Paradox of Pleasure

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Enter through the gates of Tinseltown Studios and your pulse starts to quicken. The light bulbs begin to flash and the autograph seekers close in as they clamor to get a glimpse of one of the stars of the evening: You! Follow the red carpet and you find yourself in a bar where Hollywood glamourati scrape and fawn over your every move. In the banquet hall, you are treated to a sumptuous dinner while you watch celebrity interviews on a gigantic screen featuring... you, the celebrity of the moment. For two-and-a-half hours, you get to enjoy life at the pinnacle of status-all for about $45.

At such prices, this seven-month-old dinner theater in Anaheim, California, which recreates a glamorous Hollywood premier every night for about 650 celebrity wannabes, represents a relatively upscale treat for its primary audience-middle income, middle-class Americans. But that's part of the attraction. "Some people really play it out," says Tom Etter, senior vice president of Ogden Entertainment, owner of Tinseltown. "Some [patrons] dress up in tuxedos and evening gowns, rent limos, the whole thing." Such lifestyles-of-the-rich-and-famous posing, he says, confirms Ogden's hunch that middle-income consumers, who have made interactive entertainment a hot business, are hungry for something a little more upscale. "Our idea," says Etter, "was to create something that appealed to adults who want to have a nice dinner with china and tablecloths, instead of eating chicken with their fingers."

The finer things in life-a great meal, the best clothes, pampering service-are in vogue again, and not just for the monied class. The exaggerated allure of Tinseltown Studios reflects the universal desire of the late-'90s consumer to be treated as someone special, to feel the pleasures of living large. Of course, many Americans have been enjoying the luxe life for a while now. Driven by the heavenward ascent of the Dow, low unemployment and inflation, and vast numbers of duel-income boomers in their prime earning years, a consumer spending spree has powered the U.S. economy safely past the contagions of economic woes in other parts of the globe. Marketers have responded with a ceaseless array of pricey, upscale products aimed at satisfying wealthy Americans' appetite for "the very best": leather-lined SUVs as big as tanks, $1,300 sheets, restaurant-quality appliances (for kitchens where hardly any cooking gets done), and vast cruise ships offering every form of luxurious coddling.

And this upscaling of the upper crust has hardly escaped the attention of mainstream consumers, regardless of income level. According to a July 1998 survey by Roper Starch Worldwide, respondents credited virtually every form of flaunting it with more prestige in 1998 than in 1996. Seventy-two percent of Americans said owning a vacation home qualified as a status symbol, up 3 points from two years earlier; 67 percent considered eating at expensive restaurants a badge of the rich-and-famous, a 6 percent increase; owning an expensive car said "I've made it" to 71 percent, 8 points higher than in 1996. On average, Americans were 6 percent more likely to grant status to the 20 trended items than they were just two years earlier.

In his latest book, Robert H. Frank, professor of economics at Cornell University, dubs this limitless appetite Luxury Fever. Huge increases in wealth among the very rich have fueled the sales of $17,500 Patek Philippe watches that are sold as family heirlooms (thus justifying the price tag), created the clamor for a $48,000 Lexus (options extra), and resulted in a two-year waiting list for $14,000 Hermes Kelly bags. While only a tiny fraction of consumers can afford such indulgences, Frank argues that this sky's-the-limit upscaling has raised the stakes for all consumers, sweeping up Americans at every income level into a status spiral that makes the middle-class good life ever more expensive to maintain.

Frank argues that luxury fever is a disastrous trend for middle-income Americans, whom he portrays as being dragooned into the upscale lifestyle by those who earn more. Consider the expanding American home: In the 1950s, the average house was 1,100 square feet. Today, according to the National Association of Home Builders, a new home averages nearly 2,200 square feet. And 30 percent of new housing tops 2,400 square feet, 12 percent more than in 1986.

Frank insists that, for households with before-tax earnings of $30,000 to $50,000 (roughly placing them in the fourth quintile of U.S. households, according to the Bureau of Labor Statistics), "It's not just an issue of seeing something nice that you envy and would like to have. There are more basic issues at stake for someone who wants to be in a good school district for their children." Bigger, more expensive housing means it costs more to achieve the education that is the bedrock of the American middle class. The same can be said for cars; in 1998 the average price of a car topped $22,000, 75 percent more expensive than a decade earlier. As luxury features in appliances trickle down the product chain, base models become pricier, Frank says. It's as if, in the absence of real inflation, the artificial inflation of luxury fever continues to put the squeeze on the middle-income consumer.

Yet if the upward drift of prices for consumables forces middle-income consumers to spend more, there is also evidence they are volunteering to upscale their purchases. According to Simmons Market Research, from 1995 to 1998 ownership of premium sports cars (a category that includes Mazda RX-7s and BMW Z3 Roadsters) rose 18 percent in the $20,000-to-$49,999 group. Among the $40,000-to-$49,999 earners, 123 percent more were hitting the road in sports cars in 1998. Even luxury car ownership-Cadillac Cateras, Audi 4000s-edged up a percentage point between 1995 and 1998 in households earning $20,000 to $49,999.

In order to take home such trophies, consumers are spending to their limit and sometimes beyond. As of December 1998, consumers had borrowed almost $559 billion on their credit cards, helping fuel a hefty 5.7 percent increase for the year. In the meantime, according to the Economic Policy Institute, the rate of personal savings in the fourth quarter of 1998 fell to a big fat zero, bringing the annual rate to 0.5 percent, down from an already low percentage of 2.1 in 1997. It is not surprising, then, that the Administrative Office of the U.S. Courts reported 1.39 million filings for personal bankruptcy last year, up from 1.35 million in 1997.

Yet does Frank's "arms race" theory of spending, in which luxury consumables for the rich force everyone down the economic ladder to spend more to keep up, explain what middle-income consumers are buying, or why? Attitudinal consumer research says otherwise. It is the great paradox of the luxury-goods gold rush of the late '90s that even as consumer behavior indicates a passion for status purchases, consumers themselves claim that they couldn't care less about keeping up with the Rockefellers. Observes Roz Chernoff, a partner at Yankelovich Partners, "Status has become much more personal and intangible. Consumers are not buying so they can show off, but because it makes them feel good."

George Rosenbaum, CEO of the Chicago-based market research firm Leo J. Shapiro & Associates, puts the case even more strongly. "Middle-class buyers treasure their middle-class status," he says, and the values and ethics they associate with that. "They're not about to let the luxury buying habits of the rich destroy it. Today there's very little agreement about what constitutes luxury. But it's most likely to involve comfort, pleasure, health, savings of time, and preserving youthfulness." These attitudes, Rosenbaum says, translate into freer spending on restaurant meals and prepared foods, plus a focus on the home, with lots of luxury spending on bathrooms, kitchens, and home entertainment. The irony is that the less consumers say they care about status, the more likely they are to be free with their money. "When you believe in inherent value, as opposed to conspicuous consumption or buying for show and appearances, you are a much stronger consumer," Rosenbaum says.

Of course the vague term "middle class" can mean many different things. Rosenbaum characterizes it as households headed by adults with at least some college education, who "use a computer or keyboard to make a living," are involved in the education of their children, and have "some feeling that their standard of living will be maintained."

But with college graduates earning an average of almost $63,000, according to the BLS, these are likely not to be middle-income households, but ones belonging to the highest income quintile. How much of the buying behavior in the third- and fourth-income quintiles ($22,000 to $56,000) reflects these same values?

Observes Carol Davies, managing partner at Kane, Bortree & Associates, a New York City marketing consultancy, "'You're special' is a relevant message no matter what the income level. That's an emotional message and emotion works with all consumers."

What doesn't seem to work, however, is glamming up advertising, or projecting an image that is too upscale. "Middle income people have a kind of resistance to a very wealthy image," Davies says.

But they also appear to have more traditional notions of what constitutes the luxe life than those who can more easily afford it. What more classic symbol of the Tinseltown lifestyle could there be than a drop-dead fur coat? According to Simmons Market Research, in 1998 there were 63 percent more fur owners in households earning $30,000 to $39,999 than in 1995, and a whopping 98 percent more in households earning $20,000 to $29,999. Above $40,000, however, fur ownership either declined or rose very modestly-despite a huge effort among marketers to restore the glamour quotient of fur over the last couple of years.

Other familiar signs of success score a bit higher among middle-income consumers than among those who are wealthier. In the 1998 Yankelovich survey, 24 percent in the $20,000-to-$49,000 income group agreed that "the only really meaningful measure of success is money," against 19 percent of those earning more than $50,000. In the same vein, 59 percent of the lower-income respondents said they would rather buy "something expensive that I could keep and enjoy for a long time" than splurge on a trip abroad, while only 51 percent of the higher-income group expressed that preference. Lower-income groups also showed more old-fashioned status consciousness: 21 percent said they selected a brand because it "lets other people know where I am on the social ladder," while only 17 percent of wealthier respondents cited that as a reason to choose a brand.

These more traditional notions about upscale consumption are also reflected in study by WSL Strategic Retail, "How America Shops." While all other income groups reported shopping less often in department stores in 1997, according to the survey, the frequency of department store visits among those with incomes from $25,000 to $44,000 held steady from 1996 to 1997. They are the stalwarts of this beleaguered retail category. The changing habits of ethnic consumers (defined in the study as those who did not describe themselves as Caucasian) also sheds indirect light on the changing habits of middle-income shoppers. Their visits to department stores increased 10 percent, and they represented the only group to shop more often in malls (5 percent) in 1997 than in 1996.

According to WSL's Candace Corlett, such behavior is the flip side of the phenomenon of more upscale consumers shopping at mass merchandisers: 19 percent of shoppers in households earning more than $70,000 said that they frequented such stores more often in 1997 than a year earlier.

The common denominator that holds all of these groups together, Corlett says, is their confidence that they "know how to get value. For the middle-income shopper that great buy might be a crisp white shirt from Macy's, while for the upscale shopper, it's a crisp white shirt from Target."

At the same time, there are signs that some of the items commonly found in fifth-quintile households are trickling down. Consider home entertainment. According to Simmons, the number of people in the $20,000-to-$29,999 crowd with a new home theater audio system edged up 2 percent from 1995 to 1998, and jumped 39 percent among households earning $40,000 to $49,999. Ownership of laser video disc players, though down 20 percent in $50,000-to-$59,000 households, rose 14 percent among those earning $30,000 to $39,999, and 20 percent in the $40,000-to-$49,999 group during the same period.

Spending on restaurant meals is another bellwether. In 1995, the first year the BLS analyzed consumer spending by education level, lower-earning high-school graduates devoted nearly 34 percent of their annual food expenditures to meals outside the home, compared to 45 percent spent by college graduates. In 1997, as the percent of the total spent by the college educated increased to 47 percent, the high- school grads kept pace: spending on meals away from home accounted for 36 percent of their annual food outlays. And these figures don't count take-out or prepared foods purchased at stores and super markets, which qualify as in-home eating by the CES.

Upscale consumers have also undergone what has been described as an "aestheticization" of taste. It is this desire for aesthetic pleasure among the well-to-do that has driven the feel-good-against-the-skin cashmere sweater vogue, as well as the penchant for exotic travel. In contrast, middle-income consumers seeking the same pleasures inevitably bump up against the realities of their disposable income and credit-card limits: According to Simmons, the number of households in the $20,000-to-$49,999 income range who said they had taken a cruise vacation in the previous three years declined from 1995 to 1998, as did the number who'd gone to a health or resort spa, or stayed at a hotel or motel on vacation in the previous year.

Yet middle-income people do show signs of spending more on entertainment and other aesthetic treats. From 1992 to 1997, according to the CES, spending on movie, theatre, opera, and ballet tickets in households in the third quintile rose nearly 20 percent; it went up 14 percent for members of the fourth quintile. It's little wonder that a recent promotion at some McDonald's, restaurateur to the masses (which now offers cappuccino on the menu), offered tickets to the Broadway musical Jekyll & Hyde, advertised on the backs of french fries containers.

The fact is, when it comes to consumption, Americans are not particularly class-conscious. Their means may differ, but they are fairly unanimous in their growing desire for indulgent service, comfort at home, and diversion on the town.

Which may explain the success of Yorktown Premium Cinemas of Lombard, Illinois, not far from Chicago. If Tinseltown allows middle-income people to indulge in the fantasy of being Hollywood stars, this movie theater lets them pretend they're Siskel & Ebert. At Premium, valets whisk customers' cars to the parking lot. Once inside the theater, patrons can sink into comfy business-class-airline-style seats or rocking chairs. A bottomless bag of popcorn comes with the theater ticket, and if that's not enough, for an extra charge movie-goers can order out for dinner and have it served to them in their seats. All the comforts of watching a movie on the VCR at home for an admission price of $15, roughly twice the cost of a movie alone. These are the kinds of added-value "luxuries" that coax dollars out of the pockets of middle-income people.

At least, until the credit cards come due.

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