Following the wealthy's early '90s examination of conscience, some of the richest Americans are today still drawn to the practical luxury of the sport-utility vehicle and pricey back-to-basics Smith & Hawken gardening tools. Others, mostly those on the way up, want to show off as many new toys, houses and cars as they can buy. Today, consumers who can afford to buy high-end goods differ not only by generations but by attitudes as well.
Don Ziccardi, president-CEO of New York ad agency Ziccardi & Partners, whose clients include fashion designer Ellen Tracy and Loews Hotels, examined the landscape of the affluent to divine exactly who has the bucks and who is most likely to spend them. He's penned a book, due out in September from MJF Books, titled "Influencing the Affluent: Marketing to the Individual Luxury Consumer in a Volatile Economy."
FOUR KINDS OF LUX PRODUCTS
Luxury products today can be divided into four categories, according to Mr. Ziccardi. The top-end luxury brands, class brands such as Bentley and Cartier, are one category and will always be aimed at the wealthiest of the wealthy.
The second category, class gone mass, includes those brands that have added an entry-level product, priced more affordably, to their product lines. Examples include the Rolex Tudor watch, retailing for about $1,000, compared with a Rolex Submariner, usually priced at $8,050. The new Mercedes C-Class line even advertises that certain models start at under $30,000.
Then there are the mass brands that have taken on the patina of class, or mass gone class, such as Banana Republic's upscale yet still affordable fashion or Pottery Barn's home furnishings.
Finally, a new class of luxury products has emerged, what could be tagged everyday luxury items such as Starbucks' Caffe Latte or a Bliss Spa massage.
Among those who buy these products, "The rich are not created equal," says Randy Jones, president-CEO of Worth Media, which publishes Worth magazine. "There are certain spenders and certain savers, and they have a totally different money personality."
And a brand message needs to be targeted based on those money personalities.
"Who are you as a brand and how do you reach the consumer who will most likely respond to your message? Consumers want to hear the same things about your brands, but they may need to hear it in different ways," Mr. Ziccardi says. "Brands need to speak in one voice, yet still appeal to the different types of consumers, without ending up sending mixed messages."
types of consumer
Each of these different levels of luxury goods holds an appeal to a certain type of consumer. Mr. Ziccardi also has segmented consumers-by age, how they acquired their money, as well as which socioeconomic trends will influence their spending decisions.
The first group, dubbed "Millennium Money," consists of those who benefited most from the last decade's expansion: dot-com and high-tech millionaires, athletes and entertainers. This group came into their money suddenly through their own talents. As a result, the younger generations of this group, whom Mr. Ziccardi calls "Power Children," are quick to question whether they deserve their fortunes and tend to be community minded as a result. Those over 35, termed "Late Bloomers," tend to have traditional values and are more influenced by brand quality than using brands to state their identity.
The "Old Money" group includes those whom most people think of when they think of the rich. These are the families who've passed fortunes down over generations, thus they tend to be the most conservative. The younger of this group, the "Trust Fund Babies," carry with them a strong heritage and culture of the past, and tend to stick to their own social circle. The older "Old Money" folks, whom Mr. Ziccardi dubs the "Grey Pouponers," are not only conservative, but they feel they deserve their privileged lives. However, this group also believes strongly in philanthropy.
Both "Millennium Money" and "Old Money," interestingly, subscribe to the same types of socioeconomic values, Mr. Ziccardi found. He calls it "Grass-roots Lux." These groups like to think of themselves as down to earth, albeit with plenty of cash on hand. They present themselves as bohemians, who also happen to hold MBAs or degrees from Ivy League schools. They favor New York City neighborhoods like Greenwich Village, SoHo and the Upper West Side. They drive Range Rovers and buy products they call practical, such as Sub-Zero refrigerators and Viking stoves, which most of America would view as extravagant.
Below "Millennium Money" and "Old Money" in income levels are the groups Mr. Ziccardi calls "New Money" and "Middle Money."
"New Money" includes self-made people who have climbed the corporate ladder to the highest levels and are now enjoying their wealth. The younger of this group, the "Freshmints," are highly aspirational, quick to show off their latest purchase and generally act like kids in a candy store, satisfying every whim. The group aged 35-50, the "Reaganauts," are the recent empty-nesters who believe in investing in the market. They also tend toward free spending, but it's tempered with age. The "Country Clubs," those born before 1942 in this "New Money" group, are mainly retired senior executives who still hold a lot of admiration for the "Old Money" set.
`MIDDLE MONEY' TIER
The lowest-tier luxury consumer, dubbed "Middle Money," includes the upper middle class that can afford some luxury products but still has to live within their means. Those under 34 in this group, the "Generation Gap," are the biggest buyers of mass to class products. They aspire to values, trends and wealth of the uppermost tiers.
The boomers of "Middle Money," known as the "New American Dreamers," aren't above using credit to maintain a luxury lifestyle. Still, they're price sensitive and will look for a deal before they buy. Those born before 1942, the "Shuffleboarders," are the most insecure about holding onto their money and are the least likely to respond to luxury brands.
The "New Money" and "Middle Money" groups tend to ascribe to the socioeconomic values of strivers. They're working so their kids, or grandkids, can have the silver spoon in their mouths. Those groups believe they're entitled to a luxury lifestyle. They're aspirational, have their bachelor's degrees and maintain a strong work ethic. These are the people living in the suburbs, driving their Land Rovers, stopping daily at Starbucks, visiting day spas and shopping at the Gap.
All luxury consumers, however-no matter whether they're "Power Children," "Freshmints" or "Grey Pouponers"-tend to be influenced by generational values when it comes to spending. The younger the consumer, the more they tend toward "Zen Spending." These kids are more educated and wealthier than their predecessors, so they often make purchases to satisfy a yearning for spiritual and intellectual meaning. Pure and natural cosmetics purveyor Aveda, community-minded Ben & Jerry's and Rowenta USA with its "Feng Shui of Ironing" brochure, used to sell its irons, all make sense to this group.
Those in the middle, at the upper end of Gen X into the baby boomers, experience "Class Fusion." They borrow attitudes from those above and below them. They buy products that reflect a mix of culture and counterculture, and view themselves as avant-garde and non-conformist. They buy townhouses in New York's Harlem, Hell's Kitchen and gentrify the Upper West Side. They wear Marc Jacobs and Burberry, carry portable DVDs, and frequent restaurants in New York's Meat District. They may have money, but they like to stay in touch with the unconventional and artistic types.
Those at the upper age range of the boomers and the group born before 1942 are most likely to ascribe to "Gold Coast Syndrome." They believe more is more, and are very demonstrative of luxury possessions. They buy designer anything, and prefer addresses on Park Avenue, Sutton Place or in Palm Beach.
Worth Media's Mr. Jones recommends luxury marketers in a downturn go after those "who have a genetic predisposition to spending. ... There are wealthy individuals who aren't full of financial anxiety, still in control of their money."
He points to the type of affluent household described in the book "The Millionaire Next Door" by Thomas J. Stanley. "They are the worst kind of consumer, they sat on their wealth. What a marketer wants is to find people who look at money as a means to an end to a more fascinating, exciting life. The last 10 years of a bull market have conditioned the affluent to spend; that's not an easy habit to break. There are people who believe retail therapy is what they need once in a while." In other words, the "Freshmints" and the "Reaganauts" would make good targets during this downturn, as would those who hold onto their wealth no matter what the stock market does, the "Old Money" folks.
small dot-com segment
In fact, an American Express Publishing Corp. study this year found the new class of wealthy Americans created by the dot-com revolution is a tiny slice of the market. Most of the nation's affluent are middle-aged, mainstream, modest and driven more by values than flash. Only 6%, or one out of 16 wealthy Americans, credit the dot-com boom for building their wealth.
Don't expect consumers to step up and tell you they're among the rich. More than half of all millionaires (54%) describe themselves in the study as "upper middle class."
According to Mr. Ziccardi, class and class-gone-mass marketers during this downturn need to keep a consistent brand message, and emphasize quality as a way to portray their products as a smart investment. Mass-gone-class and everyday-luxury products should send the message that their products are affordable alternatives during tight times. Consumers want to feel they can still afford the good things in life, he says, even if it's just a $3.50 Starbucks Grande Caffe Latte.