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Attract Young Affluents to Survive Changes in Luxury Spending

Mar 11, 2014 12:46 PM   By Jeff Miller
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RAPAPORT... The affluent consumer segment in the U.S. has remained fairly resilient in the past several years, but Unity Marketing warned luxury goods marketers of a bumpy road ahead, especially if they fail to play into the sensibilities of a ''generous spending'' pattern observed by wealthy, young shoppers. Unity Marketing surmised that the ''traditional affluent customer,'' who is older, may have reached a tipping point this year, as their desire for luxury no longer exceeds the higher prices they are asked to pay.

Unity Marketing suggested that U.S. luxury marketers must confront that tipping point by challenging their traditional branding and strategies as well as  their underlying assumptions about their target customers.

The group's ''Luxury Market Trends for 2014:  What's Ahead for the Affluent Market in 2014 and How to Take Advantage of the Opportunities,'' concluded that higher prices at top luxury brands are pressuring affluent consumers to trade down to less expensive brands.

''For example, affluents' overall demand for luxury goods such as clothing, fashion accessories, jewelry, watches, beauty, personal electronics, wine and spirits and other personal luxuries rose at the end of 2013, but spending is off by 31 percent from same period in 2012,'' Pam Danziger, the president of Unity Marketing, explained.  ''Such a pattern -- a spike in demand, but a decline in spending -- points to luxury shoppers taking advantage of sales, discounts and trading down to less prestigious brands.'' 

The survey confirmed that luxury brands can't keep marketing in the same way and expect to succeed, she added. Marketers need to build connections with the young affluents, ages 24 to 44, with incomes of $100,000 or more,  who are more willing than older wealthy shoppers to trade up to luxury brands. 

"While income and wealth demographics are frequently used by luxury marketers to identify their best prospects, knowing that a prospective customer has enough money to pay luxury brand's high prices isn't enough to predict who is most willing to spend that money to buy,'' said Danziger. The group's survey of 1,300 affluent consumers  found that the age of the customer, rather than his or her income, was a more important predictor of a brand's best prospects. The study focused on high-potential younger customers who may be new to many luxury brands that historically have focused on the over-50 crowd.
"With so many unknowns, luxury marketers need to focus on the customers that offer the best prospects for growth both now and into the future, and that is the younger generation of consumers on the road to affluence.  Marketers need to understand their special needs and desires and configure marketing and branding strategies to attract their loyalty.

"Demand for high-end luxury goods and services is greater across the board among young affluents than matures 45 years and older.  What's more, young affluents consistently spend about 50 percent more than mature affluents on luxury.  Understanding this young consumer and what they value is critical to find growth in 2014 and in coming years," Danziger said.  

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Tags: affluent, brands, Jeff Miller, Jewelry, luxury goods, Pam Danziger, spending, Unity Marketing, younger generation
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