Many luxury-good sellers aren’t feeling the same pressure to cut marketing budgets that has hit other categories in recent months, thanks to a booming market for luxury cars, travel packages and other premium products.
Luxury brands are benefiting from pandemic-era growth in the net worth of the wealthiest consumers, along with the emergence of millennial millionaires and a rise in so-called revenge spending, or consumers spending more than they ordinarily would as they emerge from the pandemic.
Global luxury goods revenue will increase from $309.6 billion last year to $349.1 billion in 2022, according to market-research firm Statista Ltd., en route to $419 billion in 2027.
“At the high end, life is good and demand is robust,” said brand consultant Simon Sproule, who formerly held top marketing and communications roles at
Tesla Inc.
and
Aston Martin Lagonda Global Holdings
PLC.
“‘As wealth rises, people tend to accumulate higher-end experiences as they go.’”
Businesses ranging from social-media firm
Meta Platforms Inc.
to publishing conglomerate
Gannett Co.
Inc. have seen their earnings clipped in recent months as overall ad spending softened.
Some formerly red-hot startups have cut both head counts and marketing budgets, while big spenders in sports betting and cryptocurrencies have had to recalibrate their outlays.
Luxury marketers are making different calculations.
Most luxury brands could theoretically stop marketing since they can’t produce goods fast enough to meet current demand, but smart marketers are spending more to build long-term equity, Mr. Sproule said.
Luxury brands’ marketing budgets were much higher in 2022 than in 2021 and show no sign of slowing as 2023 planning begins, according to Julie Michael, chief executive of
Publicis Groupe SA
advertising agency Team One, which specializes in working with luxury brands such as
Toyota Motor Corp.’s
Lexus and
Marriott International Inc.
St. Michelle Wine Estates Ltd. has increased its marketing budget by 15% year-over-year, driven by increasing demand for premium varieties, said Chief Growth Officer Toby Whitmoyer. “Lower-value wine is in decline, while the $15-plus price category is showing growth,” he said.
Marriott has boosted 2022 marketing budgets for high-end names including the Ritz-Carlton and St. Regis, similarly motivated by increased demand for high-end hotels, said Chris Gabaldon, senior vice president of luxury brands at the hotel chain.
“As wealth rises, people tend to accumulate higher-end experiences as they go,” Mr. Gabaldon said.
And Four Seasons Hotels Ltd.’s paid media budget will increase 300% year-over-year in 2022, according to
Marc Speichert,
the luxury hospitality chain’s executive vice president and chief commercial officer.
Four Seasons in August began an ad campaign themed “Luxury Is Our Love Language,” which it said will be the most expensive in the company’s sixty-plus-year history. Ads depict scenes that Four Seasons said are based on real-world examples of high-profile guests being catered to by hotel employees, such as an executive who receives bathrobes, lattes and steaks branded with his signature monogram.
The decision to base the campaign around individual guests’ experiences was informed by Four Seasons’ work over the past year-plus expanding its internal data analytics capabilities and developing profiles of some two million guests, in part to better target the high earners who provide a disproportionate share of the company’s revenue, Mr. Speichert said.
“I have their email; I have their address; we have a profile. The minute they walk into the door, I know that these are the guests that I should be paying particular attention to,” he said.
Some brands are going to great lengths to reach the jet set with events.
Electric-vehicle maker Lucid Group Inc. just began a city-by-city “Dream Ahead” tour where people who have reserved but not yet purchased cars—along with other interested parties like reporters or Lucid email subscribers—can test-drive its high-price cars.
“There’s no filtering, it’s direct-to-consumer, and we think that’s how consumers want to hear from luxury brands,” said Jeff Curry, vice president of marketing, communications and product, in describing Lucid’s marketing strategy.
About 300 people who preordered the $300,000 Aston Martin 2022 V12 Vantage sports car attended dinner at the company’s main factory in May.
Photo:
Aston Martin Lagonda Global Holdings PLC
In May, around 300 people who had preordered limited edition Aston Martin 2022 V12 Vantage sports cars traveled from as far away as Australia to attend a black-tie dinner inside the auto maker’s main factory in Warwickshire, England, where they saw the cars unveiled on the same floor where they were assembled, according to a company spokesman. The models retail for approximately $300,000.
Executives said these events for existing customers and even paid events double as marketing functions, because they have the potential to raise luxury brands’ profiles among wealthy consumers.
Later this month, Four Seasons will launch a program in which a small number of guests take a weeklong drive through the Tuscan countryside in the luxury sports car of their choice. All parts of the trip, such as visits to exclusive venues and interactions with area chefs, are curated by the chain, with a price beginning at around $35,000 per guest.
Four Seasons also expanded its 24-day, international private jet experience program, with the least expensive “around the world” trips starting at $190,000 per person. Mr. Speichert said the program is 90% sold out through the end of 2023, with the company currently selling tickets for 2024.
A number of brands attracted by the luxury sector’s profit margins have also begun attempting to move into the category, leading some more established luxury names to try to move even higher up the ladder, said Mr. Sproule, the consultant.
Last year, Aston Martin began describing itself as “ultra-luxury,” and in July it launched a rebranding campaign to emphasize the exclusivity of its products, said Renato Bisignani, head of global marketing and communications.
It has moved money away from outdoor display ads, as well as mass-market gatherings that aren’t targeted to ultra-high-worth individuals, Mr. Bisignani said.
“Luxury is probably one of the most abused terms in the industry right now,” he said.
Write to Patrick Coffee at [email protected]
Corrections & Amplifications
Julie Michael is chief executive of advertising agency Team One. An earlier version of this article misspelled her last name as Michaels. Separately, Aston Martin held a black-tie dinner for people who purchased the 2022 edition of its V12 Vantage sports car. An earlier version of this article incorrectly said it was the 2023 edition. (Corrected on Sept. 15)
Copyright ©2022 Dow Jones & Company, Inc. All Rights Reserved. 87990cbe856818d5eddac44c7b1cdeb8
