“I was treated very well in my local boutique, but abroad I had to queue to get into the store.” “I haven't received an email from a brand I've spent a lot of money on in eight months, so I won't be going back there.” These comments, collected by Very Important Clients (VICs) as part of a study published by the Boston Consulting Group (BCG) in conjunction with the Italian luxury association Altagamma, give an idea of the surprising shortcomings of the sector when it comes to this increasingly courted category of clientele, whose spending potential is growing rapidly.
In recent years, luxury brands have been rethinking their strategies, focusing on wealthier customers, abandoning aspirational customers in the process, as evidenced by the rising prices of handbags and leather accessories from major brands. But to attract this very special clientele, it is necessary to understand them, as deciphered by this BCG study, which draws an unexpected profile of VIC consumers, or “Beyond Money”, as it calls them. This category, at the top of the pyramid, represents almost 30% of the revenues of some major brands.
The survey's authors looked at consumers who spend more than €50,000 a year on luxury goods, with an average spend of around €350,000, interviewing a panel ranging from the “lowest spenders” with annual purchases of between €50,000 and €300,000, to those who spend more than €1 million a year. While VICs represent a small part of the market – less than 1% of all luxury customers over the past ten years – they have seen their weight in terms of spending skyrocket, from 12% at €88 billion in 2013 to 21% in 2023 – €213 billion. In terms of spending, each of them is now worth between 200 and 250 times more than the average luxury customer.
Operation seduction
“For VICs, the luxury spectrum is complete: it covers luxury goods, wellness, travel, but also financial services. To serve this customer, they have to face enormous competition, as they are invited to exclusive events by fashion houses, hotel chains, car manufacturers, banks and insurance companies,” underlines Filippo Bianchi, one of the authors of the study entitled “How to win the hearts of very important customers”, presented on Tuesday in Milan.
Two-thirds of these consumers are also UHNWIs (Ultra High Net Worth Individuals), or ultra-rich clients, who represent 3% of the population but hold 40% of financial assets and grow at an average rate of 10% per year. Another interesting fact is that the spending of VICs is five times less volatile than that of aspirational clients, as it is not linked to the GDP curve or to economic cycles. “The only real constant is the growth of their spending,” says Filippo Bianchi.
With such a profile, it is surprising that VICs are so poorly identified by labels. According to these very special customers, “only two of the nine brands they frequent, i.e. 20%, recognise them as VICs.” “Often, they are recognised in the store they visit, but not in their foreign branch. To identify them, brands only take into account what these customers have spent with them, and in a limited period of no more than 18 months. They should use multivariate models to understand what their customers spend elsewhere, analysing their entire journey and not just a part of it,” suggests Guia Ricci, also Managing Director & Partner at BCG and author of the report.
According to the study, 89% of VICs value products for their craftsmanship and quality, and 85% for their exclusivity and recognition. Finally, they are wary of brick-and-mortar stores, instead seeking personalized experiences. However, according to the testimonies collected, the desires of VICs “are evolving faster than the ability of brands to satisfy them.” “The four key points – a unique and exceptional product, remarkable experiences, exclusivity and impeccable service – are well known to brands. However, the people we asked told us that they were completely satisfied with these points only in 70% of cases,” continues the researcher.
Avoid dissatisfaction
The study provides some examples of the reasons for this dissatisfaction. VIC customers want hyperlocal personalisation and at the same time to be recognised in all the brand's stores, which is not always the case. They are willing to expect an exclusive and personalised product, but they want to be involved and informed about the production process throughout the process. Finally, although they consider themselves very special, they would like to participate in a community. Creating this feeling requires different strategies, depending on the type of product and the customer profile. Here too, a distinction must be made between Western customers, who prioritise impeccable service and a relationship of trust with the company, and Asian customers, who rely more on a unique product and personalisation.
The study also highlights a final key element: the role of the customer advisor, which is becoming increasingly important. In the report, 64% of the VICs surveyed say that the relationship with their sales advisor is a key factor in their decision to return to a brand. Above all, 68% of them would be willing to follow their sales advisor if he or she left for a competitor. However, younger generations are increasingly less attracted to this profession and transfers from one company to another are very common. Hence the importance of attracting and attracting the best talents – increasingly present in the hotel sector – and motivating them to stay, while creating specific training courses.
In short, to retain their wealthiest customers, luxury companies will not only have to perfect the four key points (unique product, experiences, exclusivity and impeccable service), but also know how to differentiate themselves through greater personalization to show their VICs that they know them well, offer them tailored products and experiences, make them feel part of a community, without forgetting to pay special attention to their sales advisors.
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