The Luxury Institute forecasts 2007 Luxury Marketing Trends.

1.) Hola Amigos! Luxury Discovers Minorities and Specializes Marketing and Production in Response

Innovative luxury goods and services firms are finally beginning to realize that African-Americans, Hispanic-Americans, and Asian-Americans are emerging in large numbers to form potent and profitable demographic segments of the wealthy consumer population. While wealthy actors, athletes, and entertainers from minority groups are the most conspicuous consumers of luxury goods (think Jay-Z and Cristal champagne), smart luxury purveyors understand that most rich minorities are actually conservative entrepreneurs, executives and professionals.

These wealthy “minorities” are new money, desiring to consume and experience top luxury brands – and they expect genuinely friendly customer service. The really smart luxury players will not only embrace conservative, wealthy minority consumers on their own terms, but will begin to tap their authentic (not stereotyped) cultural roots for new product and service lines that will generate loyalty, affinity, and profits. Many initiatives geared toward minority segments are bound to have crossover appeal among mainstream wealthy and international consumers, as well.

Look for 2007 to be the start of this trend toward cultural luxury marketing, particularly as the top luxury brands finally learn to segment their customers more surgically. The top luxury firms will grasp that a bit of outreach to wealthy minorities, in terms of product design and customization – such as, perhaps, an Armani wardrobe branded “Brazil” or “Mexico” – will catch on as legitimate fashion trends in their own right. These product offerings will drive sales globally in these countries, and in the U.S., where ethnically inspired luxury goods and services will deliver dramatically higher sales and profits to companies that do it right.

2.) The Luxury Access Revolution, Phase Two – Darwinism at its Best

A few years ago, the Luxury Institute was the first to predict the advent of the “Luxury Access Revolution,” an accelerating phenomenon at every price point on the luxury-spending spectrum. From early large assets like jets, yachts, vacation homes, autos, vineyards, and golf courses, the newest entrants are less pricey items such as handbags, jewelry, watches, etc. Perhaps the latest wave is more like Netflix and less like Nordstrom for the moment, but membership-based access programs are breaking new ground in giving access to pure experiences – selling utility without the hassles of ownership.

We also predicted that brash entrepreneurs would drive the first phase of innovation, but, as happens historically, they were eventually overrun by bigger, better-capitalized, established luxury brands. In 2007, we will see many of the entrepreneurial providers of these membership models merge, consolidate, or disappear, due to lack of resources, flawed business models, or worse.

Next, in the third phase, established providers and original equipment manufacturers take over, leveraging their trusted brands, synergistic offerings, and vast resources to legitimize these access models for the mainstream affluent and wealthy.

3.) “Diffusionals” are Delusional

The true luxury fashion brands that want to retain their “luxury” status in the minds of wealthy consumers will retreat from – or avoid all together – leveraging their prestigious names to launch low-margin “second-tier” lines – so-called “diffusionals.” Uniqueness and exclusivity are qualities that wealthy individuals rate highly when weighing a purchase decision.

Luxury firms cannot afford to squander their brand equity pursuing a move down-market. It’s delusional to think that luxury firms can make such a move without losing their luxury standing among their best customers – wealthy consumers. None of these “diffusional” brands can compete with the business model of Gallicia’s Inditex Group, the company behind Zara’s rapid fashion cycle and quick adaptations to meet changing customer demands quickly. Another best practitioner who’s hard to beat is Sweden’s H&M (Hennes & Mauritz AB).

True luxury brands will realize that the sub-optimal economics are definitely not worth the risk of sacrificing their high-margin business for the thinly profitable move to less prestigious offerings.

4.) “New Alms Race” Heats Up, Transforming the Philanthropy Industry

Gates and Buffet, Gates and Clinton, Clinton and Branson – just a few permutations of the numerous philanthropic cross-pollinations going on around the globe. Many new philanthropic “conglomerates” are forming and these new charitable entities will completely shake up and transform the world of philanthropy.

The titans of business and politics are taking over charitable institutions, making these not just hobbies, but second careers where they remain relevant by raising money. This trend will uproot the traditional model of charitable giving in three ways. First, these entrepreneurial business giants – including ex-politicians – are creating mega-brands that will carry their family names and legacies on for generations to come, creating brand equity and credibility to attract an accelerating flow of dollars from the coffers of their wealthiest donors. Second, these mega-brands will bring in best-in-class professional managers from other industries to run these new colossal entities; and third, they will demand – and receive – measurable efficiency and effectiveness improvements. Think of Frederick Winslow Taylor meets Frederick Douglass! This drive toward efficiency in philanthropy will create a hyper-competitive landscape in the normally staid domain of philanthropy. The upside is that many of the inefficient charities – along with their incompetent executives – will have to deal with market forces, or risk losing out on donations to the operators who deliver better charitable value. Fortunately, the poor and destitute across the globe will be the ultimate winners.

5.) Luxury Competes on Technological Prowess that Enhances brand Appeal

Many luxury brands are starting to look tired and old-fashioned due to lack of investment. There is no excuse after the recent luxury boom. Stay at some of the world’s finest luxury hotels, test drive the foremost luxury automobiles, buy a new pair of shoes from the best craftsmen, and you will find old, tired brands that need major reinvestment in facilities, models and products.

Today, luxury brands must deliver the most up-to-date technology, modern design, all with the greatest of comfort and style. Look for the best hotels to upgrade to high-definition, flat-screen TVs, get rid of bulky furniture, dramatically upgrade bathrooms. Look for upstart ultra-luxury cars that use technology and comfort to burnish their brands to replace tired brands that do not keep up. Service providers, such as wealth managers, need to stay on top of their technology upgrades to provide the best of security and convenience to their tech-savvy wealthy customer base.

Even if the economy turns down in 2007, the best luxury brands will invest in new systems and business models to remain competitive.

6.) Luxury Communities and Services Spring Up Online

The celebrated sites of “Web 2.0” – MySpace, Yelp, Facebook and YouTube –
among them – are for the young and restless (and careless) who have nothing to lose. In 2007, Internet entrepreneurs will discover that mature, affluent and wealthy consumers are more tech-savvy and more valuable customers than low-end browsers.

Look for a new wave of online peer-to-peer style affinity communities that cater to wealthy consumers to sweep across cyberspace. Many of these models will be subscription and membership-based –essentially online, commercial-free “gated” communities.

Publishers and entertainment firms will compete increasingly on a number of non-traditional media platforms. The emphasis will continue to shift from traditional media such as broadcast television and print magazines to emerging venues for reaching the viewer or reader – online communities, video-on-demand, and even satellite radio. Some will deliver far better traditional luxury services for less. They will challenge the old guard of luxury in ways that will flatten major players who fail to adapt.

7.) Luxury Discovers the Science of Customer Experience

Luxury firms should have been among the first to use sophisticated technological and analytical tools to surgically target and customize offers for their clients. So far, however, most luxury goods and services firms get an “F” in CRM. A shocking number even fail to execute on easy lay-ups such as a well-targeted and measured referral program. It doesn’t help that most firms lack strong marketing departments and even appropriately skilled quantitative and analytical staff on hand to create such programs.

Having understood the power of optimizing customer experience in the creative and artistic sense, luxury marketers will begin to develop the personnel, analytics, and data management skills, as well as the testing and learning methodologies, required to operate a highly adaptive, customized marketing and selling operation – akin to the prowess shown by companies like Capital One and Harrah’s, at segmenting their customer base and implementing highly-targeted marketing efforts. It will be a very difficult transformation to this level of business intelligence, but it will happen with quickening frequency in 2007.

For more information at http://www.LuxuryInstitute.com