Luxury brands are marketing themselves to a country full of young people by tweaking products and prices.
When premium German car maker Audi decided to launch its small SUV Q3, it chose to flash a peppy and bright orange model in its publicity campaigns, instead of the usual sombre black or grey. It roped in John Abraham to launch a music video on social networking sites instead of the traditional 30-second commercial on television. And tagged it all with “Start Young.”
The German car maker is, in fact, just one among the growing number of luxury brands across segments that are queuing up to woo a segment hitherto chased by colas and clothing brands – youth.
Gen Y is now one of the hottest target groups. In developed markets such as the US, Gen Y consumers are still the smallest group for high-end luxury brands – but they are the fastest growing segment.
According to credit card issuer American Express, Gen Y buyers emerged the new saviours for luxury brands in a rather depressing recessionary US consumer environment, increasing spends on luxury brands by 31 per cent in 2012 compared to the previous year.
But what do brands do in a country where nearly 60 per cent of the population below the age of 35 years?
Change marketing tactics. Audi, for instance, decided to change its positioning to be in sync with the demographic profile of the car buyers in India.
"We looked into the ideal strategic profile and figured that the SUV segment has more buyers in the 22-35 years age group. Some of these have just joined the family business, or a top multinational company. They also have a strong influence in their family's buying decisions and we wanted them to start the ‘Q’ life much younger," said Michael Perschke, Head, and Audi India Perschke.
The Q Life refers to Audi's SUV range which now starts from the Q3, and then goes to the Q5 and flagship Q7 models.
Take, for instance, the multi-brand luxury fashion house, Kimaya. In a bid to “catch ’em young” it got funding from Franklin Templeton and launched a new brand, Karmik, at the Lakme Fashion Week in March this year.
Pradeep Hirani, Chairman, Kimaya, said, “We realised it’s important to offer the young, fashion-conscious consumers with high aspirations an opportunity to own designer wear at an affordable price. Once you get used to wearing uber-cool designer wear, it is difficult for one to get back to basics.” The company has launched about six stores and has plans for a 50-store roll-out to make Karmik popular among the globe-trotting young Indians in due course of time.
Gone are the days when orders for Louis Vuitton’s products or Rolls Royce cars from Indian royalty outnumbered the world. It is the millionaires created by new economy sectors such as IT who are fuelling the growth for luxury products.
Franck Dardenne, General Manager at LVMH Watch & Jewellery India, said, “TAG Heuer’s DNA is to be a young brand! Some other brands were longer in the market, but customers today want more variety, and different products, than the ones worn by their parents. In India, TAG Heuer has a good distribution, it can be found in the new malls where young customers walk in. The depth of the brand is such that, from Shah Rukh Khan to F1, young customers can find the products which embody what they stand for.”
According to ‘India entry’ consultancy Tecnova, which specialises in assisting foreign companies looking to invest in India, the overall India luxury market is currently about $6 billion and growing at around 40 per cent. This includes apparel, watches and fine dining, but not premium car brands.
“With global exposure to brands, the young consumer in the 16 to 28 age group is driving the luxury market. Even the working woman population has gone up, a big driver for luxury sales,” said Sunil Choudhary, Senior Consultant - Consumer & Retail at Tecnova.
Courting the upwardly mobile
The high-income groups – those who have not yet joined the high net worth individuals club – go for name brands. “Households, which fall into the $100,000 to $250,000 annual income group, go for well-known brands. They choose mostly accessories and not hard goods such as luxury cars or apartments. They are being cultivated for the future,” Choudhary added.
Luxury analysts say it is this segment that the luxury brands are now increasingly eyeing.
“The youth are highly influential but need deeper engagement through a social networking strategy. Young members of industrialist families are known to splurge, corporate executives are known to do more impulsive and occasional shopping,” said Neelesh Hundekari, Principal and Head - Luxury and Lifestyle Practice, India, A. T. Kearney.
He says luxury brands are increasingly using strategies such as lowering the entry price barriers as well as off-season discounts to woo the young. “After all, a person who buys a product in the off-season sales is expected to upgrade eventually,” he added.
Not only luxury products but even luxury services such as fine dining, travel and spa segments are increasingly thriving on the aspirational young. The luxury hotels are dancing to the tunes of the young by sporting more contemporary interiors and the latest gadgets and gizmos rather than a formal and stodgy ambience.
K. B. Kachru, executive vice-president, South Asia, Carlson Rezidor Hotel Group, said, “Gone are the days when staying or dining at the top-end luxury hotel was only for a person who had made it in life and was in his late 40s. Luxury and five-star hotels are re-shaping their strategies to match them with the new-age high spenders, entrepreneurs and corporate professionals.” This segment, which on an average was just contributing just 5 per cent to the revenues of hotels in India, has swelled to 15 per cent in the past 2-3 years, he says.
Luxury travel brand Abercrombie and Kent, for instance, is receiving requests from younger travellers for that exotic adventurous trip to Machu Picchu or exploring the Galapagos Islands with their families. “This segment of 25 years and above is small but growing. After all, Indians have been introduced to luxury in its full fervour only in the past five years,” points out Vikram Madhok, Managing Director of Abercombie and Kent India and chairperson of the World Travel and Tourism Council Indian Initiative.