Daniel Langer is one of the world’s most renowned experts on luxury in a digitally disrupted world and with Millennials and Gen Z. He was named one of the global "Top Five Luxury Key Opinion Leaders to Watch 2021” by Netbase Quid. He founded the luxury strategy firm Équité and is also the Executive Professor of Luxury Strategy, Disruption, and Pricing at Pepperdine University in Malibu. With his team he consults some of the world’s most admired and iconic luxury, lifestyle and consumer brands and also several luxury startups and smaller brands. Daniel is the author of several top-rated luxury management books in English and Chinese and is frequently featured in leading global media publications including Financial Times, The Economist, Forbes, New York Times, Nikkei, Luxury Daily, and Jing Daily. His education includes Harvard Business School and he holds an MBA and a Ph.D. in luxury management.
Q: When luxury brands approach you, what is keeping them up at night?
Dr. Langer: There are five trending themes that are disrupting the luxury world in a way never seen before: First, how to reach the clients in a rapidly noisier and increasingly complex world and how to acquire the necessary savoir faire. Second, how to become culturally relevant and influencing in a world where geopolitics suddenly become important. Third, how to create desirability for Gen Z. Forth, how to play to win in the metaverse. And five: how to attract and build talent and increase their intercultural knowledge and empathy. These are among the most critical topics I am discussing with the CEOs of luxury brands across all categories and all over the world.
Q: Let’s start with reaching clients. Why does this become a critical topic?
Dr. Langer: Until very recently the world of luxury was rather traditional. Relying on person-to-person interactions in boutiques, stores, events, restaurants, grand hotels, private clubs, or other exclusive venues. Advertising was straightforward and brands could focus on few channels to communicate regularly with their best clients and to create desirability. Over the last three to five years the reality changed in the most dramatic way. An ever-increasing variety of social media channels all over the world is forcing companies to completely rethink their messaging approach by platform and this includes all aspects, just think about the recent Instagram controversy. From the right channels to the right influencers to the right content. In the moment when brands understand how to play in one channel, say on Instagram, the world already changed to TikTok, requiring completely different content and messaging strategies, and the changes will Accelerando in the future at an increasingly fast pace. When you think about China, only a handful of brands is really playing to win even on WeChat, although the platform has been around for years. Most brands have massive deficits in matching the expectations of Chinese clients across different digital dimensions. This creates competitive disadvantage and opens the door for local brands to step in. And it is happening massively already.
Q: What are the consequences?
Dr. Langer: Brand storytelling was never more important than now. To convince audiences, the why has to become clear and maximum consistency in messaging is needed. In my view, very few brands are great in this today. Gucci is one of them. Louis Vuitton, too. Many others have deficits and it shows in the increasing distance between the leading brands and the others. On top, in practically every product category new brands emerge almost daily. Take the hospitality industry as an example. Every day at least one hotel opens worldwide, on many days 5, sometimes 10. The number of hotels that close is almost zero. This means that even at the top end of the luxury sector competition is heating up like never before. And only the brands with a differentiated, relevant, and actionable message will have a chance to survive and to win. Importantly, the brand experience has to be a consistent expression of the underlying story. I am asking you: how often do you experience that? Probably your answer will be: almost never. But for luxury to create extreme value, the experience has to follow a detailed script in order to be exceptional and magical. Magic does not happen by chance. 90% of brands today have storytelling deficits in my point of view, many of them in a massive way. This is where action needs to start. Because without clarity of messaging all brand activities will confuse and - over time - destroy brand equity.
Q: Let’s talk about cultural relevance. What do you mean by that.
Dr. Langer: For people, especially Gen Z, to desire a brand, it needs to become a cultural influencer. Hence, when we think about a brand today, we must strategize on how to be influential. This goes far beyond craftsmanship and great products. Both are necessary, but they don’t make you win the new game of luxury. To be culturally relevant requires a deep understanding and sensitivity of the context in real-time and world-wide. The tools exist that enable that, but few brands use them. And relying on old-fashioned market research that does not allow moving in real-time prevents many brands from being influential. Once they identify what is trending, the audience already moved on. And the speed will increase exponentially with the emergence of the metaverse. Another critical aspect is geopolitics. As tensions between the West and China increase and the war between Russia and Ukraine is a sad reality, brands cannot rely anymore on markets that are safe. Brands that put all eggs into one basket, say becoming overdependent on China, have put themselves into a high risk scenario and will need to think of a Plan B. And cases of consumer backlash will increase as people all over the world start preferring increasingly their own culture and local brands. All of this adds complexity to the new game of luxury that only very few players master.
Q: You mentioned Gen Z. Why do you keep pushing for brands to focus on them although they are not yet the most important consumer group?
Dr. Langer: If a brand today does not overindex with Gen Z, the future is at risk. Gen Zers are today already the most influential consumer group for luxury brands. By 2030, according to our research, Gen Z will be the largest client group in luxury. Since brand preferences form early, brands have no time to waste. A healthy share of Gen Z revenue for a brand in the Western world should surpass 15-20% today, in China 25%. If your revenue with Gen Z is lower, you may already have a relevance problem. And convincing Gen Z is dramatically more difficult versus older clients. Your youngest clients are more discerning and they may not fit any stereotype. They scrutinize more and they expect brands to be inclusive, diverse, and socially and ecologically sound. Lip service does not work for a generation that is digitally native and fact-checks on the go. Many legacy brands will not survive the transition to Gen Z, it’s already clear today.
Q: Let’s talk about the metaverse. Is it a hype or is it real?
Dr. Langer: As we speak, Web3 is already changing the way the internet works. What most managers underestimate is that the Web3 is a closed internet, not the open Web2 internet that we are used to today. It will be pay to play not just for brands but also for users. This will lead to a significant segmentation and massive increase in complexity in reaching clients digitally. The metaverse, part of Web3, is the more immersive iteration of the internet. More immersive means that people will spend more time in the metaverse and they will expect content that is incredibly engaging, far beyond what brands need to do today. The implications are massive. It will require even more precision in brand story execution and the bar will rise disproportionately. Today I see too many metaverse projects that are labeled “experimental” within companies. The hope is that they generate hype. And many brands underestimate the risks for brand equity. Pricing in the metaverse is complex and little understood by many managers. The combination of tokens for payment and auction platforms inflates the willingness-to-pay short-term which will lead to market and value corrections for NFTs that are not backed by real-world assets or don’t have a unique story. While brands “experiment” they actually gamble their future if their digital assets collapse in value and signal to they digitally savvy Gen Z audiences an inability to create value digitally. These are the challenges brands already face today.
Q: Do you see a lot of convincing metaverse projects?
Dr. Langer: I recently had a presentation at a crypto and NFT conference in London and led metaverse masterclasses in New York, Paris, and Monaco. My take is that the vast majority of metaverse projects today address the wrong issues, don’t create any client value, or lack in clarity of execution. To create a game that no one plays may trighger some short-term hype and please internally, but projects like these just waste time and money that companies need to strategize how the metaverse will impact their business model. I am not saying not to do a NFT project, but when you do it, do it right. It needs to be innovative, inspiring, and intentional. And it needs to be on strategy. Importantly, you need to reach your audience. Most projects we audit don’t match these criteria. And this is playing with fire. You will get burned.
Q: Let’s talk about talent. Why is it keeping companies up at night
Dr. Langer: In the entire luxury industry there is a massive talent shortage. As more and more players enter the market, they need people who deeply understand luxury and yet are able to think disruptively. This combination is hard to find. Most business schools focus on mass market marketing strategies, very few like Pepperdine put full focus on building future leaders in the luxury space with a critical mindset, trained to change the status quo of the industry paired with a strong cultural sensitivity. Understanding cross-cultural differences, embracing them, and developing empathy are to me among the most important skills of the luxury leaders of the future. As I am doing many luxury and cultural trainings at luxury brands I can see that the lack of understanding of these critical aspects sets brands back significantly because the teams across countries and regions have misunderstandings and don’t know how to make global content regionally relevant and inspiring. On top of this, there is a shortage of personnel in the service area in practically all areas from retail to hospitality. This impacts the client service and costs brands not just short-term business but also brand equity due to sub-par service experiences.
Q: What do you recommend brands to do to be future ready?
Dr. Langer: Be brutally honest and identify your gaps. Build capabilities to address these five areas. As you can see, they are strongly interconnected. It starts with the brand story and this story needs to be delivered through social channels, content, the metaverse, initiatives, whether digital or physical, and through the service experience. Luxury has no room for errors. if better is possible, good is not enough. Importantly, don’t waste time with projects that don’t create value. They will haunt you. Instead, obsess with how you can create extreme value for your clients on all aspects of the experience. And ensure that your teams are exposed to the latest insights into managing luxury. The industry is changing faster than ever before and old strategies will not work in the new game of being a cultural influencer.
Thank you!
