exclusive Japanese credit card JCB “the class.”
The goal of these services is to bring customers from client companies together
with level 3 consumers from distant networks, therefore increasing social
inter-connectedness and creating added value for the consumers who are
participating. By providing events linked to their interests in the arts,
culture, and music, an atmosphere is created that does not give the image of a
direct marketing attempt. The networking among the participating level 3
consumers is now conducted within a neutral environment, as opposed to, for
example, a trade show or a brand event for obvious deliberate marketing. This
atmosphere accelerates word of mouth and, by bringing together people from
different business fields, makes the passage of information from one network to
another possible (Stroper 1997).
Ypsilon Group's goal is for the existing customers of luxury companies to
associate art exhibitions and other events with the brands of client companies,
and also to enhance their CSR activities. The manufactured image is regarded as
being cosmopolitan and sophisticated—it is not only for status. From December 2008 on, Ypsilon Group plans to expand
its services to offer client companies customized events that can be used to
invite both existing customers and level 3 consumers from its own database. By
inviting people from its own membership club, Ypsilon Group provides client
companies with access to approximately 7,000 HNWIs. This will offer an
opportunity for both customer acquisition and retention, as can be seen in
figure 3.7.
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As the people in the database are themselves customers of the personal concierge
service offered by the Ypsilon Group since 2004, not only customers of luxury
companies, the database is not tied to any specific brand or company. This
point is important, for they expect to be contacted for special services and
events as they are members by their own initiative to get exactly this kind of
attention. So the database of rich people offered has three important
characteristics: 1) it includes many famous and connected opinion leaders that
joined the database in order to get special privileges and services, 2) it is
brought into connection with arts and culture considered to be sophisticated,
and 3) any approach made to these people is not considered push but
pull-marketing. No direct marketing effort is made but companies get access to
a network of connected rich people, and get them to mingle with their own
customers. This marketing environment can now be used to start word of mouth
strategies (detailed in section 3.4) in order to enter the highest marketing
exclusivity: one-on-one communication among the rich and influential about
luxury products.
For companies in the development phase of creating membership services for their
customers, the Ypsilon Group offers its own marketing experts and furthermore
works together with KT Marketing (detailed below) and employs independent
experts that have extensive know-how and connections in the HNWI business.
AdComm
The company led by the German CEO Andreas Dannenberg offers an interesting
service for the acquisition and retention of HNWI customers with its luxury “Whitebook”, a high-class magazine that is published four times a year. It is filled with
articles by an assortment of 8-12 brands, all coming from different consumer
segments in the luxury segment, representing one company out of their field
(automotive, jewelry, travel, fashion, interior, etc.). It is not available to
the general public. Rather, it is sent to top VIP customers of each of the
participating brands, each copy being personalized with the logo as well a
letter from the president of the respective company that the customer has
acquired a product from.
The Whitebook is essentially a virtual database of selected, highly
complementary brands and their most valued customers. It offers brands a
platform to create associations and transmit images of their core values and
beliefs in a less direct manner than plain advertising, and is designed to
introduce current and potential customers of one brand to the products and
services of others. The magazine has a unit volume (depending on the databases
of participating companies) of approximately 20,000 copies. Cooperating luxury
companies in the winter 2007 issue have been: Hennessy (fine wine & spirits), Porsche (automobile), Bang & Olufsen (audio & visual), Casina (interior), Steinway & Sons (musical instruments), Lufthansa (airlines), De Beers (jewelry), and Ralph
Lauren (fashion). The magazine not only features brand stories, but original
content created by a specialized editorial team with a different theme in each
issue. Topics include the world’s finest chefs and cuisine, arts and music, as well as philanthropy, clearly
taking up the trend in luxury for “informed consumption.” (Among the articles that have appeared on page 1 of past issues are essays by
novelist Jiro Asada and other popular writers such as Natsuki Ikezawa and
Nozomu Hayashi, and an interview with ballet dancer Tetsuya Kumakawa) The
magazine has also published articles introducing people who engage in
humanitarian and CSR activities (Examples are the Association for Aid and
Relief, Japan, a nonprofit organization helping refugees, the Japan chapter of
Medecins Sans Frontieres, the Japan Guide Dog Association and other
organizations), and stories on the work of distinguished Japanese artists from
a number of fields, including sculpture and calligraphy. It further features a
password protected, closed-user group website with expanded features, as well
as a series of special co-partnered events among the participating brands.
Companies profit from the association with other strong brands and can reach
the shared customer bases of all participating brands (Events include Christmas
parties for readers of the magazine, trips to the French winery of Dom Perignon
where readers can meet the chief vintner and another to visit the head office
of Harry Winston on Fifth Avenue, in New York, to let participants see how
jewelry is made).
By not directly advocating specific products but providing information on the
brand values, the advertisement becomes a pull-approach that allows to “access the living rooms” of selected HNWIs who come from different networks.
KT Marketing
KT Marketing is a highly-specialized consulting company with specific know-how
on the HNWI market in Japan. Prominent client companies include Lexus, Jaguar,
Audi, Hummer, Mitsubishi Real Estate, Nomura Real Estate, Mitsukoshi Department
Store, Diners Club International, Citigroup, Lexus and the extremely successful
Isetan department store. It offers consulting on rich marketing and
club-marketing strategies, as well as help for the execution of respective
services. It proposes that companies who wish to expand their rich customer
group should concentrate on the consumer rich and engage in collaborations with
successful luxury companies and brands that have customers with similar
consumption patterns (KT Marketing 2008).
The “VIP project” aims at increasing the loyalty of premium customers of client companies. After
selecting premium customers who have to be cultivated, the loyalty of this
group is increased by CRM measures and loyalty programs. The “blackcard project” maximizes the lifestyle experience of selected premium credit card owners,
analyzing their consumer behavior and then constructing a membership service
with especially high conditions for admission.
By accessing customer databases of credit card companies and mileage clubs,
client companies can access HNWIs with an indirect push-approach. A cooperation
with the Ypsilon Group for the execution of concierge services further adds to
the assets of this company.
Roots and Partners
Several introduced companies have HNWI databases. The question is now what kind
of relationship does the service company have with them? It can range from
anonymous address lists (credit card companies), over customer databases that
give legitimation to establishing contact (AdComm), to HNWIs that are
themselves customers of the service company (as in the case of the private
concierge services of the Ypsilon Group). But what about personal contact? What
better legitimizing value for inviting someone could there be than to know them
directly, having met several times, maybe even done business with them?
Following the argumentation by Stanley (1997) direct contact and acquiring up
to date information on HNWIs demands exactly this kind of personal involvement.
There is simply no other way to get reliable data. Asking affluent for their
incomes does not produce accurate results, doing business with them over
several years does. As HNWIs tend to value their privacy and only trust sources
that are not directly motivated by business alone, what is needed is an
intermediary, an agent, someone who can convincingly claim independence and
objectivity. Such a person (or an agency) could invite HNWIs, preselect them
and act in the interest of both the affluent and the companies who want to do
business with them.
Exactly this is what Tatsuya Masubuchi from Roots and Partners is doing. He has
worked more than five years as the head of Seven Seas Magazine. During this
time he was involved in the execution of up to 100 events per year for a
selected audience of rich people, all of them subscribers to the magazine,
roughly 18,000 individuals. He used that time to gather personal data and to
network with those people and to select a core of approximately 6,500
individuals for a HNWI database. His main agenda is to keep the contact level
to those affluent people high, and to engage them in conversations and business
that will further deepen his understanding of their needs and business matters.
In January 2007, Roots and Partners started its own membership service and
opened the “Root Galleries” salon—a high-class hideaway overlooking the Shiodome shopping district—catering exclusively to its members. Further, Eldorado is planning to hold
various events in the salon specially for its members, including seminars and
talk shows featuring special guests, as well as vintage wine-tasting parties.
The “Root Galleries” aims to provide information and services for the benefit of an exclusive circle
of selected HNWIs, and will have the goal to act as a media function for client
companies, increasing their accessibility to networks and to buzz-marketing
(Root and Partners, company web site,
http://www.rpartners.jp/business/galleries.php). In December 2008, the "High
Net Worth Magazine" will be launched. It concentrates on qualitative contents
and editorials, and advertising space is used predominantly by companies owned
by HNWIs personally known to Masubuchi. The goal is to keep a two-way flow of
information.
Roots and Partners is currently giving management consulting and marketing
consulting to companies catering to HNWIs. It further plans to expand its
Business to Customer and Customer to Customer services by introducing companies
to individuals in need of their offerings and by also introducing rich clients
to each other. Roots and Partner's function in this process is as a mediator,
as a filter function, to ensure that the privacy of the rich clients is honored
and that they do not get the feeling of being marketed to, in short: to keep a
high marketing exclusivity. In all this, Roots and Partners wants to refrain
from any clear affiliation with any company, keeping its independence and
therefore its credibility.
Figure 3.7 completes the luxury marketing model by adding social networks and concierge
services. The small boxes represent the four companies that have been detailed
and show which kind of services they provide. Other companies predominantly
offer media channels for accessing HNWIs in Japan. These include E-marketing,
which offers Seven Hills Magazine. Whatever tactic is chosen to interact with
level 3 customers, push-approaches are only allowed after continuous
pull-approaches. After word of mouth about the brand has set in, normal
marketing barriers are broken and potential customers are ready to be targeted
directly. The focus of the next paragraph is how this word of mouth mechanism
is executed, and how the flow of information seen in figure 3.7 can be
controlled and accelerated.
There are several service providers that offer luxury companies in Japan access
to tools necessary for both customer retention and customer acquisition of HNWI
customers. Some of them are providing creative ways for accessing level 3
consumers, by increasing the marketing exclusivity of magazines, by creating
special media solely for HNWIs, or by the use of direct marketing in
cooperation with credit card companies and mileage clubs. What the companies
have in common is that they all give access to selected databases of HNWIs, and
then offer some kind of service to enhance the customer loyalty programs of
client companies. The basic goal of all of them is to change the way rich
marketing is performed: to get away from luxury marketing via normal media
channels and go to a higher level of marketing exclusivity. By excluding
customers from accessing special services, by limiting the audience and
offering preferred treatment within a specially created marketing environment,
the image of mass marketing is transformed into one-to-one marketing.
The most exclusive marketing environments, as mentioned before, are the
conversations between consumers, or word of mouth. As will be outline in
section 3.4, word of mouth marketing methods are especially suited to reach
HNWIs. In order to make full use of this marketing approach, an environment has
to be created where people with higher marketing exclusivity can meet and
exchange information. This environment is always connected to a database of
rich people—HNWIs and sometimes even ultra-HNWIs—and forms the primary asset of businesses that are presented below. The more
detailed the information on their consumer habits and lifestyles and the closer
the relationship of the service company to these rich consumers, the higher is
the value that can be offered to luxury companies that want to do business with
them. Taking care of such a database, keeping it up to date, devising creative
methods to add detail to data sets, and creating new ways to increase the size
of the database—all these are basic practices necessary in HNWI business that are often beyond
the scope of the marketing department of even the most sophisticated luxury
companies.
An important factor to consider is whether or not there are incentives for rich
people to belong to that database, meaning that once the motivation on the side
of a HNWI is lost, this specific data set is basically worthless. Just a list
of addresses with income brackets can be useful but can't be used to generate
marketing exclusivity. What the companies described below offer to luxury
companies in Japan is the exclusivity of their contact to HNWI people. As will
be seen, some offer more exclusivity and better contacts than others. To
explain figure 3.3 again, high marketing exclusivity means the access to
exclusive environments and the permission to contact people in those
environments who refrain from the lower levels of marketing exclusivity.
Furthermore, as described in section 3.1, getting contact is only one side of
luxury marketing. For customer retention, special loyalty programs have to be
executed, in order to keep the level of contact from declining, and the
customers from defecting. Let us now take a look at the companies in detail.
Abraham-Holdings and YUCASEE
Abraham-Holdings is a small company specializing in on wealth management advice
for HNWIs and consulting for companies that operate in the rich market. It
describes two points as missing in present services for the rich: they are not
accessible on the internet and do not offer the information wanted by HNWIs.
According to the company, it is a widely known fact that the information
literacy of the new rich in Japan is high, but the industry has not reacted
properly to that trend. The danger for luxury companies that offer services on
the web is a possible brand devaluation. The YUCASEE solution was developed
with those two problems in mind. It forms a social networking service (SNS)
only for HNWIs with assets more than 100 million Yen (approximately 600.000
Euros). Abraham-Holdings guarantees a strict system of invitation and checking
of possible new members (Abraham-Holdings 2007b).
YUCASEE offers an environment for HNWIs to get access to products that are
specifically keyed to their needs, meaning a mature SNS with high-class
information and advertising limited to products and offers aimed at rich
clients. By creating this environment, Abraham-Holdings separates the market
for HNWIs from the normal mass market. The solution has some limitations. By
limiting entry to only HNWIs with more than 100 Mill. Yen in assets, the
clientele does not represent the customer profile of most luxury companies, but
only consumer level 3 customers. A SNS benefits from the number of users in
order to achieve significant network effects and the number of households with
such high assets is severely limited. The main question for evaluating the
service will be the number of HNWIs that are members of YUCASEE.
Abraham-Holdings does not disclose this information due to confidentiality
issues (Interview with Takaoka Souichiro, CEO of Abraham-Holdings, Tokyo,
Kamiyacho, 01.04.2008).
Ypsilon Group
The club marketing strategy by the Ypsilon Group aims to provide high-quality
services to client companies that want to execute premium treatment (“concierge services”) for special customers. The Ypsilon Group is offering its own “amusement menu” of art, travel experiences, exclusive restaurants, music events, and concerts.
It then offers the created “amusement” to members of its own membership club or the customers of the tie-up companies.
Research executed for over five years gives Ypsilon Group a database on rich
services and a network of shops, restaurants, and businesses that is probably
the most extensive of its kind in Japan. Up to date, the Ypsilon Group is the
only company that is able to offer concierge services on such a high level to
companies in the premium market (This database is used by Diners Club Japan to
give its elite members concierge services. American Express executes its own
concierge services, attaining a quality level comparable with the one from
Ypsilon Group. Quintessentially, a company offering concierge services, based
in Great Britain, opened a subsidiary in Japan in October 2007, but is not yet
able to support an infrastructure like this). Further, taking up the trend of
art and culture within HNWI business, the “art produce” mechanism was created for the sponsoring of young artists. At present Ypsilon
Group has monthly exhibitions at headquarters, connected to a party with many
prominent guests. Companies who use these services are Diners Club, ANA,
Mistukoshi Department Store, and the
