The number of wealthy people has been increasing over the years. Currently, the number of high net worth individuals is estimated globally at 12.7 million. These people own $46.2 trillion of assets. The number of very rich (with assets between $5 million and $30 million individually) was 2.67 million as of 2019.
The very rich tend to spend money on things that most people cannot afford, things that create a sense of exclusive differentiation. It is these expensive things that make up the luxury market. Originally, the luxury market was dominated by physical things such as accessories, apparel, watches, jewelry, perfumes, cosmetics, and others.
Lately, there has been a shift from goods to experiences. More and more of the rich have been spending money on experiential things like luxury furniture, gourmet food and wine, and luxury vacations including hotels. The luxury experiential market is the faster-growing segment of the luxury market now.
By 2024, the luxury market is estimated to grow to a total spend of Euro 1260 billion, spent by 496 million rich people. This is too big a market to be ignored by entrepreneurs.
What does Experiential Luxury look like?
Let us take a look at a few examples from every-day items to exotic experiences.
The Intelligent Toilet
A toilet is a daily routine that can be messy and uncomfortable. A modern technology-enabled toilet can transform the whole experience. For example:
- Instead of having to lift the seat covers manually, the seats of these toilets open at a touch on a remote panel
- The cleansing bidet seats are warm and comfortable
- The cleansing function is thorough with water instead of paper, with adjustable water temperature, soft and strong pressure sprays that move back and forth
The whole toilet comes in great designs and colors to suit any décor.
An Exclusive Dining Experience
The El Bulli restaurant was associated with meticulous preparation and imaginative presentation of food (naturally priced high), and also with molecular gastronomy “that seeks to investigate the physical and chemical transformations of ingredients that occur in cooking.”
El Bulli was not open throughout the year. For example, the PIXA season was from 15 June to 20 December.
Restaurant bookings were available for only 8000 diners a season and were taken a year in advance. Booking requests often exceeded two million. The huge volume of requests for the limited seats points to its exclusivity, a key feature of luxury.
Unfortunately, it had to close down owing to accumulating losses. It is now the El Bulli Foundation.
A Luxury Vacation in Jamaica
The Golden Eye is “a collection of private villas, cottages and beach huts. Each is set amid tropical gardens, private beaches and secluded coves.” It is the place where James Bond stories were created. In fact, you can book to stay at the Fleming Villa where Ian Fleming created the Bond stories.
The hotel offers some super spots to enjoy food and drinks amidst fantastic surroundings, including a beachside perch to watch “a fiery Caribbean sunset” with a cocktail, a Bamboo Bar where you can “with sand underfoot, enjoy the smoky flavors of Jamaican Jerk BBQ along with grilled fish straight from the sea.”
You can also take part in activities that are going on locally. Go deep-sea fishing, or stay in the magical Blue Mountains, or engage in any other activity you enjoy.
Skylights Aero is offering personalized VR headsets that enable airline passengers to immerse themselves in virtual reality (VR) entertainment during their flight.
Emirates offers in-flight nanny services for travelers with children, along with several kid-friendly programs, including a live puppet show.
Landmark Mandarin Oriental in Hong Kong is offering exclusive Dior Skincare in its luxury spa, “along with the spa’s experiential showers, chilling ice fountains, refreshing vitality pools, and tepidarium chairs.”
The Marketing Challenge
The original challenge before luxury marketers was to project an image of exclusivity that appealed to a wealthy clientele and allowed the sellers to charge high prices. With the arrival of the Internet, things began to change.
Technology-enhanced and traditional products were now available conveniently online. Social media began to change people’s way of seeing things. Showing off pictures of an unusual experience in say, Tibet attracted far more likes and shares than a picture of a luxury product they just bought.
When people begin to spend money differently, marketers have to follow the money. And that is what is happening with the surge in luxury experience offers. Marketers found that they cannot achieve growth by continued focus on selling more products to more people.
Responding to the Experiential Marketing Challenge
The first challenge is to decide how you will meet the changed market conditions. How will you focus on experiential luxury instead of on product features? There are several options, including:
- Entering a pure experiential luxury market as LMVH did by acquiring Belmond, which owned high-end hotels and offered train services and river cruises. Acquiring an existing business is a good strategy as it can bring in skills and experience relevant for the new industry
- Adding luxury experiences to your products. The intelligent toilet above is an example. By adding elements of style and technology to an everyday product, Kohler was able to deliver a luxury experience. Developments in technology offer innumerable opportunities to adopt this strategy
- Identifying an experience that your customers will value and adding it to your offer is another way to tap opportunities. For example, Emirates understood the value of in-flight childcare for adult travelers
- Enhancing your image by adding a social element to your business can also work with an increasingly social-conscious group, the Millennials. This is what GoldenEye did by channeling some of its revenue to the local community in Jamaica
- Designing experiences that are great for social sharing could also work with Millennials. What unusual experience can you offer that they can instantly capture and share on Instagram?
Additionally, as is the case with any marketing effort, marketers have to understand the luxury customers’ journey to the final purchase:
- Awareness, consideration, and evaluation
- Purchase and
- Referrals about their happy experience.
They have to be present before the customer at each of the above stages by:
- Selecting the right channels to reach the luxury customer at each stage and
- Presenting the right message that projects the unique value they deliver.
Experience need not be confined to the final service or product. You can incorporate it even into your marketing efforts. If done right, it can not only be effective in creating awareness and desire but also for creating long-term loyalty.
- When a new 55000-square-foot Nike store opened in New York, it included a mini basketball court, a treadmill with demo screens simulating different outdoor runs, and a small soccer area. Even buying a pair of shoes had become an experience, with shoppers able to personalize a pair of Nike Air Force 1s. Naturally, luxury customers tend to prefer such experiential stores compared to traditional ones.
- How would you like to get away from it all and recharge your soul? That’s what RetreatBySoulCycle offers you in the form of a retreat in the lap of nature, with a chance to bond over nourishing food with others like you. One great advantage of experiences like these is that they are not easily forgotten. Such a business will have a long-term customer who will continue to rave about the experience.
Experiential marketing involves getting customers to engage with the business in a realistic setting. If it is relevant to the customer and on-brand, it can have an extraordinary impact.
According to Forbes, “traditional marketing simply doesn’t cut it anymore.” Experiential marketing is the future of marketing, “because that’s what today’s consumers are responding to, but also because the impact lasts longer and has a greater influence on future purchases.”
Experiential Luxury Market: Summary
With increasing numbers of wealthy people around the world, the luxury market is growing. However, it is not a luxury product market but the market for luxury experiences that is growing fast.
We had a look at what experiential luxury looks like, the marketing challenge in the context of changing market conditions, and how to meet this challenge. One notable observation was that experiential luxury was being applied even to the marketing exercise itself.