The Luxury and Retail Industry faces some unique challenges as Millennials and Gen Z move into their prime earning years — with Millennials accounting “for some 130 percent [of industry growth], to account for 50 percent of the market in 2024.” Tastes are shifting as “mass luxury” and “affordable luxury” fit better with Millennials ― as opposed to previous generations that might segment exclusively into luxury vs. mass goods. Millennials are more likely to mix and match, seeking to express themselves and identify niche brands that fit their lifestyle. However, luxury companies still have the unique brand license to set trends rather than react to them (like CPG, Retail, etc.).
How are innovative luxury fashion, cosmetics and automotive companies (amongst others) modernizing to meet these new aspirations? The key is balancing broad reach with maintaining brand equity. Per both Boston Consulting Group and McKinsey & Company’s 2018 sector outlooks, building digital first organizations are crucial to both elements. According to BCG, “for the first time, social media is the first source of information and the channel of primary impact used by true-luxury consumers, followed by magazines and brand websites. … The percentage of online sales perceived as being additional, and not a cannibalization of, physical sales is decreasing each year. … Fifty-five percent of luxury consumers buying online use their mobile phones versus personal computers.” While social and mobile are a priority, many luxury companies are still struggling to maximize their investments in these areas. McKinsey speaks to these challenges, suggesting that continual transformation, leveraging the power of big data, and evolving ecosystems will allow leading luxury brands to succeed.
Social listening provides opportunities on all three: informing transformation efforts with unfiltered customer data, quickly parsing big data for better decisions and combining data from a variety of sources (social, digital, product/store reviews, competitors, influencers) for a holistic customer experience. Leading luxury brands are using listening as an edge to stay on top of the competition plus inform digital strategies analyzing both prospective and existing customers.
The analyses highlight our focus on industry leaders using social data across the customer lifecycle, looking at:
· Tracking brand equity in real-time for more informed decisions on marketing and digital strategy
· Campaign Optimization and Influencer Engagement
Remember, beyond the specific insights, this article provides analysis frameworks that can be repeated for any brand looking to get more out of social analytics.
Tracking Brand Equity
For luxury brands, maintaining brand equity is crucial. While affordable luxury and casual styles are growing in popularity, it is still important to avoid erosion of core brand allure. Social listening provides multiple ways to understand how consumers view your brand and if products are maintaining their luxury status. Specifically, you can use social listening to understand metrics we have found unique to tracking success in luxury such as share of discount conversation, brand passion, and share of sentimented conversation.
Fashion Spotlight: Louis Vuitton
Another standout in our industry report is Louis Vuitton. Part of the company’s success is in balancing broad reach and accessibility, while maintaining strong brand equity. We can use social listening to track that success over time and validate positioning versus competitors.
For many industries, straight competitive comparisons for volume and sentiment metrics are good grounding points. In luxury, it’s critical to go deeper than that. Starting at the highest level, Gucci does well on volume while Coach does well on sentiment. In some cases, volume of conversation could be about the wrong things and mean brand erosion; sentiment doesn’t matter in luxury if it is missing a strong pull toward the brand.
Looking at these second-layer metrics, we can start to understand Louis Vuitton’s success. The first analysis is to consider the share of discount conversation relative to the whole brand. We find this metric to be a good measurement tool for leading fashion luxury brands as a means to measure brand equity. Think of it this way – the more conversation about deals, sales and secondary markets, the less exclusivity for the brand. In this case, we can clearly see that Coach is dragging behind the competitive set, even though the positive sentiment is higher than others (likely driven by finding sales, lower prices ― but at the cost of no longer being a luxury brand)
Beyond discount conversation, another key metric for the luxury category is brand passion ― do people “like” the brand or do they “love” the brand. We can also judge brand passion by comparing counts of positive and negative conversation. As an example, Credit Suisse has shown that share of negative conversation has a negative effect on the brand’s market performance. To analyze the conversation, we can break of the share by sentiment type ― strong positive, positive overall, negative overall and strong negative. By this metric, Louis Vuitton is doing even better versus competitors.
Starting on the left, we can see that LV, Gucci and Coach all have similar amounts of positive conversation (67 percent-69 percent for each brand). However, looking at passionate positive conversation, Gucci is much further behind ― 11 percent vs. 17 percent for both Chanel and LV.
Finally, we can take a look at negative conversation, the indicator from the Credit Suisse article. In this case, LV has both brands beat – with the lowest share of negative conversation (11 percent vs. 12 percent and 15 percent) and, most importantly, the least amount of passionate negative conversation at 2 percent.
Another way to visualize this data is to combine volume, sentiment and passion in a single comparison ― in NetBase we call this the Brand Passion Index. Using this chart, we can see that Gucci is driving the most conversation (largest bubble) but that Louis Vuitton is driving more positive conversation ― and, importantly for this industry, more passionately positive.
So how to use this information? In some cases, social listening is the inspiration point, as shown in the influencer and audience examples above. In other cases, social listening is a measurement tool to monitor effectiveness and course correct in real-time. For LV, these comparisons provide a measurement versus the competitive set and benchmark to identify corrective action (and which competitor to analyze) if brand equity winds begin to shift.
Luxury brands need to go deeper than top level volume and sentiment. Track brand equity with:
1. Relative share of unwanted conversation including discounts, sales, offers, secondary markets, etc. that would signify erosion of brand equity.
2. Analyze sentiment by type to understand share within the brand – particularly looking at passion as an indicator of brand success.
Campaign Effectiveness and Influencer Engagements
Driving awareness via effective campaigns is the lifeblood of any retailer. Influencer marketing in particular has become synonymous with the industry. As influencer strategies become more sophisticated, many brands are looking to find the right celebrity to target the right audience and maximize their investment.
Retailer Spotlight: Zara
Over the last few years, Zara has become a leading retailer in the industry with its ability to quickly follow fashion trends. In addition to supply chain achievements, the company has also cultivated a chic brand image, going from low-cost retailer to runway queen. Kate Middleton recently gave the brand a vote of confidence with multiple photos which Vogue described as “elevated” while “refreshingly affordable.”
Looking at this year’s NetBase Retail report, Zara jumped 20 spots all the way to #7 on the overall list. But how has the brand built such a positive connection? Part of that has come from Zara’s work with notable, yet smaller scale influencers to build authenticity and a specific image.
For this analysis, let’s go back to the comparison of Zara and Bonobos — but in this case, we’ll take a look at content and influencer engagement.
We can start by analyzing the engagement for each brand on their own channels. As expected, Zara has a significantly larger following. However, what’s more impressive is the engagement per post with Zara driving nearly 2500 engagements per Facebook post and 36K engagements per Instagram post. Clearly, the company is doing well in terms of building its own community.
When we take a look at the most engaging posts for Zara for the year, five of the top 15 are influencer driven — evidence that its influencer strategy is paying off. Further, those “partnered” influencer posts are driving more engagement than the brand itself— averaging more than 50,000 engagements per post vs. 25,000 engagements for Zara. However, which of those influencers is providing the most bang for the buck?
Taking a selection of Zara’s influencers, we can analyze each of their own followings to understand their impact. For this analysis, we look at ALL posts the influencer creates on their channel (so not only the brand posts). Often, we have clients that seek to measure influencers based on follower count or impressions. In some cases, that makes sense if the goal is awareness.
With Zara’s Influencers, Holly Willoughby and Christian Lee Navarro have the largest following by far — more than 2 million each and drive 30,000+ engagements per post. However, notice the column on the right — engagements per post per 10,000 followers. Beyond understanding the total reach (great for awareness) and total engagements (total reach), there is also a consideration for maximizing influencer marketing dollars on engaged influencer audiences — those with followers that are more likely to engage with their posts.
In this case, Kanika Mann and William Franklyn Miller are the leaders with 215 and 184 engagements per 10,000 followers, respectively. And this data is evident in their work with each of these influencers. The list of posts shows the top engaging posts for Zara from the list of influencers. While Christian and Holly drove the top three posts for the year, the next four are all from Will and Kanika — with nearly the same engagement level (at likely a lower cost).
In summary, influencer marketing can obviously be very effective in building and driving community engagement. Remember to consider the goals behind your influencer campaigns and maximizing your influencer investment by:
• Aligning influencer metrics with campaign goals: consider impressions, reach and engagement when selecting influencers.
• Tracking the impact on your community: break out your engagements by Owned (your brand), Partnered (your influencers) and Earned (organic) to understand influencer effectiveness.
The luxury and retail markets continue to shift based on changing preferences of younger generations, increasing buying power in emerging markets, and the ephemeral nature of brand perception. “As these shifts take hold, the traditional, linear customer journey has been blown to bits: today’s average luxury shopper engages with brands through multiple touchpoints — up to 15 — along a fragmented, highly personalized journey. Half or more of these touchpoints are digital.” As mentioned at the beginning, social listening provides leading luxury brands with an opportunity to understand and optimize that customer journey while also maintaining brand equity via authentic partnerships and brand messaging.
The strategies in this guide can be applied to help drive better return on influencers, target actual vs. aspirational customers and more quickly adjust to consumer brand preferences. For each use case, remember to consistently benchmark overall brand and campaign results against competitors and historical results to understand what’s working — and what can be improved. Finally, in addition to the marketing use cases in this guide, there are also opportunities for social listening to inform retail strategies and in-store experience (see NetBase’s Best Practice Guide for Retail for further details). As a luxury and retail brand marketer, make sure that you are using social listening to provide both early feedback mechanisms to correct course or put more gas on a successful product/launch.
Scott Cohen is vice president, consumer insights, NetBase.