Given the widespread impact of this recession on the previously recession-resistant luxury consumer market, luxury marketers and retailers have no historical precedent that will help them plan for the future of the market after the recession. To fill that information gap, Unity Marketing announced that it undertook a special research investigation to measure how the current recession is affecting the luxury market today, specifically what do luxury brands and retailers need to know about their customers to help them plan for the future after the recession is over.
"Significant growth in the luxury market over the last several years has been a result of people spending their 'perceived wealth,' as measured by rising the value of their home and gains in their investment portfolios," explains Pam Danziger, president of Unity Marketing and author of the new study examining the effect of the recession on the mindset of the affluent consumer.
"But now their wealth is gone and they are back to living off their income. The fact is it takes four-to-five times the average income for a household ($67,609) to have any significant money to spend on luxury brands. There are only about 2.3 million of the nation's total 115 million U.S. households that live at that level of income, or roughly 2 percent. People with incomes only two-to-three times the national average live a fairly comfortable life, but they don't have a lot of discretionary income left over to indulge often in luxuries," Danziger says.
The research included a series of focus groups conducted in Beverly Hills, California among highly-affluent and highly-engaged luxury shoppers. Beverly Hills was chosen for this study because this community is ground zero for the conspicuous consumption lifestyle. The focus groups were followed by a quantitative survey among 1,041 luxury consumers (i.e. affluents who bought one or more luxuries in the study period.).
New research investigation examines how luxury consumers are responding to the changes in their lifestyles -- and what will happen once the recession is over
The survey found that the majority of affluent consumers have experienced not just a decline in personal wealth as measured in their investment portfolios and home values, but significant changes in their incomes as well. Most notably one-third of those affluents who feel the pain have experienced a drop in bonuses and commissions. This cut in bonuses and commissions has had a proportionately greater negative impact on luxury marketers and retailers, since much luxury spending is stimulated by 'found money' that bonuses represent.
As luxury brands and retailers have felt the effects of a cut back in both spending and in the number of affluent shoppers active in the market, they have responded by chopping prices to stimulate sales. Which leaves a nagging question for all brands involved in the discounting of previously undiscounted luxury brands: Is offering a luxury brand at a discount a good way to breathe life into sales figures, or a nail in the coffin of that brand's reputation?
Unity Marketing, a firm dedicated to delving deeply into the mindset of the affluent shopper and giving its clients reliable facts and figures, not just anecdotes and opinions, conducted the research to answer these critical questions about the future of the luxury market:
What does luxury mean today among affluent consumers? Has it changed as a result of the recession and will it be different after the recession ends? How much of the cut back in luxury spending is driven simply by 'recession chic' and the desire not to be too conspicuous and how much by a fundamental shift in affluents' value system?
Since luxury consumers have gotten off the consumption 'tread mill' and have had time to ponder what they need versus what they desire, they are going to make different decisions about their discretionary spending once the recession is over. Luxury marketers can get out in front of these changes to attract these reformed affluents who have given up the conspicuous consumption habit.
How can a luxury brand connect with the new psychology of the affluent shopper who has been hammered in this recession?
This study addresses where the true value of luxury lies. It answers how brands can maintain their perceived value in order to command higher prices without being perceived of as out-of-touch or living in the past.
What does the future hold after the recession? How will affluent consumers express their desire for a luxury lifestyle in the new economy? What will be the 'new normal' in the luxury market after the recession?
A cultural shift is occurring that is a shift toward traditional values along with more responsible, less extravagant consumption. Find out what this will mean for luxury brands and how they must adapt for the future.
Luxury marketers need to get ready for the big changes that are coming after the recession.
"Luxury marketers need to get out in front of the changes that this recession brings for the affluent consumer market. That is why Unity Marketing conducted this important research investigation into the new psychology of affluent consumers who are dealing with changes in their financial status," explains Danziger.
"Affluent consumers are redefining, reassessing and reevaluating their lives and their lifestyles. This is happening across the culture, not just among a small segment of the affluent market and it will mean major shifts to how luxury brands can market their goods in the new economy. This report will be an invaluable tool for luxury brands and marketers to get ahead of the shift so that they can plan for the 'new normal' that is coming. Once the recession is over, the luxury consumer market is not going to go back to its spend-thrift ways. Change is coming and for many marketers change is here already."
About Pam Danziger and Unity Marketing
Pamela N. Danziger is an internationally recognized expert specializing in consumer insights, especially for marketers and retailers that sell luxury goods and experiences to the masses as well as the 'classes.' She is president of Unity Marketing, a marketing consulting firm she founded in 1992.
Advising such clients as PPR & Gucci, Diageo, Waterford-Wedgwood, Google, Swarovski, GM, Orient-Express Hotels, Italian Trade Commission, Marie Claire magazine, The World Gold Council, and The Conference Board, Pam taps consumer psychology to help clients navigate the changing consumer marketplace.
Her latest book is Shopping: Why We Love It and How Retailers Can Create the Ultimate Customer Experience (Kaplan, $27) is in the bookstores now.
Her other books include Let Them Eat Cake: Marketing Luxury to the Masses-as well as the Classes, (Dearborn Trade Publishing, $27, hardcover) and Why People Buy Things They Don't Need: Understanding and Predicting Consumer Behavior (Chicago: Dearborn Trade Publishing, 2004).
She has appeared on CNN's In the Money, NBC's Today Show, CNBC, CNN International, CNNfn, CBS News Sunday Morning, Fox News' Your World with Neil Cavuto, ABC News Now, NPR's Marketplace and is frequently called upon by the Wall Street Journal, New York Times, American Demographics, Women's Wear Daily, Forbes, USA Today, Associated Press, Los Angeles Times, Chicago Tribune for commentary and insight.
For more information visit http://www.unitymarketingonline.com