“Affluent consumers are starting 2013 with a dismal view of the overall economy and their personal financial situation. This is bound to have a dampening effect on results for marketers that target the luxury consumers specifically, and the consumer economy in general,” said Pam Danziger, president of Unity Marketing and author of Putting the Luxe Back in Luxury, today.
In her firm’s quarterly Luxury Consumption Index (LCI), a survey conducted among 1,369 luxury consumers (average income $267,800) on Jan. 9 to 15, the measure lost 19.4 points this month, its second largest drop since first quarter 2008. Last October, the LCI rose 24.3 points, but today it stands at second quarter 2012 levels, Danziger said.
Though the affluent consumers in the survey represent the top 20% of U.S. households by income, which starts at about $100,000, this top 20% represents about 40% of all consumer spending, noted Danziger, who was recently named to Luxury Daily’s inaugural list of “Luxury Women to Watch 2013.”
“The affluent are the ‘heavy lifters’ across the U.S. consumer market of 115 million households. Most any consumer-facing business, such as automobiles, fashion, retail, grocery, food and personal services, depend upon attracting the generous spending of the affluent,” Danziger said. “From dollar stores to 5th Avenue luxury boutiques, the affluent are a critically important consumer segment with plenty of discretionary spending. Today they are feeling depressed about their financial situation.”
‘Reposition Luxurygoods as a Value Proposition’
That pessimistic point of view permeates much of the affluents’ attitudes in the latest LCI. For example:
●More affluents since the Great Recession believe they will be worse off financially 12 months from now. Nearly one-fourth (22%) predict that they will be worse off in the next twelve months as compared to today.
“This is the highest we’ve seen this measure since the depths of the recession in 2008, Danziger adds.
●Nor are the affluents very optimistic about the nation’s financial situation either. Last October, prior to the national elections, some 37% of affluents felt the country as a whole was better off. That figure fell by 8 percentage points to 29% this month.
Danziger said, “While the latest figure is somewhat higher than seen throughout 2011, when it averaged 25%, the affluents aren’t particularly confident that the nation’s leadership is up to the challenge of this slow-growth economy facing a rising tide of debt.”
●Spending among the affluents also may decline. More than a quarter (28%) said they expect their luxury spending to decline over the next 12 months. That’s greater than the 18% that said the same thing last October.
Given this more cautious affluent consumer, marketers and retailers of luxurygoods may need to alter their marketing messages.
Tom Bodenberg, Unity Marketing’s chief consumer economist, said, “Marketers need to reposition luxurygoods as a value proposition. That means to keep the luxury image and connotations–advertising creative, packaging, media and service–but communicate, in a very implied, almost one-to-one way, affordable pricing.
“The key is an almost subliminal positioning of value. The current cultural climate can’t support showy displays of luxury,” he added. “People with means want to make smart buying decisions and playing up the quality and value of a brand while downplaying the pure ‘luxury’ of it is key for today.”