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Luxury brands make the most of digital ad spends

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MUMBAI: Since digital advertising became mainstream, if there is one sector that saw  a sea change in its media planning, it's the luxury brands. With social media influencers, independent makeup artists, Instagramers, Youtubers and what not becoming the the new age style icons, it is not unnatural for them to call dibs in the precious ad spends.

Now that there are so many channels of communication at the brands’ disposal, the bifurcation of annual marketing is far beyond the straightforward split in print, OOH and television. Brands are exploring content branding and native advertising with partnerships with well known publishers, putting up content in brand owned platforms and of course, the social media. This shift from traditional to unconventional was drastic and needless to say, so was the change in planning for the brands.

Looking at the broader picture in the market, between 2014 and 2015 the expenditure on luxury goods advertising -- such as luxury automotive, fragrances & beauty, fashion & accessories, and watches & jewellery -- saw a major setback dipping down to 1.9 per cent growth rate in 2015, partially due to advertisers reaction to the unrest in BRICS nations, as per ZenithOptimedia's Luxury Adspend Forecast, which is a collaboration  Zenith’s Worldwide Publications Team and Zenith France

“Adspend shrank by 1.4 percent in Asia and by a massive 20.3 percent in Eastern Europe, mainly as the result of the oil crisis and rouble devaluation in Russia, but the global total was buoyed by strong growth in North America (3.6 percent) and Western Europe (4.7 percent),” read the report.

The latest 2016 report however shows a slow but positive recovery of the luxury ad spends in Asia to 2.9 percent, pulling the overall global growth in ad spends to 3 per cent.  “The decline in Eastern Europe slows to 2.8 percent. North America will stay strong, with 3.9 percent growth, but Western Europe will slip back to 1.7 percent. Overall we forecast 3.0 percent growth in luxury ad spend across our top 18 markets in 2016,” the report adds.

The 18 markets are China, Colombia, France, Germany, Hong Kong, Italy, Malaysia, Mexico, the Netherlands, Peru, Russia, Singapore, South Africa, South Korea, Spain, Taiwan, the United Kingdom and the United States of America.

 

The figures in the report however clearly point at the slow rate at which  luxury advertising is growing as opposed to all other categories.

“Across our top 18 markets, luxury advertising grew by 2.9 percent in 2014, compared to 5.6 percent for advertising as a whole, and 1.9 percent in 2015 (compared to 4.1 percent). We forecast this underperformance to continue, with luxury advertising growing 3.0 percent in 2016 compared to 4.5 percent growth across all categories,” the report further pointed out.

While many factors can be listed for the underperformance of the category, several industry experts find it unfair that luxury advertising be compared to other categories as it works on a completely different set of marketing rules.  As senior brand consultant and business strategist Harish Bijoor puts it, “True luxury is never advertised as luxury is meant to be exclusive. Therefore expect the luxury ad spends in traditional marketing mediums to grow won’t be correct. Luxury advertising is always meant to be a nano-niche of mass advertising. “

“Most luxury brands’ marketing budget should not go in their top line advertising but in below the line work. Some brands also spend a lot on direct marketing or one is to one communication with specific clients. A fair bit of money goes into all that,” Bijoor added.

Dentsu Aegis Network South Asia CEO and chairman Ashish Bhasin on the other hand sounds comparatively more optimistic of the category’s performance, especially in India. Quoting a study done by Carat, Bhasin shares, “Don’t know about Asia, but the growth of luxury brands’ ad spends in India was more than 15 per cent in the last one year as per Carat’s estimates. Moreover, retail is a very important aspect of luxury goods marketing, and as the retail situation in India improves and as the FDI mandate loosens up allowing international brands to open single owner stores in cities, the industry will see a boom.”

Regardless of the difference in perspective on the performance of the category and its contribution to the overall advertising spends, all media stakeholders unanimously agree that the category has more scope to grow with digital media, albeit in different forms.

“Digital is definitely a great medium because every consumer of luxury brand is mostly fully and completely digital; owns a smartphone, is on more than one digital device and screen, etc. Therefore targeting consumers who can afford to pay premium using digital is definitely a smart play,” shared Bhasin.

In fact, as per the current Luxury Advertising Expenditure Forecasts by ZenithOptimedia, “Digital advertising is by far the biggest contributor to the growth in luxury advertising, growing consistently at double-digit rates. We expect digital media ad spend by luxury advertisers to increase by USD 837 millon between 2015 and 2017. Over this period, television, radio and cinema will increase by a total of USD 26m between them; outdoor will shrink by USD 10million; and print will shrink by U$150 million”

Elaborating his point on below the line advertising, Bijoor too emphasised on the growing importance of digital for the sector. “Apart from digital advertising, below the line advertising on digital has proven helpful for luxury brands to grow their market, where bloggers and social influencers are handpicked to make oblique reference of the brand, or wear it themselves which leads to social media conversations and buzz around the internet.”

While mix media campaigns, promotions leveraged by social media influencers are popular amongst the Christian Diors, Guccis, Tiffanys and the Pradas of the world, not all of them are commercial deals. Meaning not all promotions are paid for by the brands  and thus doesn’t require any marketing budget allotment.

Popular online style icon Hanadi Merchant who runs the fashion blog style DesiHighstyle.com frequently gets requests from brands like Gucci, Dolce and Gabbana and more, but without any commercial deal in place. “I regularly work with Dior and Gucci, but it is not a paid thing. I do shoots for their product and talk about it in my blog and wear their accessories as well, but there is no commercial deal in place. International luxury brands don’t do such deals in India I think,” Merchant shared.

When pointed out the fact that these brands spends millions of dollars into advertising their product for the right promotion and visibility, Merchant asserted that her international counterparts do make hefty sums of money through these native advertising efforts, although ‘those bloggers are in a different league altogether.”

Merchant is also trying out a few Indian high end brands and if things work out well, she would consider a paid deal with the brands. While paid blog articles and social media influence is an ongoing concept in India, due to lack of regulation and monitoring it is hard to estimate how much money is going into these BTL advertisements. As the lines of advertising continue to blur in this market, digital would continue to grow as a preferred medium for communication for luxury brands.

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