Winning Back the Ultra-Rich

The luxury slowdown can be attributed to several factors, such as the commercialization of luxury brands, lack of product innovation, sharp price increases, and questionable product quality. According to Business of Fashion and McKinsey’s report on the state of luxury, one-third of luxury customers feel in-store experiences have worsened in 2024. Not only have aspirational luxury customers become increasingly skeptical of post-pandemic price increases, but they feel let down when these price hikes are not reflected in the experience or quality, causing them to gravitate toward more affordable alternatives. Ultra-High-Net-Worth Individuals (UHNWIs), on the other hand, are less sensitive to price increases but have evolved significantly in their expectations. This elite group, who indulged in revenge retail post-COVID, has begun to experience diminishing returns from additional purchases and come to expect more from luxury experiences, often describing them as transactional and predictable. This critical client base represents approximately 20% of a brand's customers and contributes up to 70-80% of sales revenue. To drive growth in 2025, luxury brands must address the gaps in service and reimagine their offerings to cater specifically to this ultra-rich segment.

What Do the Ultra-Rich Want?

Studies reveal that many ultra-rich customers feel undervalued by luxury brands. The purchase of luxury goods has become functional rather than experiential, which fails to provide the long-term emotional fulfilment these clients seek. This dissatisfaction is driving UHNWIs to prioritize hospitality and travel over retail experiences, as these industries are far better equipped to pamper, engage, and care for them. The shift from product-centricity to customer-centricity has been a slow struggle for most luxury retail brands, providing historically service-oriented industries like hospitality, travel and leisure a competitive advantage.

I can personally relate to this phenomenon when I reflect on my personal consumption choices in 2024. On my birthday, I forfeited a tangible gift to splurge on a Michelin-star dining experience followed by an evening at the Dubai Opera. For my husband’s birthday, I was more than willing to replace his overused backpack with a nice bag, but he chose a luxury spa experience followed by an indulgent brunch. Even as an occasional consumer of luxury goods, I recognize these experiences provided me with much more value. Firstly, we felt a plethora of positive emotions that lasted for hours during and after the experience, in the form of beautiful memories, photographs, and anecdotes to share with others. The service itself was reliable and impeccable, with dedicated managers making us feel like our emotional well-being was their top priority. We also felt part of a very exclusive community of privileged individuals heightened by the excitement of seeing and being seen. In comparison, a retail transaction would have offered the fleeting joy of acquisition.

We all understand theoretically that luxury retail goes hand in hand with a stellar customer experience, and we want to believe that very important clients (VICs) receive red carpet treatment. However, a study by BCG emphasizes that VICs, many of whom are UHNWIs, often feel misunderstood by luxury brands, with only 20% feeling recognized as VICs. "I received special treatment in my reference boutique, but abroad I had to queue to get into the shop." "In eight months, I haven't received an email from a label I've spent a lot of money with, so I won't be going there again," are comments reported by VICs in the BCG report. In summary, the ultra-rich want to feel valued through emotionally engaging experiences.

How Can Brands Retain Ultra-Rich Customers?

While luxury brands certainly have VIC strategies in place, there are gaps and opportunities for them to retain this significant customer category. Here’s what these discerning clients are looking for:

1. Hyper-Personalization: Ultra-rich customers are no longer impressed by the generic luxury store experience and one-for-all marketing communication. They expect hyper-personalization in the form of tailored recommendations, relevant marketing messages, and the ability to customize products.

2. Immediate Access: Top customers expect to be catered to on demand, whether it’s access to products, their dedicated relationship manager, or immediate in-store welcomes.

3. Feeling of Exclusivity: The democratization of luxury, while profitable in the short term, has diluted its exclusivity. Brands like Hermès and Brunello Cucinelli maintain aspiration in 2024 through exclusive products and experiences, such as inviting customers to the designer’s home.

4. Sense of Belonging: UHNWIs want to feel part of an exclusive community and be recognized globally. Strong omnichannel CRM systems and unattainable events can achieve globaly consistency in a brand's experience.

5. Genuine Human Touch: Most VICs say they will follow their dedicated relationship advisor if they move to another brand. Luxury customers often complain that sales advisors lack essential skills such as brand knowledge and empathy. It’s crucial for luxury brands to hire talent with strong people skills and retain them to offer customers a consistent experience. This aspect is undeniably the most critical in the UHNWI’s world.

Luxury brands must align their strategies to the evolving expectations of their ultra-rich clientele by addressing gaps in personalization, access, and emotional connection. Service design as a method always quick design and implementation of customer persona specific strategies. A deep understanding of different types of UHNWI personas is a great place to start designing effective customer journeys to build lasting loyalty and ensure that their most valuable customers remain engaged.