Use Behavioral Economics and Distinctive Packaging to Court Luxury Shoppers
How to persuade a new generation of shoppers with disposable income.
When the term “luxury shopper” is mentioned, several stereotypical images may come to mind: Perhaps a well-dressed woman looking at Prada handbags or a distinguished gentleman wearing a Rolex watch.
But today’s luxury shopper is just as likely to be a young Chinese woman in Seoul’s Incheon or London’s Heathrow airport looking for bargains at Duty Free before she catches a flight home. Or the shopper may be a newly-retired Baby Boomer searching for a gift online at Nordstrom.com.
In fact, this market for beauty, spirits and fashion continues to grow impressively and change rapidly via the impact of e-commerce and social media. Given these dynamics, PRS IN VIVO recently conducted several studies to better understand the shopping experience across luxury categories. We’ve explored the planning process for luxury purchases via social media—and used eye-tracking to document shopping trips at Duty Free stores. In this article, we’ll share some of what we’ve seen and learned, along with best practices for driving success.
The Luxury Mindset
Marketers often have the tendency to think in terms of shopper profiles such as demographics and psychographics and perhaps retail channels or trip missions. But in our experience, it is more helpful to start with the mindset that people bring to their purchases. Specifically, we can begin with a relatively universal, foundational insight: “Luxury shopping is less habitual—and far more emotional and experiential—than shopping for packaged goods or grocery products.”
Whether splurging on herself or buying a gift, the prestige shopper is typically less focused on rational considerations (features, benefits, price/value, etc.), and is more driven by less tangible elements, which often center on emotion (how an item makes them feel) and social context (how it will be perceived by others).
Clearly, this luxury mindset presents an opportunity to persuade shoppers via branding, packaging and in-store experience. However, it also requires an understanding of the irrational, often subconscious factors that impact decision making. These “Drivers of Influence” are rooted in behavioral economics research by Professors Daniel Kahneman, Dan Arielly and others, and they are particularly powerful in this shopping context:
- We’ve continually observed the power of “scarcity bias.” Whether it is Japanese whiskey or French perfume, whenever specific products are presented as “limited editions,” demand soars. People are somewhat irrationally drawn toward items that may soon be unavailable. For example, Urban Decay’s new Naked Heat eye shadow palette recently sold out in 13 hours, partially due to its marketing as a limited edition.
- We’ve also noted the power of “Anchoring” and “Framing.” In categories that are shopped infrequently, many people don’t have a normal price point (i.e. a point-of-reference or anchor) firmly in mind. Thus, the manner in which choices are framed can significantly impact their perceptions and selections. Specifically, we know that many shoppers gravitate toward the middle option. So while a super premium item may not sell many units, it can still be valuable in framing a product line—and ultimately leading people to the next highest option.
Leveraging these drivers of influence is critical to developing a distinctive packaging and retail presentation. If marketers can begin by identifying specific, desired shopper behaviors such as promoting trade-up, incremental purchases, etc., and relevant drivers, they are less likely to fall into the trap of creating somewhat generic—and easily ignored—displays.
Three Contextual Hurdles
Luxury marketers also face a more complex shopping and usage context. Specifically, we’d point to three factors that have direct implications for packaging design:
- The Diversity of Retail Environments. Luxury packaging needs to work in a wide range of contexts, from bars to salons and department stores. Moreover, it is often displayed via a combination of primary and secondary packaging, so both forms need to break through clutter and drive immediate brand recognition and differentiation from competitors.
- The Role of Displays. Luxury packages often appear within in-store displays, which can be extremely distracting. Ideally, these vehicles should complement each other, with the display conveying very visceral or aspirational imagery (escape, indulgence, pampering, etc.)—perhaps tied more closely to advertising—that is difficult to convey on-pack. However, we often encounter packs that are unquestionably beautiful in isolation yet nearly invisible in the midst of a complex display.
- The Importance of the Opening and Usage Experience. The second moment of truth (SMOT) is crucial for prestige items. This begins with opening of the package—which is particularly important in a gifting context—and runs all the way through product usage and storage in the home. To justify its high price point, the package needs to reinforce premium imagery and repeatedly delight users via its shape, form and texture. Often, this comes from appealing to multiple senses. For example, the unique the closing click sound of Chanel reinforces premium imagery and helps distinguish the brand from lower-cost competitors.
Taken collectively, these three factors place a heavy set of demands upon luxury packaging. And while there are notable success stories, we’ve found that many packs fail to effectively represent their brands in-store—or to delight users in the in-home.
The Semiotics of Luxury
The primary semiotic or symbolic cues associated with luxury or prestige products are well-established. These design strategies include:
- Unique colors, shapes and structures, which often convey elegance
- Special techniques and finishes, which speak to multiple senses (tactile, olfactive, etc.)
- Design simplicity, which typically translates to style and sophistication
These symbolic cues are generally effective in connecting with consumers on an emotional and experiential level. However, these approaches are also ubiquitous. They have become a cost of entry, which makes it quite challenging to apply these cues in a truly differentiated way.
Enormous resources and creative thought have been applied to this challenge. And in fact, many brands have succeeded in creating truly distinctive, recognizable and “ownable” identities (Tiffany’s blue, Grey Goose’s unique bottle, MAC’s bold appearance, etc.).
Yet by focusing on brand identity, marketers often sacrifice shop-ability. Luxury packaging often errs on the side of visual consistency, which leads to shelves of very similar-looking packs, with minimal claims/copy to differentiate them. This is problematic in more complex categories such as skin care, in which there’s a need to convey specific product features, benefits and usage situations. And across all categories, uniformity makes it difficult to drive trade-up. If all of the packs look equally elegant and sophisticated, why should I pay $20 more for this one?
Best Practices to Drive Success
Recognizing these challenges leads us to an obvious question: What can luxury brands do to help ensure packaging and retail success? Of course, we can’t offer simple answers or common formulas. However, adopting consistent best practices rooted in the shopping experience can be valuable in providing direction, inspiring creativity and ultimately driving success.
- Start with the shopper and shopping context. Many design briefs focus almost entirely on the brand positioning, with barely a mention of the shopper and shopping context. In our experience, it is important to outline several typical shopper missions and desired behaviors as well as to visually document a range of store environments so that designers understand challenges—such as poor lighting, inconsistent shelving and distracting displays—and design for the worst case scenario in store.
- Screen new concepts on shelf. Once concepts are developed, it is important to place them within a realistic shopping scenario, for both consumer research and internal review. This should happen from the earliest stages of development, and it should go beyond viewing a pack next to two or three primary competitors. This context will ensure that marketers and designers are thinking in terms of how a new product or design system impacts the overall shop-ability of the brand.
- Think and test holistically. Many companies conduct packaging and product research, packaging graphics and functionality research on separate, parallel tracks. While this separation may be necessary at early stages, given the cost of making functional prototypes, it can lead to disconnects between expectations and delivery that disappoint consumers.
Before investing significantly in launches, it is best to conduct studies that fully replicate the full experience, from shopping (FMOT) through opening and usage (SMOT). Tied to this, it is advisable to studies in-person with physical packs, given the importance of texture and tactile feel. While it is tempting to conduct cheaper web-based studies, packaging studies are only as valid as the stimuli shown to consumers.