Our Luxury Marketing Predictions for 201730 Jan, 2017
We haven’t yet shared our predictions for 2017 and, as January is about to come to an end, we thought it was about time we did.
As we wanted our advice to be as sage as possible, we’ve turned to our leadership team – Graham, our CEO; Neil, our MD; Karen, our Director of Client Operations; and Wayne, our Strategy Lead.
Here are their thoughts:
Brexit continues to bring opportunities as well as threats (Graham.)
Commercially, Brexit has probably created more positives than negatives for the luxury industry so far. Domestic demand has held up remarkably well and the fall in the value of sterling has attracted tourists to these shores on the hunt for plentiful luxury bargains.
2017 will bring greater threats, but also continued opportunities.
The threats come from rising inflation, and from the fact that much domestic spending has been fuelled by credit. Inflation, caused by rising import costs, will increasingly eat into discretionary spending budgets. And as inflation rises, and the economy slows, debt-laden households will probably reign in their spending.
That being said, sterling isn’t about to recover anytime soon, so the luxury tourist boom will no doubt continue. And the prices of luxury goods in the UK are so much cheaper at present there’s an opportunity to push margins up whilst still maintaining attractive pricing. There’s justification for those price rises too – increasing import costs – which will make any price hike seem reasonable to consumers.
Facebook will continue to dominate but rivals will find their niches (Neil.)
You have to take your hat off to Mark Zuckerberg and his Facebook team – they’ve been very adept at staying one step ahead of public opinion and requirements. I can see little danger of Facebook losing any of its relevancy in 2017.
Looking at it from an advertisers perspective, the ad product is still incredibly effective and new opportunities (they’re now testing midrolls) are being made available all the time. I expect that to continue.
But much as they’d like to, I can’t see Facebook eradicating any of its rivals. Each will continue to gravitate towards distinct propositions and positions in the market which will make sense for both consumers and brands.
Take Twitter. It can’t win the ‘live’ battle against Facebook – the latter just has too much clout – but I suspect it may consolidate around niche interests that don’t rely on imagery (where Instagram cleans up) like business, politics and culture.
And despite Instagram copying many of Snapchat’s features, I think the latter will retain a distinct appeal for consumers and advertisers. Instagram will be the curated story of your life, Snapchat will be your ‘real’ life.
And finally, I see real potential in Pinterest – our testing of their ad product has yielded encouraging results. The challenge for them will be growing their user numbers at a more rapid pace in the coming year to encourage more brands to give them a try.
In search of revenue growth, publishers risk their brands’ distinctiveness (Karen.)
Magazines will face familiar challenges in the coming year – circulation declines and the falling revenue from both readers and advertisers associated with that.
There have been two approaches to this long term trend – bolster print advertising revenues by using smarter distribution. That’s the route that Cosmo has taken and it’s worked – although it means giving away a large proportion of free copies.
But the approach that Conde Nast has taken with Glamour is the one I expect more publishers to follow – brand extensions driven by the pursuit of revenue growth. Those extensions might take the form of licensed products, experiential – like the Glamour Beauty Festival – or collaborations.
In pursuit of profit growth, against a backdrop of declining core revenues, publishers have been cutting back – trimming editorial, sales and marketing teams. Many of these teams are now working not only cross platform but cross title. The old brand-led strategy has been replaced by a cold numbers approach to selling.
If publishers take this approach too far, they risk fatally undermining the brands that are the core of their appeal, and I fear that their traction with consumers will further fall as a result. This time it won’t be external forces to blame for their further decline, but a self-inflicted wound.
2017 won’t be about AI, but IA (Wayne.)
Artificial Intelligence was big news in 2016. From Apple’s Siri to Amazon’s Alexa and Google’s DeepMind, great strides were made in this field last year.
It’s also becoming an area surrounded by increasing sensationalism, with warnings of the dangers of dabbling in this field because of the possible ‘Space Odyssey’-style type repercussions, and predictions that AI could wipe out millions of jobs globally over the coming years.
We need to park all that feverish future gazing and look at what developments in artificial intelligence can deliver in the short term, and that’s something called IA – Intelligence Augmentation. Not replacing us, but helping us to make better decisions.
For the coming year, I see AI doing what AI is best at – objectively sifting through huge volumes of data to identify patterns and determine causalities.
So AI will be used to make programmatic campaigns more effective, to sift through customer data to determine how and when to approach them and with what product and offer, and to make websites more intuitive and personalised to each individual user.
But I can’t see AI making any inroads into the sphere of customer service – particularly for luxury brands – in the short term at least.
Despite the advent of chatbots, we’re some way from AI solutions being able to emulate emotional intelligence. Service is too important a part of the overall luxury experience for brand managers to risk messing with it.