Marketing luxury advice

Private wealth caters to high net worth individuals, who are also consumers of luxury goods and services. So is private wealth/banking a luxury service? Does the private wealth industry use luxury marketing techniques and do they work? We explore.

Defining luxury services

Defining luxury services should be easy – ‘turns out it’s not. Apparently, the academic literature on luxury focuses on luxury goods rather than on services. And the literature on services leaves out the luxury segment. So ‘luxury services’ are an emerging area of research.

Defining luxury itself is hard. The history of luxury has evolved along two main approaches – the French approach based on ‘distinctive’ and the American approach based on ‘conspicuous’ according to a recent book by marketing professor Dr Wided Batat. These two approaches explain the motivations that drive individuals to purchase and consume luxury. 

Most of the academic literature focuses on a relatively narrow set of dimensions including high product quality, a high price, exclusivity and positive customer emotions. Applying these definitions and mostly hospitality services examples to the broader luxury services is hard though. For example, people may signal their conspicuous consumption by turning up in the latest model of BMW, but signaling a luxury holiday in Bali may involve not just walking around in a conspicuously bronzed skin but actually posting pictures on social media. Services require proactive communications and storytelling i.e. bragging whereas goods can simply be used such that others can see them. This means that conspicuous consumption may be of lower relevance.

A recent paper by Wirtz, Holmavist and Fritze defined ‘luxury services’ as extraordinary, hedonic experiences that are exclusive. Exclusivity can be monetary, social and hedonic in nature. Luxuriousness is jointly determined by objective service features and subjective customer perceptions. Together, these characteristics place a service on a continuum, ranging from everyday luxury to elite luxury.’

The authors explained that services can create exclusivity through – 

  • Monetary exclusivity – difficult to afford
  • Social exclusivity – difficult to gain access to through high levels of access control
  • Hedonic exclusivity – difficult to enjoy as a certain level of customer knowledge, sophistication and skills may be required to fully appreciate and enjoy the finer details and intricacies of the multi-faceted dimensions of a luxury service experience

The paper further explains that services can be exclusive on an objective basis i.e. being truly rare, or subjective for an individual. What is luxury to one person may not be to another. The ‘extraordinary hedonistic consumptions experiences’ can be – 

  • People processing – spa or hair styling 
  • Mental stimulus processing – entertainment
  • Possession processing – pet grooming
  • Information processing – private banking

The authors placed private banking as an ‘information processing’ service’ that also involved ‘supplementary services’ that provided a luxury experience that had to ‘ooze luxury’ when providing the information or taking orders. For example, providing high net worth financial services may involve the gamut from dining and wining, exclusive talks, gifts and luxury meeting rooms.

The continuum is on both the service characteristics and the consumer behaviour and perception – 

Speaking about the attitudes of the Indian wealthy, Priya Roopani, a luxury marketing consultant, says that Indian consumers prefer to buy luxury goods such as watches, jewelry, fashion/accessories abroad because the after-sales service is a ‘nuisance or a headache here, while overseas the salesperson is constantly in touch’. She cited car services as another example, saying in India the customers have to call the car company while overseas the company calls the customers. On the other hand, ‘in hospitality, they are all over you. Here it is an invasion of privacy. They don’t know where to draw the line. At times, in luxury real estate.’

How Indian private wealth firms market and serve 

Private wealth firms are not visible in the public domain so it’s hard to gauge their marketing and client service activities. 

Client segmentation

While the generally accepted definition of HNW is net worth of USD 1 million, private wealth firms adopt their own criteria for accepting customers. Some firms position themselves at the higher end by targeting higher AUM per client while others aim at the more affluent end of the market. However, all of this positioning is done through action – none of the websites explicitly state their ideal customer profile. 

Consulting firms like Oliver Wyman have been encouraging the wealth management industry to ‘target the white space’ of affluent investors rather than cater to the competitive HNW segment. In its latest report, BCG also encourages the industry to cater to what it calls the ‘simple-needs segment’ – investors with personal wealth of between $100,000 and $3 million and whose wealth management needs are not complex.

Whether as a result of not being able to attract the right HNW segment, or chasing higher margins as suggested by consulting firms, it appears that Indian private wealth firms have been casting their net quite wide. In many interviews, firms have admitted that they will happily onboard clients with much lower commitments than their stated threshold. This approach of everyone catering to all has meant that there is no clear positioning amongst the firms.

Most firms interviewed also mentioned they segmented their clients by source of wealth rather than other possible ways such as needs for services, attitudes or investor behaviour/personality types. The segmentation mentioned in the Kotak Top of the Pyramid report is typical – 

  • Entrepreneurs – first generation wealth creators, mostly still running the family business
  • Inheritors – second generation business families that have inherited the business and other wealth
  • Professional – CXO, professionals (doctors, lawyers etc) and creatives/celebrities

There is some effort to capture differences in attitude. For example, the Kotak survey shows the differences amongst the three segments in the way they describe the beneficiaries of their wealth. 

However, it’s not clear from the interviews whether clients in each segment actually behave differently or demand differentiated services. Indeed, none of the interviewees highlighted any differences in services. 

Marketing activities

Anecdotally, they sponsor private events encouraging clients to refer friends, in line with the belief that the best way to connect with the HNW is through referrals and perhaps, passions such as art, music, philanthropy etc.

The private wealth industry is fairly active in the sponsorship of cultural events such as art and music. Another area that generates a lot of interest is politics, presumably because of its direct impact on economic policy. The top private banks and firms are visible in their hosting and sponsorship of high profile speakers on political and economic issues. For example, Kotak Wealth invites its HNW clients to events addressed by former US presidents. IIFL Wealth has sponsored the ‘Indian Express Adda’ as well as ‘The Print’s Off the Cuff’ series in which a high profile host chats informally with high profile guests, leaving a lot of time for audience interaction.

A more recent area that private wealth firms have become somewhat active in is the start-up scene. Presumably, private wealth firms want to be visible to founders (and their angel and venture capital investors) from the beginning. Some firms get active in matching founders with investors from within their client network – a service that is well appreciated by the HNW segment.

Need for digital

While referrals may introduce the firms’ names to prospective clients, it’s their brand awareness and digital footprint that will determine whether the prospect takes the next step, according to April Rudin, a global marketing consultant specializing in wealth management. ‘People vet before they’ve met,’ she quips.

Rudin believes it’s important for wealth firms to have a well designed website, coherent with their overall brand image and messaging. The website has an ‘atmospheric look and feel…It’s like walking into a home. It could be modern or traditional, colourful or neutral etc. Above-the-fold is the most important real estate so it’s important that the firm has articulated something differentiated here, that’s not a cliche.’

Underlining the importance of widening the brand appeal, Rudin reminds the industry that the next generation is likely to rely on recommendations from their peers rather than from their parents. So firms may want to start partnering with younger brands like sneakers for example. Other appealing areas are health, collectibles and philanthropy.

The Rudin group works with wealth management firms on their marketing and communication strategy. Their process starts with a thorough discovery stage of talking to stakeholders. ‘Principals of firms are shocked to hear that clients say they don’t care about performance or 200-year heritage. They assume a lot of things…so they need to hear clients verbatim’. 

In the second stage, Rudin works with the firm on messaging and content creation. She employs digital tools like social listening tools and A/B testing to ensure the marketing spend actually works. For example, wealth firms tend to put out too much technical content that perhaps only small proportion of clients would understand or use. Instead she recommends putting the same information in 3-4 multiple formats. It’s possible that the older client glances at the infographic and the millennial reads the detailed whitepaper. 

The third stage is distribution in which Rudin helps firms reach out to the market via various channels. 

Talking about her experience in Asia, she agreed that firms have to take into account the tighter knit community, high digital adoption and mobile penetration rates and customise the global approach with the local touch. 

Her message to wealth firm CEOs is to remember that the world is client centric so the marketing communication needs to be more about them and less about the firm. 

Rudin agrees with the simple client segmentation approach. She said some firms have got this right with business owners, whether male or female, having different needs and challenges than inheritors. She admitted to having changed her mind about segmentation when she saw firms going overboard by setting up microsites for millennials and women with stereotypical images. ‘At 51% of the population, women are not a segment! Perhaps men should be’, she said, quite upset about the way some wealth firms market to women assuming that all women are the same. The images for ‘fun loving millennials’ are also ridiculous – millennials are now in their 30s and quite diverse.

Rudin advises wealth firms to use technology to hyper-personalise. She also advises firms to make their communication more authentic, saying ‘people want to work with people, not corporate brands.’ 

How Indian private wealth firms are doing digital marketing

Simply put, it appears they are not. 

The industry doesn’t appear to be very active on social media, apart from using WhatsApp to share content such as invitations to webinars etc. This is understandable as WhatsApp has become the de facto messaging platform for India at a time when SMS apps are bombarded with spam. HNW individuals also appear to be active on facebook, with nearly 75% saying they visit facebook at least once a day.

Conclusion – can marketing help the industry achieve its potential?

As outlined in the previous chapters, there seems to be a huge gap between the number of HNW families mentioned in various wealth reports and the number of clients served by the industry. 

While the industry constantly talks about the huge potential, it doesn’t appear to be marketing its services beyond the existing client pool. It’s not clear why.

This implies a huge scope for the industry to raise awareness for wealth management services generally.


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