Luxury brands have been particularly reticent to wade into digital advertising. Now, they are slowly coming around, thanks in part to a push in digital marketing in the hospitality and lifestyle category.
Companies across all sectors of the luxury market are expected to increase digital advertising spend to a collective 33 percent of total budget allocations, up from 30 percent in 2017, according to Zenith’s 2018 Luxury Advertising Expenditure Forecast. Taking a closer look at the breakdown within the sector, hospitality leads the way with highest expected spend, followed by automobile, jewelry, beauty and fashion. This was the first year Zenith included the category of hospitality — which encompasses high-end hotels, restaurants, bars and clubs — a nod to the expanding definition of luxury and its prominence in digital marketing.
“After a relatively slow start, luxury advertisers are now committing to the digital future, led by luxury hospitality brands,” Jonathan Barnard, Zenith’s head of forecasting wrote in the report. “Luxury brands face unique challenges online, such as the need to maintain exclusive brand values while communicating with potential customers at scale. By using personalized digital communications and high-quality e-commerce experiences, luxury brands can generate new sales while preserving their exclusive appeal.”
Data courtesy of Zenith
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Relatedly, a Bain and Company examination of luxury sales in the last quarter of 2017 found that luxury experiences and lifestyle categories were a rapidly growing area of interest, informing advertising strategy. For example, high-end food and wine increased by 6 percent from the same period in 2016, and categories like luxury cruises increased by 14 percent. The report contributed the rise to a growing portion of the market that is fueled by millennial and Gen-Z shoppers, whom studies show tend to value experiences over material things.
“A broader ‘millennial state of mind’ is permeating the luxury industry and changing the purchasing habits of all generations. This shift in mindset is pushing luxury brands to redefine what they deliver to customers and how they deliver it,” the study stated.
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Among the biggest projected changes leading into the rest of 2018 is the particular ways luxury brands are expected to advertise. While print advertising long reigned supreme for luxury companies hoping to get in the hands of Vogue readers, brands across all categories are increasingly cutting their print budgets and moving to digital.
“Luxury brands have historically been skeptical of the value of the digital environment for conveying their brand values, with its limited ad formats, crowded pages and often poor-quality content. However, the environment has been improved by better ad formats and more high-quality content,” the Zenith report stated.
Data courtesy of Zenith
That said, luxury brands are still lagging behind everyone else.
Data courtesy of Zenith
The two biggest markets for luxury advertising are the United States and China, which together comprise 61 percent of advertising spend across the 23 countries examined by Zenith. The report notes China is expected to have the most rapid growth in the coming years, buoyed by the growth of luxury e-commerce platforms like Tmall and the growing popularity of Singles Day, rising from 53 percent in 2017 to an anticipated 68 percent in 2019.
