What Web 3.0 And Changing Consumer Psychographics Mean For Luxury Brands
Web 3.0 is coming fast. While it still hasn’t been fully realized, it promises to mark the end of the domination of the internet by power platforms, like Google, Facebook and Twitter and put users in charge.
“This third generation of internet services will be the catalyst for a new internet, connecting data-driven technologies like artificial intelligence and machine learning to completely distributed data ecosystems,” Forbes.com contributor Danial Araya wrote.
In essence, Web 3.0 will shift the power of the internet from a narrow band of platforms that retailers and brands currently rely upon to reach customers. That power will transfer into the hands of consumers organized within interest communities whose members will interact across multiple platforms.
As that future unfolds, consumers aren’t going to rely on authorities, like brands, to give them the information they need, but on each other.
‘Early adoptors’ reveal the future
Consumers classified as “early adopters” can be our guide to brands’ future in Web 3.0. Early adopters are a segment of consumers who typically are younger, more highly educated and moneyed.
They are the harbingers of change in the consumer marketplace, picking up on new technologies and trends that the rest of us eventually follow. They also tend to be luxury consumers, given their higher economic status and educational attainment.
To look over the horizon at the changing priorities and expectations of early adopters and Web 3.0, Boston Consulting Group conducted a study with Highsnobiety, a fashion and lifestyle media platform that is a favorite of the early-adopter class. In the study, entitled Luxury 3.0, they call them “Cultural Pioneers” and look specifically at their preferences in the luxury market.
But don’t be fooled. The implications of this study go far beyond just the luxury market and luxury brands. It can help all consumer-facing retailers and brands get ready for the power shift coming under Web 3.0.
And just like “early adopters” are the bellwether for changes that will come to the wider consumer market, luxury is a bellwether too. Luxury is where fashion, beauty and lifestyle trends start and then get translated down to the mass market.
BCG’s Sarah Willersdorf, who led the study, notes that luxury brands have been ahead of the curve in adopting Web 3.0 capabilities such as blockchain, DAOs (decentralized autonomous organizations) and NFTs linked to physical and digital products. But many mass brands are dipping their toes in Web 3.0 as well, including Coca-Cola, Pepsi, Burger King, McDonalds and Gap.
“Web 3.0 is characterized by decentralization away from traditional sources of authority,” the report explains, and brands at any price point have been a traditional source of authority. “Luxury 3.0 [or read Consumer 3.0] represents a profound shift where individuals and communities have more control over the narrative than ever before.”
Cultural Pioneers lead and the mass market follows
Among the over 4,000 luxury consumers surveyed, slightly fewer than one-third were classified as Cultural Pioneers. They were distinct from general luxury consumers surveyed by being more knowledgeable about brands, fashion and design trends. They also skewed younger and spent 38% more on luxury than the general luxury consumers.
But don’t get sidetracked by the “luxury” label. Luxury consumers buy lots of other non-luxury brands and products. What’s most important about this study is not so much their luxury purchase behavior but their psychographics or underlying consumer psychology, which applies across all consumer categories they participate in.
As a group, Cultural Pioneers are highly engaged on social media, with about two-thirds participating once a day or more frequently. They favor Instagram (89%) and YouTube (50%) to engage with their online communities. Facebook trails way behind, used by only 33% of Cultural Pioneers, and they are more active on Reddit (33%) and Discord/Slack (19%) than other consumers surveyed. They also have more followers online, making them thought leaders and influencers within their groups.
Cultural Pioneers over-index in online communities organized around sneakers and streetwear (both 57%), luxury brands (52%), brand specific (46%), crypto investing (20%) and social activism (20%). They are about equally involved as other luxury consumers in sports (31%), running/fitness (24%), gaming (22%), and work/industry (14%).
Rise of metacommunities
Under Web 2.0, brand communities were largely brand-owned and operated, existing on a narrow set of channel platforms where the brand controlled the community. Described as monolithic, closed and linear with top-down brand communications, these brand communities comprised a cohesive group of brand enthusiasts present to laud the brand.
That traditional brand community model is being replaced in Web 3.0 by a decentralized, circular model that BCG calls metacommunities.
“Metacommunities are fluid, dynamic and fragmented,” Willersdorf said. “It’s a very different notion than a brand talking to its community of people shopping for the brand. You’re actually talking to many different sub-groups and audiences around the brand, be they fans, consumers, detractors or commentators.”
In Web 3.0, brands must engage with a much wider audience than just a narrow set of purchasing consumers. People are drawn into decentralized metacommunities primarily to learn new things, gain insider information through group discussions, and bounce ideas off others in the group. Willersdorf points to Diet Prada, Slow Factory, Old Celine and Dank Art as examples of these new metacommunities.
“When we think about engaging audiences, not just consumers, it’s about sharing brand stories and insider industry knowledge,” Willersdorf said.
Another difference between Web 2.0 and 3.0 is the notion of co-creation. “It’s changing the role of the brand’s creative director from coming up with new ideas and pushing them out into the market to orchestrating relationships with other creators whether its co-creating product or advertising,” she said.
“People want a participatory, collaborative relationship with brands, treating their consumers as equal partners in the relationship. They expect two-way communication that didn’t exist before,” she continued.
And brands will be held accountable if they don’t live up to community members’ expectations. They demand accountability from brands related to ESG (environmental, social and governance) issues and expect brands to listen to and act upon community feedback. If they sense a lack of credibility, they won’t stay silent.
Balance of power shifts
It will be a challenge for every brand, from mass to luxury, to navigate the new world of Web 3.0 and how grassroots organized brand audiences will change the dynamics of the consumer-brand relationship.
For too long, brands have believed that they held the balance of power in that relationship, but as Web 3.0 evolves and the force of metacommunities grows, they will learn differently.
In closing, the BCG/Highsnobiety report quoted Céline Semaan, founder of the Slow Factory Foundation. She perfectly expressed the changes coming as metacommunities rise and begin to exert their power over brands in Web 3.0.
“Communities don’t exist in a vacuum. Communities don’t belong to brands. Communities exist independently of brands. Communities don’t need brands. Brands need communities,” Seaman said and added, “Communities exist around interests. It’s up to the brands to bridge the gap between their values and their actions by meeting those interests.”