'Tis the Season ... to Live It Up
Luxury Goods Attracting More Consumers
NEW YORK, DEC. 6, 2003 (Zenit) - The usual concern over excessive consumerism at Christmas has a new twist this year: the growing popularity of luxury brands. A recent book, "Trading Up: The New American Luxury," observed that people are increasingly disposed to pay higher prices for what they see as premium products.
Coining a new phrase, authors Michael Silverstein and Neil Fiske examine how "New Luxury" goods and services are attracting middle-market consumers. "America is trading up, and it's good for both business and society," write Silverstein and Fiske, a senior vice president and ex-partner, respectively, of the Boston Consulting Group.
Consumers of these New Luxury goods fall in the income bracket of $50,000 to $200,000 a year. Some 47 million U.S. households have an annual income of $50,000 or more, and this adds up to nearly 122 million consumers "with the means and the desire to trade up," the book says. In 23 categories of consumer products and services, worth $1.8 trillion in annual sales, New Luxury products account for 19% of the total, with annual growth of 10% to 15%.
The luxury goods include even otherwise mundane household needs. A prestige trademark washer-dryer, for example, sells for more than $2,000, compared with conventional brands that retail for around $600. To their surprise, the authors came across numerous consumers from various backgrounds who assured them that possessing the higher-cost brand made them feel happier and a better person.
"In our fifty combined years of listening to consumers, we have never heard more heartfelt expressions of emotion about a product that even industry insiders think of as mundane and unworthy of much attention," marvel Silverstein and Fiske.
Other examples involve what are more commonly seen as luxury products. A premium set of golf clubs has seen one company soar to the No. 1 position in its field, when previously it was not even in the top 10. One consumer said that he had paid $3,000 for his premium clubs, as opposed to under $1,000 for a more conventional set, because "they make me feel rich."
The authors divide the New Luxury products into three major types. The first type is the accessible super-premium products. These are priced at or near the top of their category. But, being low-ticket items, they are still affordable to middle-market consumers. Example: a $28 bottle of premium vodka, as opposed to $16 for more ordinary brands.
The second type is the old luxury-brand extensions: lower-priced versions of products for the rich. Popular items here include cheaper models of top-range cars.
Third is the "masstige" goods, a term the authors use to refer to mass prestige goods that occupy a spot between mass and class and command a premium price. For example, toiletry products that carry a fancy brand name can mean a price difference of over 200%.
Fulfilling emotional needs
What is the appeal of New Luxury goods? The authors observe that they are typically based on the emotions and that consumers have a much stronger emotional engagement with them that with other goods. This compares to the very expensive old-style luxury goods that are based primarily on status, class and exclusivity. As well as the emotional factor, a New Luxury good must also have differences in design or technology.
Once consumers become convinced of the superiority of a product and form an emotional attachment to it, they are prepared to spend a disproportionate amount of income on it. This is done by scrimping on other expenditures. These consumers thus avoid middle-range products, trading down in some areas to save money, and in others going for a higher-price item.
Behind the New Luxury trend lie demographic and cultural causes. In terms of income, the earnings of the top quintile, households over $82,000, have risen nearly 70% in real terms over the last 30 years. As a result, now 21 million affluent households account for nearly 60% of discretionary spending power in the United States.
Another factor is the increased economic power of working women that has seen the number of two-income households rise dramatically. There are also more affluent singles with money to burn, as people delay entering marriage, or find themselves divorced and single once more. And the globalization of trade has made it easier to supply exotic products.
In terms of cultural factors, the authors note the increased number of consumers with university degrees and the growing numbers who have traveled overseas and discovered new tastes. Added to this is an increasing weight given to emotional self-satisfaction: "[W]e all receive countless messages every day -- especially from media influencers and celebrity endorsers -- urging us to reach for our ...
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