Is Luxury Dead? Maybe Not
A clue: 84% of this group texts from cellphones; 78% use social networking; 66% use the mobile web and 57% use mobile apps.
It's not who you think it is. In fact, it's a group whose median age is 45, not 19.
According to "The New Face of Affluence," an in-depth study from Dwell Strategy and Research, San Francisco, these are the attributes that drive purchase decisions of the "New Affluents." Indeed, the median household income of the more than 1,000 survey respondents is nearly $200,000. They're the same people who have the economy and the environment top-of-mind when making these purchase decisions.
Using 2009 Mendelsohn Affluent Survey psychographic data, and with the help of DJG Marketing, New York, Dwell identified a segment of nearly 9 million Americans who have household incomes of $100,000 or higher. They represent less than half of 1% of U.S. households, spend $303 billion annually on their favorite brands and have a whole new take on what it means to be wealthy.
According to the survey respondents, "luxury" brands, per se, are no longer important to them, or even relevant; neither is "overall social status," they say. This generation of nouveau riche is shunning "conspicuous consumption" in favor of brands that represent quality, aesthetics and authenticity. These attributes, along with uniqueness, integrity, design and performance, represent today's "prestige" for these high-end consumers. And their emerging values and brand motivations make these consumers a more diverse group than one might assume.
A brand does not have to be expensive to attract New Affluents. What they're now demanding from brands is a new and different kind of relationship. And, as supported by these findings, the days of controlled, top-down brand marketing are over, especially for this sector. These wealthy and would-be elites are actually looking for brand interaction -- a dialogue -- based on integrity, authenticity and performance. And not only are they equipped for interaction, they're demanding it.
So what brands do New Affluents find meaningful, authentic and relevant? Apple, Sony, BMW and Ralph Lauren, unsurprisingly. But Crate & Barrel, Ikea, Whole Foods and Levi's, too. Porsche, Lexus, Chanel and Viking. And Target, North Face, Volkswagen and The Gap. Missing from this segment's 75 favorites list are classic luxury brands like Cadillac, Gucci, Louis Vuitton, Armani and Versace.
These New Affluents are smart (85% graduated from four-year colleges; 52% did post-graduate work) and hard working (50-plus hours per week -- both at home and in the office); their families are their No. 1 priorities (40% have children at home). And, at a median age of 45, they are well-off. But they got there through careers that for them are a means to an end (only 4% rated "career" as a No. 1 priority). Success for them is having the independence to involve themselves in family -- and their well-being. The qualities they most associate with "prestige brands" are aesthetics, innovation, integrity, originality and authenticity. They don't buy anything "to impress others."
The majority of New Affluents agreed completely that "technology is indispensable to the way I communicate." So, just like the Gen Xers so many marketers seem obsessed with, these New Affluents text, tweet and post on social networks. "They are powered by 21st century technology" -- all of which came of age when they did. It's an integral part of their lives. Google and Dell are among the most frequently cited brands as meaningful to them.
The study's takeaway will be no surprise to successful brand marketers, except perhaps that now it applies to this heretofore stratospheric source of revenue, too: Define an integrated, consistent and positive interaction that reflects your brand's values, and understand that these consumers depend on mobile connections and social networking just like their mass-audience counterparts.
In other words, cultivate a relationship, don't just sell a product. "Great brands create experiences, not products," say the majority of the study's respondents.
It may be time for more brands to consider this sector as a source of revenue. If you're authentic, functional and design-centric, and you know how to cultivate a genuine relationship between the brand and these New Affluents, then it may be time to consider some targeted, interactive communication with them. If you can generate a "personal connection" like their other top brands do, and engage them in a meaningful way, 86% are even willing to pay more for a brand they like. They are classic early adopters, and willing to embrace brands that heretofore might be considered unworthy. Some of their emerging top brands have already figured this out and are breaking new ground creatively and are using new media.
Many of their top brands eschew traditional advertising forums to focus on web outreach. Nordstrom is one of their many favored brands posting banner ads online. For some, targeted catalog distribution is a core marketing vehicle: Design Within Reach and Room & Board both distribute impressive catalogs on a regular basis, in addition to aggressive online marketing.
Other brands have maintained and even enhanced their cachet through a reliance on long-standing brand attributes that are now even more important to this sector: quality, design, functionality and innovation. These brands include BMW, Mercedes, Bosch, Nike, Hans Grohe, Volvo, Bose, Porsche, Rolex, Canon and Viking.
Even a big-box retailer has earned its way into New Affluent-favored status as one of these "authentic," "meaningful" brands: Target. In part through its bold "Expect More. Pay Less" positioning and advertising, Target has turned a seeming contradiction into a compelling design-driven platform -- one that has direct appeal to New Affluents. Target is once again realizing net earnings growth and increased margins, no doubt in part because they've added incremental appeal to a high-spending sector without losing their base. Target has successfully extended its customer relationships through ancillary programs such as "Dream in Color" and "Democracy of Design," and their many museum and theater partnerships, including the Target National Design Center at the Cooper-Hewitt Museum, New York.
Target has helped make good design accessible to everyone.
In fact Target has taken a page out of Russell Wright's mantra, "the importance of the value of good design in everything and for everyone." Wright, who preceded Martha Stewart's retailing to the masses by 50 years, extended modernist design to the masses in furniture, accessories, dishes, glassware and table linens. Now, the study shows, there are a number of collectible, retro brands that are also among the New Affluents' top choices: Herman Miller, Knoll and Eames.
So, is luxury really dead?
No. But it has been redefined by those in the category who have clearly rejected "social status" as a contributing factor to purchase decisions. They're buying fewer things of higher quality; they're shying away from disposables when they have a choice. They have replaced older values with contemporary new qualities such as the economy, sustainability, the environment and current cultural trends as top-of-mind issues affecting these decisions.
They're using new language. Attributes like uniqueness, know-how, design and performance have redefined "prestige." Now it's "self expression," not "status." The New Affluents' brand choices evidence at minimum the demand for a new dialogue with them. Don't sell them a product. Offer them a brand. Better yet, a brand experience -- just like astute marketers have been doing for years. The difference now is it's 24/7. This newly defined segment is up late, surfing the web, taking the time to learn about products and what appeals to them. And once they're in, they'll stay with you -- as long as you maintain the relationship.
The internet has created a way for people to connect at every level, and the New Affluents are taking advantage of it like everybody else. The brands that are connecting with them know it. And now these well-to-dos are attracted to many of the same brands that other segments are. They're wearing some of the same kinds of clothes, driving some of the same cars and shopping at many of the same retailers.
Got a brand that has these kinds of values but isn't on their list yet? Ask yourself, why not?
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