How to be Successful with Luxury

Dear Caroline, you have been dealing with neuromarketing in relation to luxury brands for some time, especially in the luxury hotel sector. How did your interest in this particular combination of topics come about? Have you created a niche here?

I completed my bachelor's degree in dual studies at TUI AG and subsequently worked there as an executive assistant in the cruise sector and as an investment controller in the hotel sector. My interest in the tourism industry was therefore awakened very early on. In today's market environment, I have the impression that it is becoming more and more difficult to really inspire guests in the luxury segment, not only to fulfil their expectations, but to exceed them and to remain in the guest's memory for a long time. Especially in the luxury hotel industry, the demands are very high and differentiation from the competition is crucial.

I therefore ask myself "What makes the luxury guest tick?" "What are their deepest needs?" and also look beyond the luxury hotel industry to fundamental questions such as "Why do we consume luxury goods at all? What's behind them?"

In the field of neuromarketing and consumer behaviour, there are already several studies that show how and why purchasing decisions are made, which so-called biases [certain behavioural distortions and tendencies] play a role in this and how brands are perceived by our brain. However, there is very little research in this area specifically geared towards the luxury goods industry and the luxury hotel industry. I have gone deeper into this field and would like to develop it further in the future. I am convinced that there is new potential here for luxury brands and the luxury hotel industry.

The definition of luxury has changed fundamentally in recent years. From the point of view of a neuromarketing expert, are there differences in the marketing of luxury brands compared to "normal" brands and products? Or asked differently: why do people buy luxury products? What factors are decisive?

[laughs] "That's very nice of you, but I wouldn't call myself a neuromarketing expert. There are many researchers who are much deeper into the subject. I am at the very beginning of my journey. What sets me apart is a good understanding of the needs of the luxury guest coupled with curiosity and the question of "why" when it comes to purchasing decisions and brand perception in the luxury segment and the luxury hotel industry.

There are various theories as to why people consume luxury goods. From a behavioural science perspective, consumption can be explained by the demonstration of superiority or the survival of the fittest. Let's look at the animal kingdom, for example: male birds with the most ostentatious plumage impress females the most and are most likely to mate because they show superiority over their male rivals. Some "show-off" behaviour can also be observed in us humans. Group membership and social separation from others are also influencing factors. Overall, the phenomenon of luxury consumption is very complex and multi-layered.

For example, researcher Prof. Diana Derval, who teaches at the Sorbonne Business School in Paris, found that our tendency to consume luxury goods as adults is already determined to a certain extent by hormone levels in the womb before we are even born. The more testosterone there is in the womb, the more we feel the need as adults to distinguish ourselves from others through status and consumption and thus demonstrate our superiority. Whether increased luxury consumption shows superiority over other individuals from a value-oriented point of view remains to be seen.

With regard to brain research, it has been shown that many factors have an influence on us when making purchasing decisions. Rational reasons make up a part of our decisions, but our emotions and imprints also have a very large influence on our purchase decisions. If a luxury brand succeeds in appealing to our emotions and deepest needs, this has a strong positive reinforcing effect on the purchase decision. But there is no "buy button" in the brain. Our decisions are far too complex for that and there are too many factors involved.

In the end, however, many marketers and managers of luxury hotels already make the right decisions based on their gut feeling. Those who have been working in the industry for a long time know their consumers and their needs very well. From my point of view, neuromarketing is another complementary perspective in brand management and addressing consumers. Understanding the luxury consumer's brain helps us to target consumers better - without much wastage. In the online context, the conversion rate can be increased by creating certain so-called nudges, i.e. incentives for a certain, desired behaviour. The perception of luxury brands has also changed.

For years, the marketing of luxury brands was characterised by exclusivity, rarity and a small, elite circle that could afford luxury goods. Today, this can still be observed, but what is changing is the value system behind luxury consumption. Consumers ask about the meaning of their consumption. It is no longer about mere possession. For some years now, the trend in the luxury segment has been "from having to being". At least, this is how it is often described by researchers and consultants in the luxury segment. Behind this is the need to consume experiences and create experiences and memories in addition to pure possessions. Luxury has become quieter. At least in Western European countries. In China or Russia, this may still be different.

Consumer behaviour in the luxury segment has also evolved considerably in recent years. Consumers want to see a sense in their consumption. And they want to have a clear conscience about their consumption. Production conditions, sustainability and social responsibility also play a role in consumption today. The world of luxury consumption is therefore becoming more and more complex. This makes it all the more important for luxury brands and luxury hotels to stay on track. Sometimes, due to today's increasingly complex and rapidly changing requirements, one can no longer see the wood for the trees. An understanding of the needs and the processes that take place in the brain during purchasing decisions can create great added value here.

Your master's thesis* is about the design of websites for the luxury hotel industry. However, online distribution actually established itself very late in the luxury industry - can you briefly explain why?

Online retailing was comparatively late to enter the luxury segment because for a long time, the opinion prevailed that basic pillars of luxury marketing, such as exclusivity, rarity, a limited availability and a certain touch of the unattainable, did not go hand in hand with online retailing. There was a fear of a certain demystification of the luxury good or the luxury brand. Moreover, marketing in the luxury goods industry and especially in the luxury hotel industry, which is part of the service sector, depends on personal and individual attention to the consumer. It was feared that this could not be guaranteed in an online context. In recent years, a lot has changed and luxury consumers are used to shopping online without it detracting from the brand perception - provided that the customer journey and the processes behind it work. Guests in the luxury hotel industry today often book via OTAs [Online Travel Agencies] such as booking.com.

This fact makes it difficult to differentiate luxury hotels from each other. If you think of booking.com, for example, and want to pick a hotel there, you first see small tiles showing the individual hotels. At first glance, the differentiation of the hotels from each other works through the ratings, the star category and the price.

A differentiated consumer approach, which should possibly transport the values of the hotel and address the luxury guest on a deeper level, is made more difficult by this way of presentation.

In order to differentiate oneself as a luxury hotel today and to create a customer journey that satisfies the highly demanding guest, clever omnichannel strategies are required that function via direct marketing via the hotel's own website. This also saves the hotel the commission it would have to pay to OTAs.

Based on your research, you have created concrete guidelines for the design of user interfaces of luxury hotel websites. Which aspects should be taken into account, can you give us an example?

It is difficult to summarise such a complex topic in a few words, but I would say "keep it simple". Don't overwhelm the guest. Too much information, a too complex booking section that perhaps fits wonderfully with the hotel's corporate identity but hardly stands out in terms of colour, or too many choices quickly overwhelm our brain and we lose the pleasure and joy of the customer journey. In today's fast-paced world, where we take less and less time for things and also like to make hotel bookings "on the go" from our mobile phones, it is important to have clarity. In addition, "a picture is worth a thousand words". Images and especially video material appeal more strongly to emotions. But we have to be careful not to push our capacities to the limit with too many (moving) pictures.

Even if I am travelling between Hamburg and Berlin by train and only have an "E" in network coverage, it must be possible to load a presentable booking route. Even if the luxury guest undoubtedly has very high demands in terms of design and aesthetics, it is no use dying in beauty if the usefulness is too limited. First create a functioning, intuitively operated booking route, and then think about aesthetics and design. If you want to stand out these days, you can't avoid clever omnichannel strategies. Ideally, the reception staff already know the guest's preferences through data warehousing and can respond to them individually.

Last year you started your own business, Minding Luxury. What is the idea behind that? 

I would like to specialise further in the field of consumer and neuromarketing research in the luxury segment. My aim with Minding Luxury is to dovetail science and practice and to create added value for luxury brands and the luxury hotel industry with the insights gained. Starting at the turn of the year, I would like to do a doctorate in the field of luxury consumer research in order to delve deeper into the topic and gain further insights. I will share some of my findings on my website over time.