Five Strategies For Building A New-Style Luxury Customer Community

Luxury brands are set to pay more attention to customer community strategies, as I explored in my previous article. It’s essential to stay relevant and become more purposeful as customers are increasingly buying into the values of a brand just as much as their products.

I explained that brand can choose between three types of community, but the more conservative form of community (typical clienteling restricted to existing clients) will give way to communities where relationships are multidirectional, more inclusive and deeper because they are decentralized.

Recently born “community-native” brands playing in the high end of their industry are a very useful case studies for executives keen to create the next level of customer engagement for their brands. Here are five practices to walk in their path:

Practice #1. It’s about purpose, not marketing

If you only see communities as a way of pushing transactions and content, then they won’t get off the ground. Marketing has a self-serving purpose. But communities are, first and foremost, about serving members and helping them to serve each other. It follows that there needs to be a positive social contribution, and that is the essence of what a company purpose is about. If you link community and company purposes, you will come across as more authentic and sustainable.  

For Maximilian Büsser, CEO of Swiss matchmaker MB&F, alleviating social pain points through purpose is a key axis of the brand’s community strategy. For example, MB&F’s M.A.D. Galleries are a way of “giving back to society, by helping artists who often have no galleries to represent them,” he explains.

Now consider experimental Swiss watch concept BA111OD. Thomas Baillod, its founder, explains: “I am a horologery activist. The annual sales volume of Swiss watches has collapsed from 30 million watches exported in 2011 down to 13.8 million in 2020. Meanwhile, the high-end segments (representing about 90{ad04e458d8a67bb381461aa5bab353250a5c3a294cd93826b3ec944a191540bb} of the value but only 20{ad04e458d8a67bb381461aa5bab353250a5c3a294cd93826b3ec944a191540bb} of the volume) are doing very well but they are turning watches into speculative assets. So, if the bottom of the pyramid collapses, and with it the network of assemblers and suppliers that keeps the whole industry going, everyone is in danger.

“I launched a 100{ad04e458d8a67bb381461aa5bab353250a5c3a294cd93826b3ec944a191540bb} Swiss-made tourbillon priced $4,400 to show that you can increase the desirability of luxury via the accessible segment. My purpose is to save “Swiss-made” because smaller, more affordable brands are disappearing.”

In three years, the brand has already launched four collections (it calls them “chapters”) targeting men and women and all at mind-bogglingly accessible prices. Yet Chapters 3 and 4 are entirely Swiss-made. “People look for the catch,” says Baillod. “After all, the average price of a tourbillon is $40’000, but what we offer is high horology. The box is made from Grade 5 titanium, the glass is sapphire, and there is a DLC diamond-like carbon treatment.”

How is the brand able to sustain such attractive prices? Because the community strategy is the business strategy: if the community makes the bulk of the sales and creates a large part of the experience and social value, BA111OD does not need to invest in costly physical distribution and marketing and gives it back to its customers.

Practice #2. Break away from the luxury practices that entrench mistrust  

Depending on the type of community you think you need for your brand, you may need to break (more radically or less so, depending) with certain traditional luxury management rules. BA111OD is breaking with three of them in its model of a multi-directional, inclusive community. MB&F is breaking with one.

All these breaks reveal that in order to create trust, you might not need to control everything. The key is to control what really creates the trust that a community needs.

In the past two decades, luxury has invested considerably in controlling its distribution, reducing the share of independent multi-brand retailers and increasing fully owned retail instead. There are at least two reasons for this: adding the retail margin to boost profits and controlling the selling ceremonial in stores. 

For BA111OD, the distribution is the “afluendor’s” wrist and “I cannot control that”, says Baillod. “What I intend to control is the number of purchasing rights an afluendor gets. We are not Tupperware.”

Luxury brands’ marketing budgets have reached colossal proportions, in large part to create well-controlled brand messages through storytelling. BA111OD, by contrast, relies much more on user-generated content to differentiate itself. Although the brand regularly informs customers about what they need to know about its innovations, it wants customers to use stories and concepts that resonate in their circle of contacts because it thinks this is a better way to reach a larger variety of customer segments than the few traditional segments brand storytelling targets. The assumption made is that if the brand delivers on its promises and if there is trust, why would consumers say something negative about it?

“I chose the almost-unpronounceable BA111OD logo precisely because I wanted people to use their own words to describe the brand and its products. I wanted to help people connect, share, have fun and be creative.”

Through clienteling – which accounts for the greatest portion of luxury communities –, brands want to control the experience they create, again by ridding customers of some of their mistrust. It’s because BA111OD is open to creating customer-led experiences that it can add additional benefits to those solely controlled by the brand. For example, the community got a buzz last year when the importer of Aston Martin cars in the UAE personalized one car to pair it with a BA111OD model, at zero cost for the brand.

According to MB&F, luxury brands are increasingly spending energy trying to find out what customers want to then treat them at arm’s length and with a certain arrogance in their communication or selling approach. “At MB&F, our potential customers’ tastes and wishes are not a consideration in our creative process, but once a product is out, we welcome any customer with whom this product resonates in our tribe. This person becomes a friend.” 

The question then, is what do you still need to control to nurture the trust you need, in order to have a real community? You need to control the design, push the technological frontier, and reach irreproachable quality. In luxury, the whole world of creation should be your responsibility.

With its “one click for service” and “smart power” solutions, NIO – the Chinese multinational automobile manufacturer specializing in electric vehicles – builds trust through service, in addition to product and design. Further, the company explains one must have multiple types of channels for the community to be in touch with you. “And we respond within the same day, 100{ad04e458d8a67bb381461aa5bab353250a5c3a294cd93826b3ec944a191540bb} guaranteed,” explains Hui Zhang, Executive Vice President.

Practice #3. Make the community a cross-organizational priority

The problem with most community initiatives is that they are led by the chief commercial officer or chief marketing officer, either of whom have many other responsibilities. And so the effort quickly becomes siloed. Instead, the community should be a common priority across functions and divisions, even if there is one accountable executive at the helm of it.

At NIO, the company orchestrates its community of users through events such as the annual NIO Day, the production of shareholder reports, top executives’ exclusive messages, the drop of new cars, the NIO Houses network, the NIO app, charging and maintenance services and NOMI (an in-car AI device). Thus, sales, marketing, finance, design, product and services development, IT, digital and aftersales are contributors to the community and are all united behind one goal: the highest-level user experience in the industry. And this is the company’s ultimate KPI.

Even if it is critical to link functions, you will still need to have one person coordinating the efforts. Thus, staffing choices will be essential too. For BA111OD and MB&F, CEOs are at the forefront of the community but there are limits to that approach when you need to scale.

Community coordination and engagement has to be done internally; it cannot be outsourced. The community coordinator should have the mindset and skills for this type of on-the-ground, high social engagement and an ability to bridge internal political fault lines to weave in the ingredients of the community equation. In short, if the community is the strategy, the organizational design should be completely aligned and support it.

Practice #4. Realign your operations

Operationally, you will need to run the infrastructure that enables the important rituals, such as the  NIO Days, that your brand and/or the community create.

In the digital age, you cannot do without technology mediation, so it needs to be state of the art, highly interactive and able to enhance analytics. It’s likely you will need to deal with politics: every community has its power games and its status rivalries, which could even be truer when the community gathers mostly high-net-worth individuals. The key is to turn them into an advantage for the community and the brand, but this requires diplomacy.

The more the community is your strategy, the more you will need to stop seeing it as a cost, which is the case when its responsibility is clustered in sales or marketing. Unless you completely organize your business model around your community – like BA111OD which says its strategy yields the same profitability as a brand using the traditional distribution model – communities generally pay off in the medium to long term. Thus, in most types of brand community, you cannot apply rules of immediate returns either.

For example, last year MB&F created a limited series, the M.A.D Edition 1 available only to its extended tribe of friends: loyal customers and those artisans who had supported the brand since its inception. This watch was priced at $1,900 while normal prices vary between $50’000 and $400’000. According to Büsser, “the impact on our community was amazing. Artisans are wearing it like a badge of honour. This was not a profitable project, but the emotional return on investment is priceless. One needs first to give in order to receive later.” 

Appropriate metrics and timeframes for measuring the ROI include: user satisfaction if the community is closed, how many new customers your convert from your community activities and comparing the cost to the cost acquisition of new customers via digital channels (their cost is now rising exponentially), emotional attachment to the brand, social value created for users.

Practice #5. Navigate the pitfalls along the way

It’s important to realize that each of the four types of community will entail its own specific issues. It’s critical to navigate these with agility and anticipate them where possible. For example, if the BA111OD model is right for your brand, you will need to resist the temptation of raising your prices and thus over-ruling the system when you strike success. “Community before profit, as a code of conduct” says Baillod.

A community strategy that is more inclusive and/or more multi-directional also means the brand becomes more approachable. Therefore, going forward a challenge is to maintain the mystique that comes with luxury. It’s about finding the right balance between being approachable without becoming less respected “As the Anglo-Saxons say, familiarity breeds contempt,” explains Büsser. “And we must avoid that.” 

Finally, in today’s climate in which digital is often first, brands will need to make sure that any omniscient forms of social media or digital tools do not distort the authenticity of relationships.

To sum it up, brand community strategy will require an entire re-strategizing of branding by diving deeper into this burgeoning area of thought leadership in tandem to tackling all five practices outlined.

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