Artificial Intelligence today is a discipline that plays a crucial role for companies' competitiveness, it’s the way to leverage the (data) gold mine that many of them are sitting on. And it’s real, it’s here to stay - so not having an idea and an official position about AI & ML could put your company’s business at risk sooner than you imagine.
The scope of this post is to discuss a bit how Artificial Intelligence & Machine Learning can be leveraged in the Luxury business.
To preface, my thoughts (and experiences) are mainly based on the Luxury Retail sector (e.g. high-end clothing or shoes brands ...yep, I’m Italian), I don’t pretend to extend them “as they are” to the wider luxury business that includes, for instance, supercars, jewelry or top hospitality - but you’ll see what I mean.
Luxury Brands are experiencing a “converging divergence”
It’s a while now that top brands like Armani, Gucci, Prada, Loro Piana, Zegna just to name a few, have their shop signs in outlet malls around the world; it’s no longer needed to go to Via Montenapoleone or Rodeo Drive to buy that exclusive bag or pair of shoes, if you’re not a fan of the “very last model” you could find good bargains buying high quality for a “reasonably affordable” price.
What does it mean for Luxury Brands? They are widening the potential target market, they are multiplying tens or hundreds times the number of visits they normally have in their top flagship stores, they are simply trying to sell more goods to more people (“Pecunia non olet”, cit.). After years where luxury fashion houses focused only on the affluent market, they are now considering a portion of mass market, too.
As a consequence of this, the number of customers data, shopping behaviors data, contacts data are growing fast - and fast enough to fuel Machine Learning models to classify and cluster their customer base in order to provide a sort of “glamorous buying experience” also to those customers who are not the biggest spenders they have, but that could buy a couple of (discounted) pieces every year.
The long story short, Luxury Brands today need to put in place processes, analysis, offerings for a diversified customer base and in this case more than ever “one size doesn’t fit all”. Luxury brands have to think and actuate well diversified strategies for the growing range of customer types they’re now servicing. The good news is that Machine Learning not only empowers this kind of reasoning, it enables Brands to exploit the “new” amount of data they deal with by providing business analysts with a level of meaning, insight and granularity that “classical BI” never provided before.
Omnichannel is the new normal
The “high end” boutique store is no longer the main point of contact between Luxury Brands and affluent customers, especially for Millennials and Generation Z that alone generated 85% of the global luxury growth according to a Bain & Company report.
For regions like Russia, China, Australia - it’s highly probable that a young wealthy customer enters a physical store for the first time after he/she already did no less than three online purchases. Luxury customers expect their online interactions with a brand to match their first class offline experience and viceversa - and guess what? This is achievable if companies are able to seamlessly collect and analyze customer data no matter where they come from. Direct-to-customer e-commerce, physical stores, mobile apps, social networks are all interconnected components of a single “super-channel” that Brands use to ensure the best customer experience to their favourite clients.
Once again, Digital Transformation plays a key role in this business model transformation: thanks to Big Data technologies it is now possible to collect huge amount of structured and unstructured data, both batch and real-time, from any kind of source. Thanks to AI customer profiles are no longer periodic pictures but continually evolving data streams, updating as interactions (wherever they happen) and behaviour changes, enabling Luxury Brands to target marketing actions that reflect customers and their evolution.
Digital channels enables Brands to analyze their customers behaviors not only on the basis of what they buy but, even more interesting, on what they don’t buy: goods that are in the “wishlist” or items that were in the shopping cart and then removed before the checkout provide so much useful information to drive cross-sell and bundling strategies. We could say that sometimes “the unsaid is more meaningful than the said”.
“Don’t cluster me, I’m unique”
We have seen before that Luxury Brands are widening their potential markets but nevertheless their “core customer base” is still in the affluent segment: wealthy people that are willing to pay premium prices to buy exclusivity, recognizability and they expect to do it through a smooth, cuddly and charming customer experience, in a single phrase “their own personal experience”.
If you are spending thousands of bucks to buy an exclusive jacket you want to feel that exclusivity, you want to feel that in that moment the entire Brand is serving you and you only, you want to feel in a tight relationship with that Brand.
When sales activities need to be at personal level you can’t take the challenge without Artificial Intelligence & Machine Learning; rule-based marketing approaches are no longer a viable solution because of the cardinality, you simply can’t write a rule for every single customer but self-learning algorithms can digest tons of data from a wide variety of sources and provide marketing suggestions on an unprecedented scale; up-selling, cross-selling, next best offering can be powered by the automation provided by Machine Learning.
In fact, according to Luxe Digital, “AI-powered personalisation is set to become one of the fundamental driving forces reshaping luxury e-commerce in 2019 and the years to come”.
Artificial is Real
As I already stated in the opening, Artificial Intelligence & Machine Learning are a reality for Luxury Business.
Chatbots are already in place to manage parts of the customer service experience in a cheaper and more efficient manner; it’s not simply a matter of finding the closest shop or providing contacts numbers, AI powered bots can suggest the best chromatic pairing to a customer that is undecided on which shirt to wear with a certain dress.
Machine Learning techniques are used to enhance sales & marketing effectiveness enabling scaling in terms of data analyzed and details and granularity of the output provided.
Face recognition is used to identify a customer entering a physical shop so that the sales assistant can immediately receive on his/her mobile device shopping history, preferences and suggestions to provide the most personalized experience to that specific person, because remember that every luxury customer wants to feel unique!