As of March 2010, Facebook amassed over 400 million users. For prestige brands that strive for exclusivity, 400 million is quite an intimidating number. That’s not to say prestige brands should not target social networks, however. Instead of focusing on 400 million, prestige brands should cater to gated online communities, such as Gilt Groupe and aSmallWorld.com.
More specifically, purveyors of luxury should target the emerging class of digitally savvy affluent Gen Yers. At the 2010 L2 Generation Next conference, Sterling Lanier, President of the market research consultancy Chatter, provided a glimpse into the psychology of tomorrow’s affluent buyers. Let’s take Sterling’s insights and apply them to social media to get an idea of tomorrow’s luxury online.
First, we need to understand that affluent web users are not concentrated on open social platforms like Facebook. In fact, only 11 percent of affluent users are on Facebook, according to a study by the Luxury Institute. The aspiring rich and famous aspire to gain status among an exclusive network. The majority, or 2/3 of affluent Gen Yers thrive on “the secret handshake.” In other words, they seek exclusivity by purchasing luxury items only those that are “in the know” would know.
Indeed, in one of Sterling’s audience testimonials, a Gen Yer said he purchases shirts from a Scottish designer with around three small stores in Europe. With only a small colored tag to identify the designer, he gets gratification seeing others wear the Scottish brand. The principle of exclusivity holds true in the digital space, with gated communities like aSmallWorld.com.
Much like aSmallWorld.com, Gilt Groupe is a gated, invite-only community, but focues on lux-deals. Sterling found Gen Y needs to rationalize their exorbitant purchasing decisions. One way of doing that is finding the best deal. Gilt Groupe helps Gen Y rationalize buying $5,000 drop-crotch designer trousers. The lux-deal concept is certainly thriving. Gilt expects to pull in $500 million in revenue in 2010.
Open social networks, such as Facebook, might build brand lust, but fall short of generating revenue for prestige brands. The ultimate goal of any marketing campaign is to generate reveneues and with only 11 percent of affluent users on Facebook, it’s not worth a significant investment. Prestige brands should take a cue from Sterling and the growth of Gilt Groupe and aSmallWorld.com to grow their image among their target audience.
Read the 2010 social media report: