Marketers learn luxury isn't simply for the very wealthy

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Purveyors of luxury products increasingly have their sights set on Joe Average as well as Joe Millionaire, and that's changing the definition of "luxury."

The democratization of luxury-variously labeled as the "massification of luxury," "class to mass," "new luxury," "masstige" and even "luxflation"-is taking two main routes: Traditional luxury marketers are expanding their brands to more affordable merchandise, while at the same time the middle class is increasingly willing to, at least occasionally, buy expensive luxury goods.

The latter trend is at the center of the recent book "Trading Up: The New American Luxury," co-authored by Boston Consulting Group Senior VP Michael J. Silverstein and Neil Fiske, CEO of Bath & Body Works.

"New luxury is not about aristocrats," Mr. Silverstein tells Advertising Age. "It's about average Joes on the street who want to buy premium-price products that have real technical, functional and emotional benefits."

trading up

In the "Trading Up" phenomenon, consumers shop at low-cost mass-merchandisers for some products to free up funds for luxury purchases in other categories. It expands the luxury playing field to include 47 million households earning $50,000 or more, not to mention those in lower income brackets who also trade up, albeit more selectively. This trend is also borne out in a Bear, Stearns & Co. report titled "The Ultra-Affluent Consumer," which notes that consumers would rather buy two suits costing $2,000 each than four suits at $1,000 each.

Luxury has evolved into a $400 billion market that's expected to reach $1 trillion by the end of the decade, according to Boston Consulting Group.

But this dynamic market, where increasingly people can more than aspire to luxury goods, sparks concerns as well as opportunities for marketers. When AgencySacks, New York, surveyed 16 luxury marketers for this Special Report (see charts at right), 94% said the movement to extend luxury brands to a wide array of products is diluting the value of the word "luxury."

Others believe they can sell at a variety of price points while preserving a brand's luxury cachet. Anne Valentzas, management director for the Diamond Trading Co. account at WPP Group's J. Walter Thompson USA, New York, says that in a woman's lifetime, whether she's affluent or otherwise, she'll have the taste for "snacks," such as an $800 design of the popular "right-hand ring," and for "meals," such as the $2,500 version of the same ring.

"The total U.S. market in diamond jewelry retail value is $29.1 billion," says Richard Lennox, director in charge of the Diamond Trading Co. account at JWT. "Those purchases are coming from both high-income and low-income households."

A product that serves as both a bite-size snack or a meat-and-potatoes meal, depending on the occasion, not only reaches a wider array of consumers, but gives people of all income levels the opportunity to "constantly touch the brand," says Mr. Lennox.

"We're looking for the lifetime value of our consumer," he says. "It's much harder to get a new customer than to continue a dialogue with a customer we already have."

To that end, the Diamond Trading Co. and JWT nurture what the agency calls "zealotry"-a kind of intensified version of connoisseurship-through a steady stream of product and concept innovations, maintaining a consistent level of quality at all price points.

"If a consumer can buy a product only every five or six years," says Mr. Lennox, "that creates a very different relationship. We provide access to our product at a variety of levels without diluting its equity."

A jag for every life stage

Luxury carmakers for years have made lower-price versions available to a wide market. Steve Ling, global marketing strategy manager for premium brands at Ford Motor Co., says the goal in expanding the Jaguar lineup with models like the S-Type or X-Type "is to provide our customers with new choices of vehicles that allow them to remain Jaguar customers as they move through different life stages." He notes this also brings "in new, oftentimes younger customers who always wanted a Jaguar ... but needed something smaller or more accessible."

All the models are "true Jaguars," Mr. Ling contends. If a vehicle is engineered to reach a lower price point, it "always has to be done in a way that's true to the brand. The Jaguar X-Type must drive and feel like a Jaguar. You'll degrade the value otherwise."

In the modern world of luxury marketing, however, the intangibles of experience and personal preference can trump the material product itself as selling points.

" `Old luxury' was defined by the baby boomers' parents, who experienced the deprivation of the Great Depression or World War II," says Pam Danziger, president of Unity Marketing and author of "Why People Buy Things They Don't Need." "As a result, old luxury was about the material thing."

Their boomer children never went without, and today represent the most stable component of the luxury segment. Having stockpiled a household or two full of goods, they realize another Rolex won't create personal fulfillment. "Instead," says Ms. Danziger, "there's a high-level yearning for once-in-a-lifetime experiences that enhance who I am."

At the root of Ms. Danziger's concept is a shift from a "product-centric" to "consumer-centric" point of view. Today, luxury is in the eye of the beholder, and consumers no longer depend on badge value, category or price alone to determine their perceptions.

what consumer says goes

"You can equip a product intrinsically with all the values you think are going to make it luxurious," says Ms. Danziger, "but the question becomes `Is it luxury to me?' If I don't care about jewelry, even if I have a $5,000 ring, then it's not luxury." Modern luxury, in other words, is whatever the consumer says it is.

But that's not to say materialism is dead.

"I'm not concerned that our readers are more interested in experiences than products," says Kathi Doolan, VP-publisher of American Express Publishing's Departures, which is published exclusively for AmEx platinum and Centurion cardmembers. "When people travel, they buy. Yes, it is about the experience, but it's also about the things they buy during the experience."

The challenge marketers face is finding a way to link their product with experience seamlessly. These days, quips Ms. Danziger, luxury is a verb, not a noun.

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