Soaring prices of luxury branded goods prices tests wealthy’s willingness to pay
The question is whether today’s affluent customers have reached a tipping point in which their desire for luxury no longer exceeds the price they are asked to pay. New consumer research from Unity Marketing suggests that 2014 may be the year when luxury marketers must confront that tipping point which will challenge their traditional branding and marketing strategies and their underlying assumptions about their target customers.
Changing times call for changing business strategies, Pam Danziger, president of Unity Marketing, advises. A new study conducted among over 1,300 affluent luxury customers spotlights opportunities for marketers that might otherwise be missed without rigorous research. This research is highlighted in the new luxury trend report Luxury Market Trends for 2014: What’s Ahead for the Affluent Market in 2014 and How to Take Advantage of the Opportunities.
“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,” says Danziger.
“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. Unity Marketing’s recent study points to the fact that the age of the customer, rather than income, is a more important predictor to identify a brand’s best prospects.” This new study will help marketers focus on these high-potential younger customers who may be new to many luxury brands that historically focused on the over 50 year old crowd.
Recent trends in affluent consumer demand and spending for luxury goods reveals many affluents are trading down to less expensive brands.
As past consumer behavior is often the best predictor of future behavior, the new report examines recent trends in affluent consumer behavior. 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. 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.
This is exactly the pattern which the recent survey shows. It sends a clear signal that luxury brands can’t keep doing the same things and expecting to succeed. Marketers need to build connections with the young affluents, ages 24-44 years with incomes over $100,000, that are more willing than their seniors to trade up to luxury brands.
Danziger says, “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.”
The new trend report highlights some trend setting brands, like Michael Kors, Uniqlo, Black Box Wines, Top Shop, and Havaianas that have successfully captured the generous spending of young affluents by playing to their unique sensibility. Young affluents are turning away from brands that primarily are used as status symbols. Conspicuous consumption is rapidly becoming passé as the 1% are increasingly vilified. Instead young affluents want brands that reward them with pride of ownership and send a smart-shopper message.
“The new report looking at the luxury market in 2014 is a quick but in-depth look at the current luxury customer market: what they are buying, how much they are spending, and where they are going in the future. It provides marketers with new insights and new ideas that can stimulate cutting-edge concepts and marketing strategies that will help growth for 2014 and into the future,” Danziger said.