Building Luxury Brand Loyalty via Exclusive Experiences

Store openings for big luxury brands are typically glitzy events reserved for celebrities, fashion insiders, and press. But when Valentino, the Italian maker of $6,980 cocktail dresses, $2,195 handbags, and $445 espadrilles, opens its next boutique in New York later this year, the company plans to invite some regular customers to mingle with the stars—and charge them for the privilege.

Like many of its peers, Valentino has discovered that to-die-for pumps are no longer enough to keep sales on the upswing. Instead, top-end fashion retailers offer experiences alongside their wares, expecting that customers who have visited a workshop or met the designer will develop stronger ties to the brand. “Everything has become more experiential,” says Dante D’Angelo, brand and consumer development director at Valentino, which Qatar’s Mayhoola for Investments purchased last year for about €700 million ($936 million). “It’s a new way of providing exclusivity, making customers feel important, unique.”

Some luxury retailers are offering consumers early access to products, usually at specific stores for a limited time. Closely held Lanvin, for instance, has made at least five black python handbags priced at £2,525 ($4,000) available to top customers who can trek to its store on Mount Street in London before Feb. 28. Only 14 were produced in total.

Gucci, the maker of $8,200 mink jackets, is inviting its biggest spenders to fashion shows, equestrian events, and the Cannes Film Festival. And the company, owned byPPR (PP), has started offering tours of its Florence workshop to top customers who aren’t A-listers. The initiatives “aim to engage the client in the values at the core of Gucci’s DNA,” says Chief Executive Officer Patrizio di Marco. “Getting our clients to understand how much history, tradition, quality, and passion there is behind our work means winning their loyalty.”

That matters, given that the $283 billion personal luxury goods market faces its weakest growth since the global financial crisis, according to Bain & Co. Compagnie Financière Richemont (CFR), which owns Cartier, Alfred Dunhill, and 17 other brands, this month reported slowing jewelry sales and says Asian revenue stopped growing in the last three months of 2012. Suitmaker Ermenegildo Zegna says it’s becoming harder to clinch a sale with well-off Chinese and Brazilian customers. Shoppers today “expect higher service,” says Luca Solca, head of luxury goods research at Exane BNP Paribas.

Valentino, Loewe, a 167-year-old leather goods maker owned by LVMH Moët Hennessy Louis Vuitton (MC), and a dozen other brands are working with a startup, Luxup, to give shoppers the VIP treatment. Launched in September, the company pitches itself as an online club for travelers with a love of luxury and fashion, offering tickets to fashion shows, exclusive collections, or the chance to get sought-after products before they hit stores. Luxup members—signing up is free—select luxury products and events online that they pay for up front and redeem at stores. Subscribers who spend HK$50,000 ($6,450) at Valentino, Loewe, or Dunhill stores in Hong Kong get a Luxup personal stylist for three hours and a photographer to document the shopping spree. Those who buy an £8,000 voucher for purchases at Roland Mouret’s store on Carlos Place in London get a pair of front-row tickets to the brand’s fall-winter fashion show in Paris, including backstage access and a meeting with the designer.

“Offering the latest must-have isn’t the only basis on which brands can compete,” says Luxup co-founder James Corsellis, who is also an executive director of London asset management firm Marwyn Management Partners.

Selling thousands of branded goods has generated billions in annual sales for luxe labels, yet it has also challenged their exclusivity, says Boston Consulting Group senior partner Jean-Marc Bellaiche. Also, shoppers in their 20s increasingly define themselves by what they’ve done rather than what they own, says Bellaiche, who leads the firm’s luxury practice. And affluent Europeans, North Americans, and Japanese in their 60s, their closets crammed with luxury goods, are seeking new ways to treat themselves. “In an era of over-consumption, people are realizing that there is more than just buying products,” Bellaiche says. “Buying experiences provides more pleasure and satisfaction.”

BusinessWeek.com