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Jun
2015

The cost and complexity of consumer maintenance

The marketing battle cry last year for most luxury brands revolved around their CRM system and the need to find new customers. It was about expanding the customer base and knowing who the purchasers were. The more cynical of us might have said that these luxury brands had been making big money from the Chinese consumer for many years, so they ought to know who their customers were by now.

The fact of the matter was and still is that most brands were just taking money from consumers desperate to spend without actually finding out who they were and more importantly, their personal preferences. One can only surmise that nobody thought that the gold rush would ever end or that one-day the Chinese luxury consumer would mature and become particular about how and where to spent their cash.

This near obsession to find new customers appears to be at odds with the basics of marketing in terms of retaining and developing the existing client base and its ease and cost when compared to that of finding new customers. We all accept that customer loyalty is typically low in China and there is an argument that the cost of maintaining fickle customers here is at least as expensive as finding new ones, but based on the speed at which the consumer is maturing, this argument has a limited lifespan.

The old Chinese luxury consumer

In the good old days pre mid 2012, the typical Chinese luxury consumer was in general terms, easy to read and understand. Their experience and attitude was very immature and their drivers were the ownership and display of expensive items. For the luxury brands gathering demographic data from these consumers would not have been difficult had they tried to do so.

The reward of being classed a VIP by a luxury brand will have in most cases, meant that a consumer would willing handed over personal data in return for invitations to big events where they were seen and recognised as someone special in society. They had purchased real luxury items at high prices, so the resultant euphoria will have ensured a flow of valuable CRM data. Of course there was always a risk of the data being over exaggerated, but this is normal in China. So why did nobody collect this information?

Servicing the wealthy consumer a few years ago was simple, their expectations were relatively low, they were a homogeneous group that meant maintenance was low and quite basic. They also kept coming back for more, even if the service and maintenance they were given was low; it was perfect for the brands.

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The Chinese luxury consumer 2014

Moving forward 24 months, oh how things have changed! The homogeneous mass of luxury consumers has fragmented and continues to do so. Not only are individuals behaving like individuals, but they are far more knowledgeable that one might expect for a two year break. Their lives have moved on, as have their interests and visions of themselves. So where does this leave luxury brands and their customer relationships?

The first and critical point for any luxury brand selling to the Chinese is to acknowledge that these consumers know their value to you, they are smart and will not give up data that might help you, unless there is something significant in it for them. They want you to prove your value to them, that they can trust you and rely on you, as if you were a personal friend. This is hard to do if you know nothing about them to start with, so you need to make some educated assumptions or rely on sources of information better informed than you.

There has often been a great deal written about the Chinese consumer and their desire to find a bargain. This is a cultural fact, but in reality this isn’t the key driver for them to agree to have a relationship with you, they want strong relationships with a few brands, those that they feel they have something in common with. It’s never actually the money.

The modern Chinese luxury consumer wants a personal relationship with the brand, one tailored to them, to their likes and lifestyle, and those brands who recognise this and are able to deliver on this expectation will be those who benefit from true customer loyalty. As in their personal relationships, Chinese who find a brand they trust, that delivers what they want from it and brings pleasure to their lives, will be theirs forever, no matter what.

Unlocking consumer data

The major strand for success in long-term consumer relationships for luxury brands is service. I don’t mean smartly dressed retail staff saying good morning or have a nice day, but those who actually engage with the consumer in store. Those who are able to express the value of the brand to a consumers lifestyle, those who through demonstrating empathy and understanding make the consumer feel relaxed and willing to open up and share further facts about their lives.

All luxury brands globally aim to deliver this experience to their customers, but of course the Chinese have different expectations to other nationalities, and these differences need to be acknowledged and played upon. Within Mainland China, service has traditionally been poor in all environments, and based upon our own ‘Luxury Retail Service’ report issued 12 months ago, we found even basic service in 39 luxury stores to be poor in some cases. Poor service is one of the reasons after lower prices that Chinese consumers claim they prefer to make their purchases overseas.

The Chinese consumer is not like others from around the globe, and although a brand may employ staffs that speak Mandarin in their international stores, the only thing they do have in common with the people they are serving is the language. They are unlikely to be Mainland Chinese themselves and will come from a very westernised background; empathy is unlikely to be the result. Of course the staff based in Chinese luxury retail stores are Mainlanders, but they will still not be of the status and social background of those they serve. The mismatch is obvious wherever in the world you look.

The way forward

The take away from this article should be empathy and understanding, and how these two attributes are the real key to consumer data. We can all recognise that its much easier to ‘open up’ to others if we feel they are listening and reacting in a supportive and positive manner to what we are saying. In the modern Chinese luxury market, consumers do not want to be sold to, they are looking for a deeper connection to a brand than just the product. The entire retail experience and engagement with the brand is now the deciding factor in terms of purchasing.

For those of you reading this who have never spent more than a week here and there in China, perhaps the speed at which things change here and hence the knock on in terms of consumer attitude may not be apparent, but these are fast learners who know they are entitled to respect. In the US and Europe, consumer behaviour is stable, well defined and doesn’t have the ‘random’ attributes of the Chinese. There is plenty of money in China, and people willing to spend it where they choose. Things have moved on in the past 2 years.

So I offer you a radical suggestion for consideration. If you have Mandarin speaking staff in stores in Europe and the US, select one or two to work in China for a few months to see how the Chinese luxury consumer behaves at home, and to assess how this relates to their behaviour when they travel. Open their eyes to this new and huge consumer base and have them return to their home base and share their knowledge with their colleagues, and train them in empathetic service for Chinese consumers. The small pieces of knowledge they may collect will make the difference to the volumes and value of sales, the repeat business you attain, and the customer data you are able to gather.

Alternatively, send Chinese staff that work in China to your locations in Europe and the US, and place them in store to expose them to a wider range of customers, to watch their colleagues at work delivering higher levels of service than they might in China, and as importantly, have them share their experiences of Mainland Chinese consumers with their colleagues so that your entire team in more Sino-savvy and the brand can maintain a current understanding of the ever changing goal that is the Chinese luxury consumer.

Luxury brands need to be more switched on when it comes to collecting consumer data, they have gone from being lethargic to almost obsessed with CRM without considering how and why the Chinese luxury consumer would want to supply their personal data. They missed the boat some years ago because they were busy taking orders and expecting the market to stay constant. The consumers are now mature and the market is more competitive, as a result they may not get a second chance unless they think smarter and use the resources at their fingertips to create a win-win for
all concerned.


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