The Future of Commerce: Blending Physical & Digital Experiences
It's no longer about the physical world versus the digital world, it's about how we can artfully combine the two.
Our recent post about creators and cults touched on some ideas that warrant deeper exploration. And so today, we’re doing a deep dive into the paradox of modern luxury, aspirational brands, and the fascinating role cult-like affinity and belonging play in building a (successful) modern brand.
Complex and distinct in their own right, these ideas are often leveraged together as part of a larger strategy. Bear with us as we wander through some seemingly unconnected ideas before tying everything back together.
Here’s a quick “too long; didn’t read” summary of what’s to come:
Advertising psychology 101
There are two ideas that serve as the baseline for understanding advertising and modern luxury.
But first, some real-world context for those ideas:
This means that Super Bowl ads are extra expensive and that there are many more cost-effective ways of reaching customers.
So why spend money on expensive advertising? The answer lies in two theories that have been applied since the time of Mad Men-era advertising agencies:
1- Signaling Theory
In this theory, advertising helps to signal a product or brand’s quality. The information communicated through the ad isn’t the point. Instead, the fact that the advertiser spent money to reach the potential consumer indicates that the product is high quality (otherwise why would they bother advertising?).
2- The Third-Person Effect
In this theory, people believe ads have a greater effect on others than they do on themselves.
Take a Rolex ad, for example. You may believe the ad will influence others to perceive a Rolex as desirable. As a result, you may believe others will be impressed if you’re flashing the latest wrist bling.
In this case, your desire for a Rolex stems from having something that others know about, want themselves, or associate with desirable characteristics. The product is a means to that status.
In a world where anyone can use cost-effective digital ads to reach customers, the brands who use premium advertising (AKA Super Bowl ads) do so as a flex. These premium ads use both the Signaling Theory and the Third-Person Effect, and their strategy is less about making short-term sales and more about increasing brand in the long term.
The modern luxury/aspiration coin
In recent years, digital platform shave enabled an extraordinary level of cost-effective, personalized targeting.
Digital-native brands Warby Parker and Casper got an early lead as they were more familiar and willing to experiment with these new channels. Those early successes led to a boom in direct-to-consumer (DTC) brands. Not wanting to be left behind, traditional brands are increasingly tech-savvy and now have greater resources to invest in these same channels. This has become especially important with COVID-19 closing brick-and-mortar retail stores.
Today, all these categories of businesses and brands are forced to compete on price, product, technology... or on something else.
In the past, that “something else” was brand identity. But this goes beyond logos.
On one end of the spectrum are the traditional, deep-pocketed brands who can afford Super Bowl commercials. On the other are cheap, copycat products racing to the bottom on everything from price to quality. Along this spectrum how can anyone create a new and sustainable business while building brand identity and demand?
Enter modern luxury and aspirational brands.
Businesses powered by modern luxury and aspiration are two sides of the same coin, and must maintain a delicate tension.
Modern luxury brings founder-led conviction for a completely new vision and product. But this must be paired with the values of aspirational brands where audience feedback shapes the product and brand in order to achieve that true cult-like adoration.
This push and pull must (appear to) happen simultaneously for the market to embrace the new idea or product. Customers want to believe that a company and product was their idea all along. Success happens when brands strike the right chord of both novel and familiar.
So, who exactly are these new businesses co-creating and selling to?
Ana Andjelic, author of The Business of Aspiration, provides a glimpse into the answer. She writes:
"Along with intangibles like access, experiences, and knowledge, the modern aspiration economy also created a cultural class unto its own. Oriented towards wellness and self-perfecting, this class of self-proclaimed "creatives" (regardless of what they actually do) defies the hierarchy that socially bound the previous generations to their economic standing, and lives the lifestyle of the affluent without actually owning the assets to underpin it (home, a savings account)."
Meet HENRY and CARLY
Cult-like fans are the backbone of modern luxury brands and have led to a rise in the innumerable creators and communities forming all over the internet.
These devoted followers are HENRY and CARLY.
HENRY and CARLY are two categories of consumers, and these acronyms are leveraged by founders, CMOs, brands, and analysts within the retail industry. They are frameworks for integrating human traits (psychographics) into the imagined communities that marketers and creators target.
H.E.N.R.Y. stands for "high earners, not yet rich." The acronym was originally coined by Fortune's Shawn Tully in 2003, and has most recently been elaborated upon by Web Smith's excellent analysis on 2pm. HENRY consumers are:
Then, meet C.A.R.L.Y. CARLY stands for "can't afford real life yet" and was created by the folks over at Future Commerce. CARLY consumers are:
Both HENRY and CARLY are avenues to create a valuable audience that will not only resonate with a brand’s products, but will also help businesses shape what they make. It’s through these categories of consumers that brands can balance modern luxury and aspiration.
Create your own niche
Recent data indicates that for new brands, building an audience first can pay greater dividends in the long term. While this is not an easy or fast process, it's one of the things many creators and founders do naturally.
David Perell wrote a great post about this process: "Don't Find a Niche. Create One."
Building a sustainable, standout brand The building blocks of (successful) modern brands today requires a longer process than most would want. It looks something like this:
1) Start building an audience around your personal interests or passions.
2) Spend time discovering your audience’s challenges and frustrations.
3) Offer a solution to those problems.
4) Continue to define (based on your own convictions and unique insights) and refine (based on audience feedback), a product that is specifically designed for this audience and the problem they’ve identified.
5) Grow your offering and expand that niche.
With the need for agility, personality, and openness, you can understand how creators have an edge in this space. However, traditional brands shouldn't completely despair. But that's a topic for another time.
The role of personalized products in modern luxury and aspiration
There’s one conclusion we’re willing to bet on: In today's highly competitive world, the only way for brands, creators, and entrepreneurs to stand out and be successful is to have a passionate audience.
Once you’ve built that audience, you'll want to keep creating for and with them—before they go somewhere else.
This is where Creative Layer sees a big gap.
The tools to build audiences exist. The tools to monetize audiences exist. The tools to build personalized products with and between audiences? Nada.
This is where Creative Layer comes in. We believe—and the data demonstrates—that the future of commerce centers around the intersection of personalization, co-creation, and customer experience.
The personalized products and experiences that will result from these collaborations will take the principles of modern luxury and aspiration to the next level, compounding the loyalty and cult-like nature of these new audiences.