SOURCE: Unity Marketing

January 28, 2010 11:08 ET

Affluents Feel More Positive About Their Financial Situation, Giving Key Segments in the Luxury Market Permission to Spend, Reports Unity Marketing

Two Demographic Segments -- Ultra-Affluents and Young Affluents -- Will Lead the Luxury Market out of the Recession, While More Mature Baby Boomer Affluents Will Continue to Be Thrifty

STEVENS, PA--(Marketwire - January 28, 2010) - Unity Marketing's exclusive Luxury Tracking Study results are in for the fourth quarter 2009 and they show a marked improvement in consumer sentiment among affluent consumers, defined as those at the top 20 percent of household income. The survey tracking luxury consumption was conducted from January 8-14, 2010 among 1,614 affluent consumers (avg. income $239.3K, 45.9 years, 41 percent male/59 percent female.

In the beginning of 2010 the Luxury Consumption Index (LCI) which measures consumer confidence in the ranks of the affluent stands at about the same level it was in September 2007, just as the recession began to drag the index down. Throughout 2009 the LCI has steadily gained. Overall the index has recovered about 80 percent of the points it lost since it bottomed out in September 2008 at its low point in the luxury recession.

Commenting on the results of the latest survey of affluent consumer confidence and their luxury consumption behavior, Pam Danziger, president of Unity Marketing and lead researcher in the luxury tracking study, says, "The latest survey shows affluents continue to be pessimistic about the overall economy. For example, only 26 percent of affluents feel the country as a whole is better off now than three months ago. Further, nearly 80 percent believe the country remains mired in the recession. The majority of affluents we polled think the recession won't officially end until 2011.

"But while affluents continue to be cautious about the world at large, they are more optimistic about their own financial situation. The share of affluents who feel their financial situation is better now than three months ago rose 5 percentage points from the third quarter. Because they feel financially more stable, they were empowered to spend more money on luxury in the fourth quarter." Danziger says.

For example, they spent about 50 percent more on luxury clothing and apparel, fashion accessories, travel and spa, beauty and massage services in the fourth quarter as compared to third quarter. These are categories that have dragged in terms of spending throughout the year. Overall affluents spent 7.9 percent more on luxury from third to fourth quarter, following a 29.4 percent increase from second to third quarter.

In the luxury market recovery, ultra-affluents and young affluents will drive growth

Luxury marketers looking to take advantage of the rising tide of affluent consumer sentiment need look no further than two key segments: the Ultra-affluents (those with income $250,000 and above) and the young affluents (aged 40 and under), Danziger advises. "The future of the luxury market is going to be split along demographic lines. 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. Young affluents (those 40 years and younger) outspent their elders by nearly 2.5 times in the fourth quarter," Danziger continues. "Given their youth, young affluents are in an acquisitive lifestage where they have a strong appetite for luxury brands and consumer goods. The more mature Baby Boomers are reaching a new lifestage 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."

Demographics also highlight the key challenges for luxury marketers in the recovery ahead. "Ultra-affluents spend huge amounts of money yet they remain a very small niche market, representing only 2.5 million households as compared with 21.5 lower-income affluents. 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 the more mature households," Danziger says.

Luxury brands need to find new platforms to help them connect with the two most powerful demographic segments for the future

Danziger advises luxury marketers for the future, "Marketers therefore need to find compelling platforms to connect with these two influential demographic segments that will drive their sales growth in the future. 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. 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 concludes.

For more information about the Luxury Consumption Index (LCI) and the results of Unity Marketing's latest survey of affluent consumer spending, call Pam Danziger at 717-336-1600 or click this link http://www.unitymarketingonline.com/cms_luxury/luxury/luxury3/Luxury_3Q2009.php.

About Unity Marketing's Luxury Tracking Study

Launched in January 2004, and every three months thereafter, Unity Marketing has measured the pulse of the affluent consumers in a longitudinal survey of 1,000-1,200 affluent consumer households. Each quarter the Luxury Consumer Tracking Study reports what luxuries they bought during the past quarter, how much they spent, where they bought, the luxury brands they became aware of and used, and how they felt about their current and prospective financial status. A total of 22 major categories of luxury goods and services are included in the poll, including clothing, fashion accessories, home luxuries, travel, dining and jewelry.

Based upon the results of the survey, Unity Marketing also publishes a Luxury Consumption Index which tracks how luxury consumers feel and helps marketers anticipate consumers spending in the coming quarters.

In addition, every quarter a special investigation of key trends in the luxury market are studied. In the current quarter luxury consumers use of the Internet and social media were the topic of the special investigation.

The Luxury Tracking Study is available as a subscription service, which includes four quarterly reports and two annual studies. In addition, each quarterly report is available in three editions:

--  Quarterly Luxury Tracking Spending Summary (chapter 2 which includes
    topline spending and LCI data)
--  Executive Summary (chapters 1 and 2 which includes the in-depth results
    of the special investigation)
--  Full Luxury Tracking Report (full detailed analysis of all products and
    services)

For more information: http://www.unitymarketingonline.com/cms_luxury/luxury/luxury3/Luxury_3Q2009.php

About Pam Danziger and Unity Marketing

Pamela N. Danziger is an internationally recognized expert specializing in consumer insights, especially for marketers and retailers that sell luxury goods and experiences to the masses or the 'classes.' She is president of Unity Marketing, a marketing consulting firm she founded in 1992.

Advising such clients as PPR, Diageo, Google, Polo Ralph Lauren, Tempur-Pedic, Ralph Lauren, Lenox, Swarovski, Luxottica, Orient-Express Hotels, Marie Claire magazine, The World Gold Council and The Conference Board, Danziger taps consumer psychology to help clients navigate and master the changing luxury consumer marketplace.

In recognition of her ground-breaking work in the luxury consumer market, Pam received the Global Luxury Award presented by Harper's Bazaar for top luxury industry achievers in 2007.

She is currently working on a new book, Putting the Luxe Back in Luxury. Her other books include Shopping: Why We Love It and How Retailers Can Create the Ultimate Customer Experience, published by Kaplan Publishing in October 2006; Let Them Eat Cake: Marketing Luxury to the Masses--as well as the Classes, (Dearborn Trade Publishing, $27, hardcover) and Why People Buy Things They Don't Need: Understanding and Predicting Consumer Behavior (Chicago: Dearborn Trade Publishing, 2004).

Contact Information

  • Contact:
    PR for Unity Marketing
    Pam Danziger
    717-336-1600