Demographic Shifts Mean Growth In Consumer Demand For Luxury, According To New Study From Unity Marketing

Furniture World Magazine

As the nation's retailers and marketers rush to discounting, seeing Wal-Mart's phenomenal success with "everyday low pricing" and deathly afraid to swim against the tide, businesses are challenged to see how low they can profitably go. Rumors that the luxury market is in the doldrums are making even staunch believers in selling at list price think twice about discounting. "The 20 or so companies that the stock market analysts group together and call the 'luxury market' may well be experiencing a slow down in sales. But the latest research into the consumer psyche reveals that all American consumers, to one extent or another, seek to satisfy their passions and desires through the things they buy. Today's luxury market isn't defined by high income or extraordinary wealth. "The luxury market today is you, me, and everyone from people living in trailer parks, suburban tract houses, "McMansions," on up to estates. After all, Wal-Mart is the nation's #1 retailer of jewelry, the epitome of a luxury product," explains Pam Danziger, president of Unity Marketing and author of the new research study, Luxury Market Report 2003: Who Buys Luxury. What They Buy, Why They Buy. Brand marketers' best option: Add more luxury value: With everyone else jumping on the discounting bandwagon, marketing and brand strategists must swim against the tide and find a direction in luxury. "When managing a brand, you can only go in one of three directions," Danziger says. The recent evolution of the beer market provides a perfect illustration: • "You can take your basic brand propositions, values and attributes and extend them horizontally across category, as Anheuser-Busch extends Budweiser to Bud Light. • "Or you can make your brand more mass by taking it to a lower-price point, so Miller Highlife is sold for the same price as popular-priced Busch beer. History has shown, and will continue to show, that discounting is a very hazardous direction to take a brand. • "Or you can move your brand up market, adding more value to the consumer by making it more premium, more special, more exclusive, more luxury, as Samuel Adams has done innovating the high-end craft beer segment. What's remarkable about this strategy is it is doable for any company or retailer at any place along the pricing continuum," Danziger says. Demographic shifts drive an expansion in the luxury market. Over the next 10-to-20 years, Danziger sees the market for consumer goods diverging, with clustering at the high-end and at the budget-level, without much middle ground, as a result of generational shifts in the marketplace. "Today the baby-boom generation of 76 million people falls within the ages of 39 to 58 years old. As a result, the majority of boomers are either already in the 'empty-nesting' phase of their life or shortly will enter that life stage," Danziger explains. "Empty-nesting consumers are at their peak in earnings while they no longer have to stretch the family budget across the demands of growing children. That means they have lots of discretionary money to spend on personal luxuries so the prospects for marketers of luxury automobiles, jewelry, apparel, beauty products, sporting goods, among others, and luxury service providers, like spas, cosmetic and beauty treatments, travel, and landscaping to name a few, are particularly bright. "Empty-nesting boomers are now connecting with the outside world and emerging like butterflies from the cocooning lifestyle that has been the focus of their energy for the past 20 years." While the boomers pursue the luxury life on their own terms, over the next 10 years the much smaller generationX cohort, comprised of only 45 million individuals and born between 1965 to 1976, will be in the family, hearth and home life stage out of which the boomers just passed. "Home marketers will feel the pinch as the diminutive genX population can't keep up the frantic pace at which boomer generation consumers had been accumulating things for the home," Danziger says. The spike at the economy, budget-end of the consumer market will arise from the maturing of the millennial generation, the babies of the baby boomers, whose leading edge today is 26 years old. This is the age associated with first marriage, so over the next ten years the move of this generation into their family-formation and children-rearing life stage will increasingly pick up steam. Selling Luxury Means Selling a Feeling: According to Danziger, luxury marketing is all about selling a feeling, which requires marketers to position their products and services as essential tools to achieve the desired feeling and support consumers in the ultimate pursuit of their passion. "A great example is the new passion for wine. Besides a great bottle of wine, you also need fine crystal wine glasses, a different shape bowl for each type of wine; a $100 rabbit-ear cork screw; a temperature and humidity controlled refrigerator; books, magazines, newsletters to keep up with the latest vintages; and even the little sterling silver wineglass charms that tell you which glass is yours. Luxury marketing is all about the passion and everything from the marketing materials, the selling environment, the packaging and delivery of the product to the actual experience of the product must enhance the luxury experience," Danziger says. Adding luxury value doesn't necessarily have to add to the cost of goods. "Luxury is for everyone and different for everyone," Danziger says. "In the coming years the luxury market is going to hold the most promise for marketers across the whole spectrum of price points. Whether you are selling your products at Wal-Mart or in a boutique on Rodeo Drive, the consumer wants to experience that special feeling of luxury." The new report, Luxury Market Report 2003: Who Buys Luxury, What They Buy, Why They Buy, will improve business planning and make it more successful by providing the facts and figures marketers and retailers need to understand the luxury market now and into the future. Based upon an integrated qualitative and quantitative research study among affluent (incomes of $50k-$99.9k) and super-affluent consumers ($100k and above) conducted in association with House & Garden magazine, the report analyzes consumers' purchase behavior among 14 different categories of luxury products and seven luxury services in the past year. This 200+ page report is available for $2,250 from Unity Marketing. For more information, go to http://www.unitymarketingonline.com/reports/luxury/luxury.html About Pam Danziger & Unity Marketing: Founded in 1992, Unity Marketing is a marketing research and consulting firm that specializes in consumer insights for luxury marketers. Using its proprietary "why people buy" strategy, Pam Danziger, company founder and author of Why People Buy Things They Don't Need (Ithaca, NY: Paramount Market Publishing, 2002), uncovers the motivations, desires and emotional needs that drive consumers to buy. Unity also publishes market research studies on the luxury market, art, jewelry, gifts and collectibles, personal care markets, as well as the Luxury Business newsletter. Pam is currently working on her next book, Let Them Eat Cake: Marketing Luxury to the Masses (as well as the Classes), to be published early in 2004.