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Today’s luxury market represents every marketer’s and retailer’s “sweet spot.” The top 25% of U.S. households (incomes of $75,000 and higher) have incomes 2.5 times larger than the nation’s average and they spend about two times more than the average on most categories of consumer goods. In effect, the luxury consumer buys more of everything and spends more every time they shop.
But today the luxury market is undergoing dramatic changes as a new generation of luxury consumers, the baby boom generation, becomes the “new luxury” generation. Because consumer insight is the ultimate competitive weapon, here are eight essential things that every luxury marketer needs to know about today’s luxury consumer.
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Luxury Lesson #1—“Old luxury” is at an end … “New luxury” is here!
Back in the “go-go” 90s, luxury was defined by the attributes, qualities and features of the product itself—like price, materials and brand—and much of its appeal was derived from status and prestige. Shopping was a competitive sport and the one who acquired the most luxury “toys” was declared the winner. This “old luxury” ideal is best embodied by the television show, “Lifestyles of the Rich and Famous with Robin Leach,” and such “old luxury” icons as Donald Trump and Martha Stewart. But “old luxury” is dying out. “Old luxury” doesn’t resonate with the new luxury generation, the baby boomers, who have always been a generation that challenged authority, rejected the status quo and went their own way.
“New luxury” is luxury defined consumer-centrically, totally from the point of view of the consumer. Today’s new luxury consumers focus on the experience of luxury embodied in the goods and services they buy, not in ownership or possession itself. So “new luxury” is about the experience of luxury from the consumers’ perspective, while “old luxury” remains focused on the attributes and qualities of the product and the traditional status and prestige ideal of luxury.
Luxury Lesson #2—Luxury consumers are driven experientially; it’s not about the money
The luxury consumer primarily interprets and participates in the luxury market experientially. Luxury just isn’t about the thing anymore; it is about the special experience people feel in buying and using or enjoying that thing. For these consumers, luxury is about achieving a comfortable lifestyle in the material realm, having those things that make life easier, more pleasant and satisfying. But the real meaning in the luxury life comes through family, friends, experiences that deepen one’s understanding and appreciation of life. In other words, the luxury lifestyle is not necessarily about money; it’s about the experiences and feelings that having enough money can bring.
The cosmetics and beauty category by definition is highly experiential. Cosmetic marketers have long known how to transform the thing they sell into an experience, as Charles Revson said many years ago, “In the factory we make cosmetics, but in the stores we sell hope.” To turn products into experiences, the secret is to focus on the luxury performance, and not only, as so many beauty product companies do, by stressing the clinical performance aspects of its products, but how well the products deliver a luxurious, special feeling to the consumers. A 23% reduction in fine lines and wrinkles sounds all well and good, but what does it really mean? A message believably stating to the consumer that by using our special lotion and potion they will have a 100% improvement in self-esteem and confidence delivers an experience. The focus should be the luxury transformation that the consumer achieves through the products.
Luxury transcends the physical and material. It is interpreted personally and experientially, and is not exclusively about what one has or owns. As a result, it transforms the individual, enhances their appreciation of life. Almost 90% of luxury consumers agree with the statement: “Luxury doesn’t have to be the most expensive thing or be the most exclusive brand.”
Luxury Lesson #3—Luxury consumers are democratic in their approach to luxury; Americans value individuality over exclusivity
While much is made in the luxury goods industry about maintaining exclusivity of goods, usually through high price and limited distribution, the luxury consumers don’t particularly “buy” the idea that luxury is better when it is something exclusive. Rather they have a very democratic view of luxury, as 77% of luxury consumers agreed with the statement: “Luxury is for everyone and different for everyone.” Since luxury is not really about money, it is something that everyone from the highest to the lowest income can, and surely does, participate in. It’s about the feeling, not the thing.
Exclusivity, in and of itself, brings very little luxury value to today’s democratically-attuned luxury consumer. That said, the luxury consumer also yearns for more “specialness” in their experience of luxury. Exclusivity for the sake of exclusivity is not what American luxury consumers value, but rather exclusivity derived from one’s ability to express a personal point of view, an attitude and one’s uniqueness. So the challenge for luxury marketers in the American market is to deliver greater exclusivity by making the luxury consumer feel special and unique, but never let that exclusivity morph into class snobbishness or arrogance. It is a delicate balance that is very hard to pull off successfully, but those marketers that do it will achieve great rewards.
Luxury Lesson # 4—Luxury goods are better; quality counts
When we draw luxury consumers back to discuss the topic, they share a widely held view that items called “luxury” are noticeably a cut above the average. They have an expectation of better quality, finer details and superior workmanship and materials that goes along with the purchase. Nearly 90% of luxury consumers agree with the statement: “When you buy a luxury item, you expect it to be a cut above the average.”
It’s this expectation of higher quality that makes luxury consumers willing to dig a little deeper into their pocketbooks or wallets to buy that extra feeling of confidence. But that extra quality doesn’t always have to cost more.
Luxury Lesson #5—Luxury consumers are bargain shoppers always looking for a good deal
While these luxury consumers appreciate superior luxury quality, they also get an experiential thrill out of paying less for the best. Over 80% of luxury consumers agree with the statement: “I enjoy the feeling of buying luxuries on sale and usually search out the lowest price or the best value.” The irony of this finding is that these luxury consumers who can afford to pay full price in every category that they participate in are unwilling to do so. They get a kick out of buying on sale, getting a bargain and winning at the shopping game.
The luxury shoppers are ready, eager and always willing to search out the best price. They don’t feel compelled to pay the highest price or shop at the full price, full-service store, when they know they can get the same thing somewhere else cheaper. They are savvy shoppers and know how to find a bargain and get a good price.
Luxury Lesson #6—Luxury consumers are highly invested in their lifestyle; they put little at risk
One characteristic of luxury is clear: luxury is always evolving, changing and moving. Once consumers achieve a certain level of luxury, which quickly becomes the “ordinary,” they seek out some new higher plane of luxury. Thus what was once the extraordinary becomes the ordinary, and they seek out a new luxury fulfillment.
Luxury is something that consumers strive for. It also is something that luxury consumers are heavily invested in maintaining and keeping. For luxury consumers who have experienced luxury, you can’t go back. It’s a divide that a consumer crosses that says, “I have made it.”
Because luxury is tied up with creature comforts and feelings of comfort, consumers who achieve a luxury lifestyle are not likely to make do with less or give up continued luxury. Luxury consumers buy and continue to buy luxury because they can afford to and appreciate the enhanced experience of luxury, but they are not buying luxury to impart status or social advancement, nor are they willing to go out on a limb financially to acquire something they clearly can’t afford.
Luxury Lesson #7—Luxury consumers don’t buy because of the brand, rather the brand justifies the purchase
The brand is not the arbiter of whether or not a specific product is a luxury. Neither does it play the deciding role in whether or not to buy. Rather, the brand becomes a justifier for the purchase. It assures the luxury consumer of the superior quality of the item and that it will last for years. The brand and its reputation encourage consumers to dig a little deeper into their pocketbooks to buy. It’s the “Good Housekeeping Seal of Approval” that confirms the product is worth the extra investment, so it plays a critical role in the buying decision. The brand transmits the value and quality messages so important for consumers who participate in the luxury lifestyle.
In the cosmetics and beauty products category, unlike most other luxury goods categories, the brand actually ranks fairly high in overall influence on the luxury consumer. But this category is what we, in market research circles, would call an “outlier” in the luxury goods market, which means it is fundamentally different than other luxury goods categories like leather handbags, diamond jewelry, down-filled sofas or the latest and greatest flatscreen TV.
Cosmetics are an “affordable” luxury; to participate in the luxury cosmetics market a consumer doesn’t have to plan on spending thousands of dollars for the top of line brand. The average luxury consumer in 2006 spent $1,730 on luxury beauty products, making this the lowest spending category of the 22 luxury product and services categories tracked in Unity Marketing’s study. By contrast a typical luxury consumer spent more than $4,000 on fashion accessories and over $16,000 on jewelry. In these high spending categories the brand is far less important than the style, design and trust in the store where the purchase is made.
Luxury Lesson #8—Luxury consumers exhibit differences of degree, not of kind
The differences we find within the luxury market are primarily behavioral, not motivational. Behaviorally, different luxury consumers might buy more or less of a certain type of luxury product—for example, the more affluent buy more luxuries and spend more when they do simply because they can—but as far as the motivations for buying luxury go, the differences are minor because all luxury consumers up and down the income scale gain their greatest luxury thrills from experiences.
Unity Marketing’s latest study of the luxury market examines and compares the 40-and-under and the over-40 luxury consumers. The report, Generations of Luxury, details what the young luxury consumers want and how their tastes and perspectives differ from the over-40 set. It includes eight key trends that distinguish the young affluents from the more mature, as well as the marketing implications of these trends for luxury brands.
Young affluents—roughly corresponding to the Generation X and Millennial generations—will play an increasing[ly] important role in the target market for global luxury marketers over the next ten to twenty years, not just in the United States (median age 36.5 years) or in the European countries where the median age [is] around 40 years, but in the developing luxury markets, like Brazil (median age 28.2 years), India (24.9 years) and China (32.7 years), where the population as a whole is more youthful.
The global luxury market is going young, so luxury marketers must learn to think young in order to survive and thrive. Global luxury marketers have gotten used to the passions and nuances of the maturing baby boomers, after years of targeting this generation. Now they have a new challenge to appeal to the young affluents who have different ideas about luxury and different priorities in how they spend their wealth.
To prepare for the future, luxury marketers must understand the unique desires of the young affluents, how they express luxury in their lifestyles today and how they will do so in the future. Understanding the young luxury consumers is critical for marketers to target their marketing communications, advertising and product development efforts effectively now and for years to come. n GCI
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This article was adapted from Pam Danziger’s latest book, Let Them Eat Cake: Marketing Luxury to the Masses—as well as the Classes (Chicago, IL: Dearborn Trade Publishing, January 2005) which deals extensively with the psychology and purchase behavior of the luxury consumer. It is used with permission.