

What are luxury customers alike?

What exactly are luxury customers like? First, we throw to Mr. Zhou’s first question, is that since we want to talk about customer loyalty, we must know who our customers are. What kind of group are our customers like? What is their user portrait like? Let’s ask Ms. Zhou to introduce, what kind of group is the consumer of luxury goods? Please, Ms. Zhou.

Dr. Zhou Ting: Thank you, Ms. Leng. Hello everyone, there may be some old friends last time to pay attention to our topic, thank you for continuing to pay attention to me and Ms. Leng live today. Ms. Leng asked a good question – who are luxury customers?

Traffic is not equal to a valid user. This afternoon I visited one of Japan’s largest fast fashion companies. They also raised the issue that while fast fashion has been a success, they are now thinking about how to use services to further encourage younger customers to come to them and spend. Everyone cares about connecting with their customers. First, where are the customers? Who are the customers? And then how do I maintain a relationship with them? Often some Internet platform companies will fool our brand side to say, “I have a lot of traffic, how many customers I have, I probably have a lot of fans.” “But at this point if you want to be high-end and want a better customer, I think you should ask the other person a question, can you filter out the rich customers here?”  Because there is often a misunderstanding in the market. I think I have a lot of data, I am a big data company. In fact, there is no equalization between the amount of data and big data. You have so many fans, you have so much traffic, it doesn’t mean these people are now your customers. Only when he has a need, and that demand is associated with your product, and interacts, can be called your customer, otherwise he is only a potential consumer.

Luxury customers: Liquid assets for the luxury industry, we are more concerned with high-end users, so our high-end areas are particularly concerned about liquid assets.

What does liquid assets mean? Some friends may ask if it is an asset, including a property, or is it an asset that can be cashed out at any time? There are two key words: first, not including your property (real estate); This would remove quite a few people. First of all, people who own a home in Beijing and Shanghai with a loan to buy a house will be excluded. Because your house is worth more than 10 million dollars, but you have loan, no cash in hand, no more money to spend, you are not a high-end brand or luxury brand care about the user, and they want to reach the user. Then second, you just have money or not, you don’t want to spend, this kind of person will be excluded by luxury brands. Third, you have money, your money can be cash, can be cashed out at any time to buy things, this matter is very important. Because with these years of start-ups, many people will say that my company is unicorn, how many assets I have, how many billions my company is valued. But I’m sorry, your pockets are empty, you can’t get a penny of cash to buy something you want to buy, or to buy a bag, you don’t have cash to buy, this kind of person is not the target group of luxury brands.
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So in the luxury industry, one of the first important conditions we screen is that we have cash in hand and are happy to spend it. This type of talent will be classified as a luxury user. This is the first point shared today.

The classification method of luxury customers

  • Classified by proximity

If we break down luxury brand customers further, we often fall into three categories. The first category is called core consumers, the second category is called marginal consumers, and the third category is called potential consumers. These are the three categories of luxury users that we want to visit.

The core consumers are very important if, according to the ratio I mentioned earlier, their liquid assets are above RMB 10 million. How many of these people are there in China? According to our statistics at home, there are only about 4 million users with liquid assets of more than RMB 10 million, not as many as everyone thinks. If the liquid assets are more than 100 million yuan, there are about 150,000. These people are considered to be the core consumers of luxury goods. Marginal consumers are estimated to be more than 70 million, with liquid assets of more than RMB1m. The rest of us usually say he’s a potential consumer.

For any company, whether it is to do service or consumer goods business, first of all, we have to find out who their core users are. This relates to an issue that we will explore later, because it is a classification method.

If we break down by consumer goods, these consumers will create a pyramid-shaped five-tiered hierarchy. So in the pyramid 5 level, we will find an interesting phenomenon, or perhaps many friends did not think of a question, is to buy luxury clothing consumers and buy luxury bags consumers, which kind of consumers are more like the general public? Which major customer hierarchy will be higher? We think that people who buy luxury clothes have more spending power than those who buy bags. Why? Because clothing is a consumable, and luxury clothing is actually very expensive, brand is also very expensive. For example, we often joke about expensive suits that can neither be washed nor dry-cleaned, and can only be worn once in a lifetime. But we can’t buy just one outfit in our lifetime, so if we can often buy luxury clothes, then the level of this customer is very high, and shows that his spending power is very strong.

And the person who buys luxury bags may relatively eat three months of fast noodles or save three years’ salary before they can go to the street to buy a 30,000-40,000 or so bags of people. So if you look at the level of frequent consumption of luxury goods, people who buy clothes are often defined as those who buy bags. This is to define the hierarchy of consumers by the category of consumption.

Here I would like to share the fourth point of knowledge, early we will appear a triangle of consumer pyramids, but in recent years with the development of the entire social economy, especially social and human transformation, the consumer triangle pyramid slowly transformed into an Eiffel Tower model. You can imagine the Eiffel Tower, the whole tower more and more fine, the tower is more and more solid, what does that mean? With the development of economy, especially the economic structure of the past two years, more and more people have fallen from the middle. Some people because of some income reasons, his income level fell, he may end up as a mass consumer. But some high-end consumers have always maintained their own level of consumption, will not change his desire to consume, nor will it change his desire to improve his quality of life, including to consume these luxury services, luxury products consumption status. Such a structure would lead to a gradual shift of society as a whole into a two-tiered structure at the consumer level, rather than the increasingly complex structure that everyone imagines China will shift. So for the division of luxury consumers, my suggested model is from the core to the edge.

  • By type of product

The second category, depending on the type of goods consumed, such as consumer cosmetics, electronics, then bags, fashion, to the purchase of watches, jewelry, luxury goods, art, collectibles and so on. Slowly you will find a picture of your client group interwoven.

In recent years we’ve found luxury brands that are deeply rooted in the core consumer market, and they’ve developed a strong interest in the mass-market. Because they have more opportunities than the general public brand, but also have their own product advantages, through multi-product development, through low-priced product development, and constantly sink, to affect the public consumer’s desire to buy and spend. So luxury goods division of customers is not our traditional sense of the first from the male, female, age, and then the region and so on these labels, but from the perspective of wealth to do the basic line. Because they only draw into this line is my customer, money to spend I can talk to him about how good my product is, I want to help him make his dream into the ideal person.

So that’s why we’re talking about customer youth today, we have to catch where our core users are, and then the marketing tools are effective.

Why do you want to be a customer loyalty?

LengYun: Next, let’s ask Ms. Zhou to share, why do we all need to be customer loyalty? Luxury goods to do, mass brands to do? So from the point of view of luxury goods, why on earth should we do customer stickiness?

Dr. Zhou Ting:

20/80 Principle

Well, thank you for your question. Because these core consumers are people who really have the financial resources and the desire to spend to contribute value to luxury brands. We say there is still a 2080 principle in the luxury industry, that is, 20% of our old customers bring 80% of the company’s performance to the brand. I’ve seen one of the world’s top high-end jewelry brands, and there’s a special category in their financial statements called Gaoke. In terms of customer share, gadding at only 6% of the brand, but I see the numbers behind it are startled, and the 6% of high customers bring 60% of the brand’s sales. This is a very surprising number. Although I can’t say its name, but basically everyone in the wedding, in the gift to their loved ones, will choose this brand. So in luxury companies, they value these old customers, they have a relatively high re-purchase rate, and they often buy high unit prices. In the high-end industry, we all know that the higher the unit price, the higher its profit margin, because consumers are willing to pay for the brand premium. And for these core old customers to create profits and create high turnover of this value, but also have to let the brand or capital better to serve these old customers.

Focus on the Chinese market

On the second hand, there is a new opportunity in the high-end field in recent years, that is, the previously rich Chinese have gone overseas to buy luxury goods, but these two years can not go out. Then they spend more time in China, when the competitive landscape of luxury brands is not what we’ve seen before scattered around the world, such as Paris, London, Tokyo, Seoul or New York, but more concentrated in China.

When so many international brands are going to rob these once-luxury consumers in China in the next two to three years, the competition in this market pattern is becoming more and more intense. There are still 92% of foreign brands that don’t enter China, or through cross-border e-commerce, hoping to reach our Chinese consumers. So we found that China’s luxury market from the original big brands in the world, into a number of brands to compete in this market pattern. Of course, there are both large luxury group brands, but also second- and third-line design brands, there are many more high-end niche, custom brands, designer brands, fashion brands and so on.

So when the competitive landscape becomes extremely fierce, because the number of customers or consumer customers is relatively limited, this time the brand should improve professionalism, thinking about how to use professional services to create a better consumer experience? And how to do a good job of the product, so that customers are more willing to buy it, and its relationship with it closer.

So the focus of future competition in the Chinese market is not so much competition for products or brand competition as competition for customers. This also shows that the company needs to spend more thought and cost on its old customers and customer relationships.

How do luxury goods improve the loyalty between them and their customers?

Thank you, Ms. Zhou. Our theme today is about learning from luxury goods how to improve customer stickiness, we all know that customer stickiness is one of the most important marketing means at the moment, it is not easy to catch a customer, after catching a customer how to maintain a long-term relationship with him is a very important thing.

As we all know, luxury services represent the highest level of the industry as a whole, can be said to be the highest level of retail. And in fact, many local companies in China, some high-end brands are also learning from luxury goods this way of treating VIP or VVIP, including doing offline activities, as well as improve their respective service levels. So we next ask Ms. Zhou to introduce, luxury goods and how to improve the stickiness between them and customers from the service point of view?

Dr. Zhou Ting: Thank you, LengYun, for throwing out a particularly good question, we all want to know how luxury brands serve their VIP? Where does your old customer consume energy? It reminds me that the last time I might have told you a little story during the live broadcast, it was a little problem I had when I was doing market consulting more than 10 years ago. What exactly is “customer satisfaction”? What is the customer satisfaction required by high-end customers? In fact, in different market levels, everyone’s service status and level is completely different.


For example, the last time I said, when I walked into a Chinese clothing brand store, the first thing we encountered was, “dear, what do you want to buy today?” “Sister, what would you like to buy today?” In fact, when a customer walks into the door of your store, the first person he faces the company or the brand’s first person’s eyes, a smile, greetings all determine the brand’s hierarchy. Because consumers may not necessarily know the founder of the brand, not necessarily to feel the brand founder’s dream and his design philosophy. But he can respond first to whether the brand is advanced or not. So I often encounter this situation in many clothing brand stores in China, coupled with the recent prevalence of Internet language, there is also the word “baby”, I was really laughing. Why?

First of all, these words are not necessarily bad, but they are rarely used when you’re in advanced situations and conversations with different levels. We say that at the door of the international big-name stores, we will meet the greeting: “Welcome to Chanel” and “Welcome to Hermes”. These greetings are very simple, very stubborn, and the whole language state is very orderly, completely different from the state of intention and saturation we encounter. These details are often overlooked by our businesses and brands. If you are a popular brand, the pursuit is to become friends with consumers, close the gap, you can use the “sister” “baby” such as the name, but if you are positioning as high-level, high-end and hierarchical people, and high-quality people to communicate, especially with a certain age and experience of the people speaking, these titles can not appear.

So when I walked in and said, “Sister, what would you like to drink today?” “I came to this store to buy clothes, and the Chinese brand I walked into was close to the big brands. This also reflects a mistake of our Chinese enterprises, feel that I put the price to increase I am a high-end brand. But to be honest, high prices don’t equal premium, which is two different things. When you instill in your employees the idea that “you have to serve your customers well, you have to give him a lot of choices, there is always a way to satisfy him”, have you ever thought about what this approach is?

When this clothing brand asked me: “Sister, we have white mushroom soup, Pu’er tea, mineral water, and orange juice, what you want to drink?” “I felt like I was walking into not a high-end clothing store, I was walking into an afternoon tea shop. If I were a picky person, I couldn’t help thinking: When did you make this silver ear soup? Where did you buy the silver ears? You said it was Pu’er tea. What’s the quality? Your intention is to provide customers with a lot of services, so that he felt that this diverse service is very intimate, there is always a suitable for you, but in fact run away.

First, you give the customer the incentive to really come to your store to spend. Second, you give him so much service, your service has not done in a perfect way? it becomes an opportunity to pick on the customer. The more you do, the more chances you have of making mistakes, and the more dissatisfied your customers are with you.

This is a very real problem. To this day, it often happens in some high-end restaurants, high-end medical and beauty, nail shops, as well as some Chinese bag stores. Just now I said the scene, the past 10 years still exist, we all take into account customer satisfaction, but what is the state? For international brands, especially luxury brands, it is the pursuit of customer satisfaction, but it regards customer satisfaction as a basic level.

But in the mass consumption industry, customer satisfaction will be divided into dissatisfaction, basic satisfaction, more satisfied and very satisfied. Then you will also be based on your service content and service quality divided into different levels. But in the luxury industry, or at the high end, this is the most basic.

Luxury services add value

So how do luxury brands do it? What they do is, even if it’s just one thing, but this one thing I have to do is the best in the industry. They won’t offer you many services, but they will do everything right. So we’ll find that in many international brands, they also have drinks or some services, but that’s how it is. For example, mineral water, it will choose glass bottles. The appearance of glass bottles of mineral water, it also reflects the cost of this water is relatively expensive, packaging is more advanced. So how did this bottle of water serve? It was delivered to the customer in a tray with a paper sleeve over the glass. Opened by the waiter in front of the guest and slowly poured into the cup, the whole process is simple, slow and elegant. They are using this process to create this pleasing view of the customer himself.

At the same time we will see the brand will also use high-grade porcelain, to bring you a cup of fragrant coffee, with the best coffee beans and special coffee grinder and so on. So we’ll find that luxury brands offer only coffee and water, but the process gives you a sense of superiority. So when we want to provide some additional services to our customers in the store, it’s also a contrast.

Cultivate customer loyalty

Contact the second question we just talked about, why should the company pay attention to good customers? Contacting customers is because they need to develop them into loyal customers, and increasing their reputation for the brand and increasing the repurxing rate is extremely important to the brand and the company. So how do you get these big customers out of their hands, good customers?

Today we say that for international luxury companies, they are more focused on customer loyalty path building. This includes “creating customers – being close to customers – serving customers – moving customers – retaining customers”. International brand companies do much more than our Chinese companies in this process. In order to achieve this customer loyalty, in addition to some conventional industry services, international brand companies have a killer, called “customer surprise”, is to achieve a leap in the heart of customers, so as to give him space to dream of this method.

What is called “customer surprise” it is when the customer sees the “Wow” sound. The key behind this is to develop a creative process, a new idea and a mechanism business, that is constantly being created in the process, and that is consistent with the creative process of the brand concept.

Luxury companies maintain relationships with VIP customers

LengYun: Next is our last question today, VIP customers. Just now Ms. Zhou also said, in fact, they also exist in the 2/8 principle. In the case mentioned by Mr. Zhou, 6% of the customers contributed 60% of their sales, which shows that these VIP or VVIP customers are very important. Let’s ask Ms. Zhou to share how luxury companies maintain their relationship with VIP customers.

Dr. Zhou Ting: On this issue, I suddenly remembered that two weeks ago in an EMBA class share, some new entrepreneurs complained to me, she said: “I think the service of luxury brands is good, but I do not feel her good service.” I still have to line up at the door, in my capacity, I feel that my service is not good at all! ”

In fact, I am thinking of another problem, in the door queue is indeed a luxury company’s situation, we in Shanghai Hang Lung, including Beijing’s SKP these big names will see a long line at the door. Especially during the outbreak, this kind of team seems to line up from morning to night, feeling that luxury brands sell particularly well.

First, why there is such a queuing policy, because luxury companies have been pursuing one-on-one service, he hopes his staff can provide every customer with a full range of full process services. He is not a one-to-many state, not one person to three people, even ten people, twenty people. If you go to the duty-free shop to buy cosmetics, find that everyone does not need to queue, all customers are scattered, just ask the sales staff how much the price? Where can I get the goods? And then can you help him find someone? Including you may go to some fast fashion brands, Uniqlo such a brand will be in this state, just find what you want, you do not need service, he does not have to provide you with special services.

But this is not the case with international brand companies, which pursue one-on-one. In fact, it must be kept within a certain area, VIP customers or consumers have enough space to select goods and try on goods. Of course, because the purchase of relatively expensive products, need to maintain privacy, so there is a queue policy. But not everyone needs to line up?

You might want to say that there’s a class of people who don’t have to queue, and if it’s a VIP like a star, VVIP, you probably won’t see where he came from. We know that in Shanghai, Nanjing West Road Hang Lung underground garage has an elevator is directly to some brands of the third floor VIP room, many stars are from the passageway into, rather than from the front of the shop into. He bought something in the back and then quietly walked away from the back, so there would be a few ways to get a front and back door in the aisles of a luxury company, which is not the same as mass consumption.

In fact, the differences in service felt by the person who made these complaints have something to do with the way he spends. Maybe he bought a lot of luxury goods, but they’re all bought here, there’s some, they’re bought abroad, they’re bought at home. But we know that to become a VIP in an international brand company is a period of time or a single consumption to reach how much money, you immediately began to enjoy a different treatment. So it may be because of the way he spends. Although he has money and buys a lot of luxury goods, but does not enjoy the brand’s VIP, this is an interesting case.

I’d like to share some of the practices of international brands, which typically systematically observe customers over a period of 3 months, 6 months, 9 months, 12 months. Some customers if 3 months, 6 months, 9 months, 12 months, every 3 months have a payment, but this customer did not come to the store, the brand will start to call customers, or use various methods to communicate to reach this customer. Find out why he is spending and give him the opportunity to deliver potential new places, or special events and benefits, so he can come back to the store again. So, you’ll find that as the times go on, it’s becoming more and more extravagant to have customers spend time in your store.

Because time is the most precious, especially for high-end consumers, today he is willing to spend time in your store, which represents a certain degree of success, then the next opportunity to provide him with marketing. So, in the next stage is a new stage, is to store consumption needs to become more and more comfortable, how can with new experiences, new services, and even new products to let customers come to the store? It became very technical.

So, let’s summarize, in the commodity system, VIP service characteristics have a few points.

The first point is to pay great attention to the relationship between sales and VIPs. In fact, in addition to the trust and endorsements that corporate goodwill builds, the relationship between individuals is very important. This trust based on selling individuals is a test of personal ability. We will find that there are many people in the industry we study who enjoy the trust they have in their own expertise, including him and his family, and his friends. Some people even throw credit cards in their sales hands and let them help them get the bags they want or new ones. As you can imagine, this trust may be beyond the relationship, I’m afraid your husband has never got your credit card in his life, but your wife left her credit card with the sales consultant. So that means this trust relationship between the sale of goods and the individual customer is very important.

Second, privacy sharing and personalized customization work. Through each sharing, we have become friends with guests, so often we will find some old customers to the store is not simply to say to buy things, may be a long time gone, he is looking forward to sales to communicate with him, and then share their emotions, share their own different topics, perhaps share their own small joy, by the way to buy a bag. So now the personal relationship between sales and VIP, this privacy sharing has become a special way for two people to communicate.

Another point is customization. The industry is beginning to show great customization, creating more and more value. Colorful activities become the connection point of the relationship, which is also in Shanghai, Chengdu, Beijing has a lot of brand show exhibition, a variety of information activities. These are important points of association.

Fourth, commodities are not simple interest development, but also their own technical and quantitative places, is supported by the entire data system, and is gradually globalized. When VIP customers, whether in Beijing, Shanghai or the Internet, as soon as he enters the store, we can know the customer’s preferences in the first place.

The fifth feature, new products and end-of-season discounts is an important breakthrough in the often-present VIP relationship. Discount is an effective value-added service, is the old customer think he as a big customer, as VIP enjoy a special treatment. This is completely different from our Chinese brand on the Internet 618, double 11 kind of discount. First, this industry law is not a price strategy, is to give VIP a benefit, this is completely different place.

Finally, I would like to summarize, what is the core of luxury VIP services? In fact, it is a one-to-one relationship coupled with high emotional value customization services. Through the high emotional value customization service, you will find that all of these custom services you do are designed to create this emotion for the customer, to create dreams for him, to satisfy some of his dreams and some ideas. So the whole VIP customer establishment and maintenance process is in these consumption processes. Whether it’s to shop or home service, or through WeChat this online means to communicate with VIP customers, in short, you have to maintain no matter online and offline is a one-to-one relationship. This service method even if moved from the line to the line, it is also the same advanced, details have not been thrown away, all the words, language, statements are to better bring him a higher emotional feeling, but also with a professional to meet his consumption or service needs, to pay attention to details, to do a good job of form. Finally, thank Ms. Zhou again, if you are interested in luxury goods or courses, welcome to pay attention. See you next Tuesday.

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