Metrics for Marketing to Luxury Buyers

Posted on by Chief Marketer Staff

The rich really are different from the mass market–and companies had better treat them that way.

That’s what Milton Pedraza, CEO of the New York-based Luxury Institute, says in introducing a set of metrics designed to measure how high-end customers feel about their experiences with the Louis Vuittons and Neiman-Marcuses of the world.

Because brand quality among upscale products is so similar, the customer experience takes on outsize proportions compared with other market segments. “That’s the battleground,” Pedraza says. “In the luxury world, three brands make pretty much the same suit. You can’t be in the luxury business with poor quality, but service, experiences, and customer interaction can differ dramatically.”

The Luxury Institute’s LCEI — Luxury Customer Experience Index — compares how companies are performing against other businesses in their category and their own history. The firm uses eight metrics in asking respondents their opinion on each of the companies surveyed. The initial four are based on how customers perceive a company’s performance, or how knowledgeable and helpful the company’s employees were: attitude, or how polite and trustworthy employees seemed; outreach, customer rewards, and soliciting of their opinions; and ambience, the location or physical appearance of a store Those four are combined into a single index that becomes the fifth metric.

The LCEI then rates the company in three other categories. problem resolution, or whether a negative experience with the company turns positive because of its quick and helpful response; loyalty retention, in which customers are asked if they would purchase or repurchase items from the company; and a referral rating, which measures how willing customers are to recommend the company.

For the most part, Luxury Institute clients see only their own ratings, rarely those of their competitors. But Pedraza points to designer apparel brand Gucci and hotelier Ritz-Carlton as being especially customer friendly. The greeter at Gucci’s Fifth Avenue store in New York, for instance, has won praise someone who always smiled and sent customers to the right place. Other companies, Pedraza says, employ “goons” – bouncers who serve to keep the less wealthy away from their doorways.

Ritz-Carlton has service ingrained in its culture. “They test people at every level before they come into the company. They know you can’t teach people to be nice when you come to an adult. They hire people who are nice, attentive, and live to help other people,” Pedraza says.

“Any company can buy a fancy bed,” Pedraza notes. “But the treatment you get from the Ritz-Carlton as a rule is dramatically superior to that of other luxury hotels. We didn’t say this. Our wealthier consumers told us.”

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