Increased consumer confidence among affluent consumers will not translate into over-exuberant spending sprees; that was the conclusion of Unity Marketing's latest series of surveys, conducted in the second quarter, according to diamonds.net. Unity Marketing's exclusive Luxury Consumption Index (LCI) rose 18.6 points, the largest increase since tracking began. Luxury goods and services spending rose 11 percent in the second quarter from one year ago, according to the results. Survey participants had an average income of $207,800, and an average age of 44.
The average amount that affluent consumers spent per luxury item declined, though, in the second quarter. Due in large part to the recession, these individuals have reassessed their priorities and reevaluated their spending — a trend Unity's president Pam Danziger first predicted nearly a year ago.
"Marketers can't afford to be overconfident right now," Danziger said. "The latest survey data, while it shows signs of improvement, also shows continued weakness in specific categories and sectors in the luxury market. Affluent consumers' expectations of future luxury spending continue to lag behind other indicators that make up the LCI index. Further, Unity's research shows that affluent consumers' basic attitudes and motivations that underlie their patterns of consumption are changing, and these changes are likely to outlast the economic downturn. The new survey points to opportunities for luxury marketers that align themselves with the new values-based mindset of luxury consumers."
The idea of "luxury" has changed, Tom Bodenberg, Unity's chief economist, said. "As more and more American families feel the negative effects of [the] recession, the idea of 'luxury' and the 'luxury lifestyle' is assuming a negative connotation. So while some affluents will relieve pent-up demand for luxury goods as a vehicle of lifestyle aspiration and expression as the recession ends, the media's focus on 'recession chic' — personal expression that deliberately excludes luxury goods — may leave a lingering distaste for conspicuous consumption and parading luxury labels."
Align your marketing and branding messages with this new consumer mindset, concluded Danziger, by doing your homework and digging into consumer data, in order to "devise realistic and achievable marketing strategies" in preparation for the recession's end. Unity Marketing describes the "post-recession" luxury consumer as someone who expects the brands he or she patronizes "to deliver on even higher expectations of quality than before." These consumers also, equally strongly, demand that the value of a purchase is in line with its price, according to Unity.
To give luxury companies a 360 degree view of their brands from their target consumers' point of view, Unity Marketing teamed with E-Poll Market Research to develop an E-Score Brand — Luxury, which Unity calls "the ultimate resource for luxury brand ratings." Participation in the E-Score Brand provides insight into how a given brand connects with affluent consumers.
Danziger said, "Coming out of this recession, high-net-worth consumers expect even higher levels of quality, but greater value, in their luxury-brand purchases. Because consumers' expectations are elevated for purchases in the luxury sector, they are not willing to accept anything less than that their high expectations are fulfilled. Because their expectations are so high, their resulting disappointment is correspondingly low if they are frustrated or not satisfied.
"The E-Score Brand — Luxury ratings system gives marketers greater access to the many dimensions of their brand in the mind of the high-net-worth consumer. It offers significantly more depth of analysis and granularity of data to help them make strategic decisions," she said.
The US Census Department has released results of its 2008 income survey which indicates mixed news for luxury marketers: The affluent segment of the US population is still the fastest growing, but the rate of growth in affluent households has significantly slowed down in comparison to two years ago, israelidiamond.co.il. reported.
The survey shows that the affluent segment of the US population (households with incomes of $100,000 and above) continues to be the fastest growing segment based upon income. The total number of affluent households increased by 8.4%, from 22.2 million in 2006 to 24.0 million in 2008. By contrast, the number of households with income less than $75,000 declined in the two-year period.
Ultra-affluent households with incomes of $250,000 and above grew 10.5% from 2.2 million to 2.5 million between 2006 and 2008. In 2008, the ultra-affluent segment constituted 10% of the total affluent market.
On the other hand, the growth rate in affluent households dropped sharply between 2006 and 2008. In the two-year period between 2004 and 2006, the number of affluent households grew by 24.4%. However, during the period between 2006 and 2008, the rate of change was only 8.4%.
