Milton Pedraza, CEO of the Luxury Institute, details the redesign of the luxury business model, which he believes will result in a true customer-centric industry
The luxury industry enters the last quarter of 2011 with some degree of uncertainty as it prepares for 2012. Many senior luxury executives, coming off a year of banner sales and profits, for some even above 2007, are asking the same question: Will it last? The fundamentals for rapid growth both locally and globally, including in China, are waning a bit and brands now must find a way to gain market share.
Customer Relationship Management (CRM) initiatives have begun to measurably pay off for luxury brands. Data collection efforts have improved but after-sales service and the critical relationship-building function of clienteling continue to be a major challenge. Most luxury brands lose eighty to ninety percent of customers in any given year, and are deficient in retaining even half of their top customers.
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