RAPAPORT... Today’s affluent consumers have undergone a sea change. The reversal of the once-buoyant economy that kept the value of their homes and stock market portfolios rising has removed the comfortable cushioning that allowed them to shop without reservation. Now, their whole point of view has changed to a “hold and wait” mentality, says Pam Danziger, founder of the marketing consulting firm Unity Marketing and author of Shopping: Why We Love It and How Retailers Can Create the Ultimate Customer Experience. “They’re really watching and waiting for things to happen in the economy so they get the green light to go ahead and spend. It allows them to be much more selective when it comes to buying, and they can move in when they find a sale and take advantage of it.”
Richard Baker, founder and chief executive officer (CEO) of Premium Knowledge Group (PKG), in Dallas, Texas, a market research and marketing services company focused on the affluent market, agrees that historic luxury consumers have become “temporarily more cautious, and they are shopping a little less frequently and when they shop, they’re spending a little less money. But they are still shopping, still buying things. And that situation may be improving literally on a day-to-day basis as the stock market goes on and a sense of light at the end of the tunnel comes back to the consumer market.”
Luxury consumers for the past ten years, continues Baker, were defined in two different categories. “There were the aspirational luxury consumers who tended to be younger and living off current income and stretching their way to get more expensive and more prestigious things. In the second catagory were the historic or traditional luxury consumers, although of a more contemporary generation, people above 50 who had plenty of money. I think what we’ve seen in the past six to twelve months is the virtual disappearance of the aspirational consumer.”
Who’s left, says Greg Furman, founder and chairman of The Luxury Marketing Council, “is what I call the best customer. Meaning, in the U.S., the 2.7 million people with investable assets of a million dollars or more, who, after the house, after the car, after the yacht, after the jet, still have a million and up liquid to play with. That demographic — and getting more like them — is the sole focus of the smartest luxury brands.”
A New MindsetTo put today’s consumer in context, Furman summarizes research American Express did on the four stages of the evolution of luxury in the U.S.
- Acquisitive (late 1960s to early 1970s): “This was the highly conspicuous consumption consumer. The bigger the brand, the more you could boast about it, the more you could use these things as symbols of ‘how great I am.’”
- Inquisitive (1980s into the late 1990s): “People became less showy and pressured to tout their wealth and more interested in learning about what makes a great product or service. People slavishly relied on authorities.”
- Authoritative, the stage we’re moving out of now: “Consumers are not afraid to influence the influencers. They are much more sophisticated and have taken the time to understand what is the best of the best.”
- Meditative is where we are now: “It’s not just about expensive things but things that enhance the experience of life. It’s about the inner joy and the pleasure of having great things. It’s very much attuned to social implications of wealth and trying to find a realistic balance.”
“I think what we’re seeing is a more underlying change in the culture,” says Danziger. “Most people know neighbors or associates or family members who are suffering in this time and it makes them question, ‘What am I going to do with my wealth? Is more for me what really matters?’ It’s a deeper, more profound change in the psychology of consumers.”
A New Value EquationCognitive anthropologist Dr. Bob Deutsch of Brain Sells references the ‘How am I doing?’ question Mayor Koch of New York used to ask.“People are asking themselves that now — ‘How am I doing? Can I stay in the game?’ And they need, sometimes, to provide themselves with an affirmative answer.” Deutsch goes on to say that while some people are saying “I’m not going to buy anything,” many of them are saying, “I’m not going to buy a lot of stuff and I might not buy all the stuff I used to buy, but I will buy things that have value to me.”
According to Milton Pedraza, founder of The Luxury Institute in New York City, affluent shoppers in the past were spending “without really considering. Today, consumers are doing a lot more calculation of value in their heads about the quality, the materials, how long it will last, whether the brand has heritage or a pedigree. The value orientation, the long-term investment approach to buying luxury, is something that was not existent during the good times.”
Moreover, notes Furman, “people are looking for the bespoke, the customized, the personalized, the individual, the rare and the unique. And people want the ability to influence the nature of the product or service, maybe more than at any time in my history.”
Diamonds have the connotation that they “take a long time to form and seemingly once formed they’re indestructible,” says Deutsch. “That’s what everybody knows about diamonds. Also, they’re luxurious and they’re beautiful and they sparkle. But to me, given all that, what they symbolize now can really relate to something in the context of today — which is longevity, continuity, reliability. And that’s part and parcel of things people want to attach themselves to as an idea and as a feeling.”
Article from the Rapaport Magazine - December 2009. To subscribe click here.