The Tastemakers

Color the Millennial Generation in Burberry plaid.

In the first quarter of 2011 alone, the British luxury brand added more than 600,000 “likes” to its Facebook page. At that rate, it’ll reach 10 million by the middle of next year.

Respond with a shrug and you may encounter more than the disdain of your pals and their virtual “friends.” If you are a luxury brand, you may also experience a slow decline. Digital channels are no longer just about looking up past loves and posting pictures of kids; following the lead of those born between the early 1980s and early 2000s, they offer brands a way to connect, engage and build loyalty at the click of a button.

Combine that with the fact that the Millennials — also known as Generation Y — represent the largest consumer group in U.S. history, and luxury brands that “get it” have reason to perk up, experts say.

But not so fast. Millennials, as a whole, are making conscious choices with their cash. They’re more interested in value than heritage and authenticity vs. tactical marketing that rings untrue. And watching the way they’ve influenced fashion, technology and even workplace attitudes in recent years, the outspoken, DIY, anything-is-possible generation will leave its mark on luxury, too.

“One thing I’ve found is that, if you look at the younger audience, it tends to be a harbinger of the entire audience,” says Paul Hurley, CEO of flash sale site ideeli, which offers members-only access to luxury brands online. “What they do now, they will likely do when they’re older. But what they’re doing now gets communicated to other segments of the population, as well.”

Younger consumers are less willing to put up with “baloney,” he says. “And when you see that in action, through somebody you know in that age group, you start saying, ‘That makes a lot of sense.’”

So what is this younger consumer putting up with?

Milton Pedraza, CEO of research firm Luxury Institute, says “legacy” products are key, and that’s where luxury brands are gaining ground. Millennials typically view expensive purchases as necessary investments in themselves — falling more into the “need” than the “want” category — but “people still don’t spend as much on luxury as they did before,” he says.

“They don’t necessarily need a bag for every season.... There’s a differentiation between the trendy stuff and the classics. They’re willing to pay more for an item, but it better last forever with a capital ‘F’. They want durability: durability in design, durability in quality, durability in style and in materials.”

A gaze into the crystal ball
New York think tank L2 released a couple of eye-opening reports in 2010: “The Gen Y Prestige Brand Ranking,” followed by the “Digital IQ Index: Luxury.”

The first report asked close to 450 high-achieving and high-earning individuals with an average age of 28.5 to score “sentiment” for 105 iconic brands. They came from 45 countries, and 83 percent expected to earn more than $100,000 per year within 24 months.

Considering the generation’s response “the closest thing to a crystal ball for predicting a prestige brand’s long-term viability,” the report placed the Millennials as the “future” of luxury brands rather than their target market.

What L2 discovered was that the age group by and large considers itself “brand-conscious”; that it is more than willing to follow luxury brands on Facebook and Twitter and receive related e-mails; and that more than half of women purchase luxury goods via discount and retail sites, but only a third buy directly from brand sites.

The top five brands for women were Chanel, Ritz-Carlton, Four Seasons, Marc Jacobs and Cartier; for men: BMW, Ferrari, Porsche, Lamborghini and Audi.

L2 associate Tanuj Parikh says a commitment to making digital a “huge part of the strategy going forward” was a key differentiator for brands at the top, especially when those digital efforts are consistent with a brand’s heritage. Case studies from the report, called “Gen Y prodigies,” include the likes of Marc Jacobs, which offered behind-the-scenes tweets from its president and live online streams of the runway during Fashion Week 2010; and Audi, which introduced the compact, less-than-$25,000 A1 model (not available in North America) as an “entry point” for environmentally conscious young consumers, as well as creating mobile gaming apps and Facebook sneak peeks.

And then there’s Coach, whose recent Poppy Project won rave reviews for its collaboration with fashion blogger community “leaders.” Coach also was the first brand in the category to add user reviews to its site, further speaking to the Millennial Generation’s desire to be heard.

Parikh says the reports have been positively received by the brands involved — including those who were rated “challenged” or “feeble” in the Digital IQ Index.

“This industry has historically been perceived as one that has lacked rigor around the data-driven analysis of what worked and what didn’t,” he says. “The members we’ve signed up, the large cache that has opted in, is telling us, ‘We like the data and the insight it provides.’ They think it’s actionable.” Those in the lower categories, in particular, have been the “most eager grabbers” of the information, Parikh says, already looking for ways to call for increased internal resources.

And what that information is showing is that luxury may have been tied to the Baby Boomer generation for the last 20 to 30 years, but the home equity lines that helped make it possible don’t exist anymore. “Generation Y is the segment that will drive luxury,” Parikh says. “They’ll be the purchasers as well as the tastemakers.”