Word-of-mouth referrals are highly effective among luxury consumers, according to research from the Luxury Institute, and the technique is being made increasingly powerful as a marketing tool by the rise of online forums and communities. But some luxury firms are still ignoring their wealthy customers' avid participation in such services, the institute has warned.
Now more than ever, says Milton Pedraza, CEO of the US-based Luxury Institute, luxury suppliers must ensure that their offerings and actions withstand the scrutiny of millions of consumer critics exchanging their opinions and experiences through online review sites, blogs, and forums.
Opinions before purchases
The institute's latest survey, entitled 'Leveraging the internet habits of the wealthy', found that 84% of luxury consumers (defined as those earning more than US$150,000 per year) regularly visit web sites where consumers can write reviews or rate products and services. In particular, women and wealthy Baby Boomers tend to gather the opinions of fellow consumers in this way before they make a purchase.
In the survey, wealthy consumers found a number of ways to express to idea that ratings and reviews are important to them when making purchase decisions. For example:
- "It's so much more important and informative reading about the experiences of product users rather than reading the advertising hype."
- "I like to see what problems others may have encountered before I purchase. Also, customer service level is sometimes addressed and this is very important to me."
- "Ratings and reviews are quick way to eliminate bad choices."
So where do wealthy consumers go to get other peoples' opinions? Many (61%) use the online forums provided on the web sites of retailers such as Amazon.com, Circuit City, and others. And they are also willing to pay to find out about the products and services they buy: The fee-based Consumer Reports web site (featuring professional ratings and reviews) is a regular source of insights for 51% of wealthy consumers.
The Epinions.com web site is also a popular destination for 28% of the wealthy, especially under-55's who have a net worth of less than US$1 million. The site is also used by 21% of wealthy consumers aged 55 and over, and by 23% of those worth between US$1 million and US$2 million.
The wealthy are especially attuned to culinary customer reviews, with one-quarter (25%) consulting Zagat before they visit at a restaurant. This proportion increases with higher levels of income and net worth.
No hiding place
According to Pedraza, "Across the luxury spectrum, nimble luxury firms understand that the world has just become transparent and there is nowhere to hide. In a web-connected world, if you are not socially responsible, you can bet that consumers will gang up on you online. And if you make a mistake, admit it, apologise, fix it immediately, and over-compensate aggrieved parties, without excuses or exceptions. With the luxury brand's reputation at stake, the rise of internet reviews means it can be damaged in a nanosecond."
Complete results of the institute's surveys and other insights into wealthy consumer behaviour and attitudes are available to professional members of the 'Luxury Board' (US$995 annual membership required).