The latest research from Unity Marketing found that affluent consumers are feeling more positive about the state of their own financial state of affairs than they did one year ago, according to www.diamonds.net. However, overall, they remain pessimistic about the U.S. economy. For the poll, affluents were defined as those with average household incomes of $239,300. The consumer confidence of these high earners was on par with that of September 2007, the eve of the current recession. Nonetheless, Unity's Luxury Consumption Index (LCI) has steadily been gaining points since bottoming out in September 2008.
The index has also provided insight into future luxury spending habits. Pam Danziger, the president of Unity Marketing, explained that ultra-affluents, or those with incomes over $250,000, and young affluents, those younger than 40, will become the main drivers of economic growth going forward and thus, luxury marketers must target this emerging demographic.
"The future of the luxury market is going to be split along demographic lines," Danziger explained. "First is income. Ultra-affluents, who make up only 2 percent of the entire economy, increased their spending by 40 percent from the third to the fourth quarter. Ultra-affluents represent a very small number of households, but their power as consumers is phenomenal. As a group, they spent over 4.5 times more on luxury than lower-income affluents in the fourth quarter.
"The second-most-important demographic that will define the future of the luxury market is age," she continued. "Young affluents outspent their elders by nearly 2.5 times in the fourth quarter. Given their youth, young affluents are in an acquisitive life stage, where they have a strong appetite for luxury brands and consumer goods. The more mature Baby Boomers are reaching a new life stage, where their focus is on life experiences, rather than acquiring more stuff. As the recovery progresses, the Baby Boomers are unlikely to return to their previous levels of spending."
These somewhat narrow demographics present challenges for marketers. Ultra-affluents spent more on luxury goods, but there are only 2.5 million households in this group, whereas lower-income affluents comprise about 21.5 million U.S. households. Young affluents also make up a significantly smaller share of affluent households, representing less than 40 percent of all affluent households, compared with 60 percent of more mature households, Danziger noted.
"Marketers therefore need to find compelling platforms to connect with these two influential demographic segments that will drive their sales growth in the future," she advised. "As we look to the future, more of the ultra-affluents and young affluents are choosing to connect with luxury brands through the Internet, so the brands must be there with compelling content and services that will entice these high-spending consumers.
"Brands also must be vigilant that they are delivering consistent high quality and authentic value in the products that they sell, for their heritage is another vital component of the luxury platform," Danziger said. "In addition, a platform based upon exceptional personal service is critical to these two types of consumers, both when interacting with brands in the store and over the Internet.
"Every touch point with the consumer becomes an essential element in the platform that brands can use to build customer relationships that will continue after the recession," Danziger concluded.
