5 New Exigents For Luxury Brands
Despite ongoing economic concerns, the last few years have largely been good for the financial performance of luxury brands. The “Deep Dive” survey on luxury within the April 2013 Mendelsohn Affluent Barometer suggests the good times may continue to roll.
Consider the findings among Ultra Affluent – the 4% of the U.S. population with $250,000 or more in annual household income (their average HHI is over $500K). One-fifth of the Ultra Affluent plan to spend more on luxury in the next 12 months, compared to only 3% planning to spend less.
Even among the “less elite” Affluent segment ($100K+ HHI, with average HHI of $192K), they found that 55% buy luxury products or services multiple times per year, more than doubling from 25% in 2011. Naturally, a reversal in the (all-time high) stock market or the (achingly slow) economic recovery could reverse those intentions, but the continued enthusiasm for luxury among core prospects is clear.
Of course, success for luxury brands requires more than merely riding a wave of consumer demand. Luxury is constantly in flux, and success will come to those that most effectively connect with evolving consumer needs and expectations about luxury. With that in mind, here are five new imperatives for luxury brands:
1. Make Quality Transparent.
Quality tops the list of what consumers expect from luxury, but 54% of Affluents agree, “Most luxury brands have lowered their quality standards in recent years.” In 2011, only 42% agreed. As one respondent put it, “Luxury is more of a commercial idea than an actual product feature now. Luxury used to refer to a product’s quality. Now it’s just an image.”
Those brands that haven’t lowered their quality have suffered from the negative halo effect of those that have. The new luxury imperative: Communicate excellence throughout brand experience – materials, craftsmanship, service, etc. – while showing you “walk the quality walk” by providing a transparent look at quality processes.
2. Maintain Margins.
When asked what terms they associate with luxury, Affluents have historically ranked quality and expensive as No. 1 and No. 1A. No longer. Quality expectations have risen, while the notion that luxury must be expensive has diminished. It’s a lasting effect of the recession – consumers have raised their expectations, not lowered them, and they now expect uncompromising quality and a deal. The new luxury imperative: Spur consumers to purchase with quality and emotional engagement, not (potentially) margin-eroding and brand-tarnishing price reductions or promotions.
3. Revisit messaging.
In describing luxury, Affluents and Ultra Affluents increasingly use terms such as unique and rare, while being less likely to use exclusive, refined, privileged and status. Rare and unique convey an authentic and meaningful scarcity, while the terms on the decline have connotations of excessive formality and a faux-scarcity manufactured for marketing purposes. The survey found several other subtle qualitative shifts in luxury desires as well. The new luxury imperative: Understand evolving luxury desires and fine-tune messaging appropriately.
4. Offer Multi-layered Benefits.
Quality has always been at the core of luxury. With the recession came the desire for luxury to deliver solid value, and to be more subtle and understated. The rise of iPhones and iPads brought additional expectations that luxury be well-designed with utilitarian benefits (particularly among mass Affluents, whose luxury purchasing is more occasional and aspirational).
Today, we see the desire for authentic uniqueness and a more informal tone. At each step, new expectations have not replaced previous ones, but rather layered on top of them. The new luxury imperative: Communicate multi-level benefits that speak to the multiple building blocks of today’s luxury desires.
5. Connect with the Next Generation.
Luxury is undergoing a generational shift, from aging Baby Boomers to high-earning up-and-comers within the Millennial generation. The next generation brings a distinctly different approach to luxury, and to brands more generally. Beyond their obvious interest in social media, for example, these Emerging Alpha Affluents show a remarkable comfort in combining luxury and non-luxury brands into more idiosyncratic expressions.