Thinking of luxury goods typically brings to mind tradition, heritage and a time-honoured approach rather than fast-paced modernity. But luxury brands have also been keen to position themselves as technological innovators – embracing trends like blockchain, the metaverse, and NFTs.

“The luxury sector has always been at the forefront of innovation,” Kate Anthony, Managing Director at global media agency Spark Foundry, told Econsultancy. “Embracing new approaches and new ideas is in its very fibre, [and] utilising the latest in technology is no different.”

Therefore, it comes as little surprise that the luxury sector has welcomed the advent of generative AI, with brands like Valentino and Prada using generative AI imagery in marketing campaigns, and the likes of Collina Strada and G-Star Raw using generative AI as part of the product design process. Other applications for generative AI include customer support, virtual shopping agents, and data analysis for personalisation.

But where does generative AI fit in with luxury brands’ reputation for authenticity and a direct, human relationship with customers? With backlash being levied at brands such as fashion brand Selkie or Levi’s that are perceived to be using generative AI to cut costs and corners, do luxury brands risk alienating their customer base over their use of the technology?

How Versace used generative AI in influencer marketing

In 2023, Versace launched a campaign called New Digital Artists in which the luxury brand showcased “a series of works from digital and AI creators”  focusing on its Greca Goddess Top Handle Bag.

Influencer agency Billion Dollar Boy collaborated with Versace on the campaign, and Senior Account Director Maxime Rozencwajg spoke to Econsultancy about how the use of generative AI by influencers within the campaign was received.

“We’ve used plenty of other technologies such as 3D production formats, but we identified generative AI as the technology for this particular campaign because of its ability to reinvigorate product-centric ads,” said Rozencwajg.

“Generative AI employs creative and dynamic elements, making the content more exciting and engaging and achieving 2-5x more engagements in general. It wasn’t simply a case of using the technology for the sake of it or to make headlines.” Rozencwajg highlighted the 6% average engagement rate for the New Digital Artists campaign, which compares favourably to a typical influencer marketing engagement rate of 1-3%.

Rozencwajg also reported an “overwhelmingly positive” response from fans of the influencers who took part. “In particular, we were really pleased to see the positive sentiment around the artistic approach of the creators,” he said.

“As long as you use the technology intentionally to enhance the creators’ craft, then we have found audiences have been very receptive to generative AI creator content. If it’s used simply for the sake of it, [however,] and the execution is poor, it can have the opposite effect – which can be particularly toxic to brands reputationally.”

Marrying the strengths of generative AI and luxury

Rozencwajg added that generative AI creative is a particularly strong fit for luxury as a sector because of its aspirational nature. “…the advertising [in this sector] often needs to convey something that’s intangible or conceptual – such as a fragrance. Generative AI can bring these brand characteristics to life and make them feel more tangible, allowing brands to express their identity in new ways that traditional creator content can’t,” he said.

Harpreet Chhatwal, Operations Director at Heur, agreed that generative AI content creation “allows the brand to think outside of the box in terms of creative campaigns” – campaigns that would ordinarily be “very costly and time consuming”, but are less so with generative AI.

There is a cost associated with any kind of foray into new technology, of course, but Chhatwal pointed out that luxury brands are well-equipped to tackle this. “Whilst many brands don’t have the capital or the time to experiment with AI, luxury brands can utilise their highly experienced creative teams along with AI tools to create marketing material that will be ground-breaking and spark future trends.”

Generative AI in luxury customer service

Luxury consumers might be more willing to accept a level of artifice in marketing, which is generally not expected to depict reality, but what about customer service interactions?

Customers are often accustomed to communicating directly with a trusted salesperson for advice and recommendations; would they still value this relationship if they knew they were instead communicating with an AI?

“It’s a … question that I think goes beyond the luxury sector,” said Ricardo Catalano, Global Vertical Lead Luxury Retail at VML. “If done well and prepared in advance, and supported by change management, there is no reason to decrease the level of authenticity and personalisation of the communications that the sales floor might have with a client.

“Actually, it’s an amazing asset … for the floor to be supported by AI.”

Chhatwal added, “Because of the prestige of the ‘luxury’ customer, luxury brands need to have an iron clad and, ultimately, highly responsive customer service capabilities – which is where AI can help.

“Thanks to [generative AI’s] advanced natural language processing abilities, customers can express themselves in any way they feel comfortable and gen AI will be able to comprehend and respond promptly, providing personalised and contextually relevant responses – which is often exactly what the luxury customer is looking for.”

With that said, too much freedom can be a drawback in customer service interactions, as demonstrated by the recent case of parcel firm DPD’s chatbot being incited to compose insulting poems and use swearwords. Brands will need to tread a fine line between applying so many guardrails that interactions become frustratingly rote, and permitting the flexibility that allows a naturalistic conversation.

Chhatwal observed that the luxury sector “often faces more harsh criticism than mainstream brands”, which means that any missteps with AI could potentially be very costly from a reputation standpoint.

“The expectations are high”

Supporting customer agents doesn’t necessarily need to mean implementing a generative AI-powered chatbot; the luxury customer experience tends to be highly personalised, and AI’s analytical capabilities can be channelled towards achieving this.

Catalano gave the example of a luxury hotel, which some luxury maisons own and operate. The high-level clients who stay there expect to be furnished with their preferred brand of toiletries, their favourite type of flowers, their preferred fragrances, and so on.

“The expectations are very high. [Luxury customers] don’t care if you’re using the data that you’ve collected with their agreement to improve the experience and to deliver the best experience,” said Catalano.

“Gen AI is recommendation – and that’s exactly what luxury brands are expecting from data.”

Mitigating the risks of generative AI

As we’ve seen with those brands that misstepped with generative AI, the consumer backlash can be swift and decisive. While no experimentation comes without some risk, what can luxury brands do to mitigate this risk as much as possible?

Clearly define what the role of AI will be

“First of all, as a company, brands must clearly define the role of AI in your working systems,” said Chhatwal. “For instance, AI might serve as a tool for generating design inspirations or supporting data analysis but should not produce final designs or marketing materials without human oversight.

“In my opinion, nothing that is AI generated should be released without having a human eye on it. However, if it turns out that this ‘final look’ process is taking longer than necessary, it is possible that AI isn’t right for your company.”

Transparency, transparency, transparency

“Brands and creators … need to educate audiences and ensure the use of generative AI is transparent through clear content labelling,” said Billion Dollar Boy’s Rozencwajg. “We’ve seen the technology can be rejected when audiences feel they’re being duped, which can result in a negative consumer backlash.”

Spark Foundry’s Kate Anthony agreed, citing a study of 1,200 consumers and 350 advertisers in the US carried out by Yahoo and Publicis Media (which Spark Foundry sits within) that showed consumers ads with and without AI disclosure.

While only 38% of the surveyed consumers were disposed to view AI positively, the ads with AI disclosures nevertheless “result[ed] in a 47% increase in ad appeal, a 73% rise in ad trustworthiness and a 96% jump in overall brand trust,” said Anthony. The transparency “had a significant positive impact on brand perceptions”.

“Being transparent with the audience on where and when gen AI is used enables the community to be part of the experience.”

Generative AI must fit with a brand’s ethos

While most brands generally want to be perceived as innovative and moving with the times, Anthony cautioned that uses of generative AI must stay true to a brand’s values. “The consideration will always be, in the application of a new trend: does this enable the brand to stay true to the brand values and raison d’être?

“A brand’s reputation is of the utmost importance, so careful testing and use cases will start small to ensure the application and end result are always positive for the customer and the brand.”

“If they are considering integrating AI into their processes, luxury brands will need to balance maintaining their heritage and craftsmanship with the incorporation of new technologies,” added Chhatwal. “This requires not only technological updates but also a cultural shift within organisations to embrace innovation, which could take a long time and may involve some teething issues.”

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