Luxury Goods

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Purveyors of luxury goods traditionally have used various types of media and promotions but have focused on magazine ads, exclusive events and radio spots in subtle campaigns that emphasize exclusiveness, quality and the idea that the consumer is "worth" the goods advertised. Throughout the 20th century, the luxury goods market remained one of the fastest growing of all product categories, a growth that abruptly slowed with the economic slowdown that ushered in the 21st century.

"You're worth it"

In the U.S., the marketing of luxury goods began in earnest in the 1950s, when the country was celebrating peace and prosperity. Steady numbers of newly wealthy people were becoming first-time luxury buyers. While they wanted to appear at ease with their new station, they also needed discreet guidance—thus, the requirement for subtlety and precision targeting on the part of advertisers.

Martex was one of the first U.S. luxury goods marketers, introducing the Patrician towel. It followed with a posh, 14-piece Patrician gift set labeled as an "exclusive" in its ads. The words "limited edition" and "registered" were used in its Wall Street Journal advertising. It also created the "Towel Girl," an image that became its hallmark. Once the symbol was established, the company's advertising agency, Ellington & Co., reduced the size of its ads, placing partial ads instead of the customary spread.

Still, there were those children of the Depression who needed to be convinced that they deserved to own upscale goods. Pinch Scotch hammered home the theme that, more than ever before, people were pampering themselves and their families with "an inch of Pinch." The ads, headlined "Wealthy" and "Worldly," ran in leading business publications targeted at upscale males. The copy read, respectively: "Wealthy: Look at it this way. Your daughter has never spent a nickel in her life. $5, yes. $50, yes. $500, easy. But never once a nickel. Why are you still drinking ordinary scotch?" And "Worldly: Look at it this way. Your wife feels that the tan she gets in Greece is more even and long-lasting than the tan she used to get in Atlantic City. And you're still drinking ordinary scotch?"

Advertisers in the 1950s also tried to change traditional notions of what luxury was. Towle Manufacturing, which marketed sterling silver, used ad campaigns to alter ingrained attitudes about silver. Young brides were no longer selecting sterling; money that used to be invested in sterling instead went to work-saving appliances that led to a casual lifestyle. The Towle campaign, created by C.J. LaRoche & Co., showed that sterling not only fit easily into the informal life but also would bring elegance and beauty to any meal, from buffet to barbecue. Ads showed mundane foods while headlines declared: "Beans become cassoulet with Towle's new sterling pattern" and "Rice becomes Risotto Milanese." The ads ran in Holiday, House Beautiful, House & Garden, Living for Young Homemakers and Seventeen as well as in bridal magazines.

Advertisements for mink coats followed much the same line—that luxury items were not simply for the older, patrician person but for "on the move" everyday career girls, too. In 1970, the young married woman and the single career woman were targets of the Scandinavian Mink Association's fall and winter ad campaign for Saga mink. The all-print program aimed itself primarily at families with annual incomes of more than $15,000 per household and also at the younger woman who could be expected to move into the upscale market. Ads from J. Walter Thompson Co. were headlined, "Mink is Friday night and Saturday morning" and "Life is too short and winters are too long to go without mink" and ran in women's service and fashion magazines.

Subtlety and sophistication

One of the most successful ways marketers create an upscale audience is by hosting "exclusive" events. Chrysler Corp.'s events in 1958 succeeded in boosting sales of its Imperial by 300%. Chrysler and its agency, Young & Rubicam, realizing that there was a certain class of car buyer who would never set foot in an automobile showroom, threw an "Imperial Ball in New York." Invitees were the cream of society. Prior to the ball, Chrysler pushed the snob-appeal theme in upscale magazines and page ads in newspapers, but the only sales push at the event was the presence of an Imperial in the hall.

In 1959, Chrysler hosted golf exhibitions in Florida to tout the Imperial, inviting The company invited almost 7,000 upscale consumers to see the game's top professionals. Clearly, the message was that Chrysler wanted the Imperial name to be associated only with those who could afford it.

In the late 1950s and early '60s, Cadillac had more money to spend than the other luxury car marketers and therefore did more advertising than the Imperial or Ford Motor Co.'s Lincoln Continental, which primarily used newspaper ads created by Kenyon & Eckhardt. Cadillac ad agency MacManus, John & Adams used spot radio. Chrysler's Imperial was the only model advertised on TV.

But magazines were the principal medium for all three automakers. It was in the print media that Cadillac marketing executives said they "zeroed in" on the Cadillac prospect. Diplomat, Town & Country, Park Avenue Social Review, and Palm Beach Life & Social Spectator all carried the Cadillac message. The Chrysler Imperial was advertised in more general-interest magazines.

In the mid-1960s, FM radio became a new medium for reaching the wealthier consumer. It was noted that selecting FM would give advertisers the opportunity to double their chances of reaching the luxury consumer, especially luxury car owners, within the audience available. In eight years, sales of FM radios increased 25 times, to more than 5 million sold in 1963.

The new affluence

Luxury products in the 1980s and into the '90s were purchased by investment-minded consumers who were highly educated and attentive to their buying decisions. They had money to burn, but not indiscriminately. Image did not mean as much to these newly affluent consumers as to their predecessors.

While in the past, luxury marketers could get away with relatively small advertising budgets, the situation started to change. Cartier International, for example, increased its ad budget 35% in 1996. Media fragmentation made it possible to target wealthy investors and intermediaries more efficiently, thanks to the creation of specialized cable TV channels such as CNBC, MSNBC and the Golf Network, as well as investment magazines and Web sites.

Business and new-economy magazines became prime outlets for luxury advertising, as marketers targeted Wall Streeters and the new breed of dot-com millionaire. Luxury advertisers in Fortune included Giorgio Armani and DeBeers Consolidated Mines. Marketing strategies designed to reach the wealthy continued to rely in large part on the traditional social events and entertainment outings, however; advertisers believed those types of affairs solidified personal relationships.

By the late 1990s, a different type of upper class was emerging, thanks in large part to the technology boom that produced so many instant millionaires. By 1999, about 30% of the world's 7 million millionaires lived in North America. In its 1999 ranking of the richest Americans, Forbes listed 268 people with a net worth of more than $1 billion, compared with only 13 in 1982. What separated the new money from the old was the newcomer's seemingly endless appetite for information; the new rich demanded unique experiences tailored to them and wanted to participate, be it in cooking classes in Provence, France, or wine classes at their local wine seller.

However, the economic downturn that ushered in the 21st century hit the new rich hardest, leaving upscale marketers facing a new set of challenges. According to Forbes, the net worth of the 400 richest Americans dropped from a high in 2000 of $1.24 trillion to $885 billion by 2002; the number of billionaires dropped from 298 in the 2000 ranking to 225 in 2002. By 2003, a recovery was under way, as the net worth of the 400 richest Americans rose to $955 billion, and the number of billionaires increased to 244.

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