You’ve said there are two types of luxury consumers. What are
they?
I divide the luxury market into “must-haves”
and “wannabes.” Members of the first group have
incorporated luxury into their lives and seek to retain that lifestyle in the
face of recession. Very high net worth individuals occupy the top rung of the
must-haves. They are largely inoculated from the downturn. Even if they’ve
lost a lot of money in the recession, they are still ultrarich. On the other
hand, those must-haves who have become financially strapped are now buying
luxury items at lower price points or buying them less often, but never compromising
on quality.
The luxury wannabes view luxury aspirationally, occasionally
investing in luxury purchases in order to touch luxury without immersing
themselves in it. They would never buy (or probably would never be able to buy)
a Ralph Lauren suit. But they can afford a few lower-cost accessories such as a
polo shirt with the logo.
How do marketers hold on to these customers in this economy?
You have to figure out how your customers’
behavior has shifted. Can you enable your more price-sensitive customers to
continue to patronize you? It’s a balancing act, because you don’t
want to taint the image of the brand.
This is more challenging at a time when cash-strapped
companies are reducing spending on market research that could help them learn just
how to reach those customers. Most large companies in the U.S. are cutting
their research budgets by 10 percent to 20 percent. To adjust to this shift, I
urge marketers to focus their research on the products, brand, and markets that
are key to their strategy. Don’t waste resources on peripheral or
potential consumers.
Should you consider discounting? Or is that always a bad idea for luxury
brands?
Of course, discounts, if overdone, can detract from brand
quality and the credibility of retail list prices. But modest, often
unadvertised discounts on selected or discontinued items need not dilute brand
quality. In fact, during a recession, even some luxury must-haves are hurting
and need a helping hand in the form of a price cut from their favored brands.
You’ve described a new kind of consumer as being a “Simplifier.”
What does that mean?
Simplifiers predated the recession, but the recession has
accelerated the trend. These are people who trade down to a simpler lifestyle
than they are able to afford. In particular, they seek to reduce the scope and
scale of the stuff they own, because they simply find it too aggravating to
maintain and less emotionally satisfying than they expected. Often, as they
grow older, they place more value on — and invest more money in —
experiences instead of possessions.
Savvy marketers will keep this new Simplifier in mind when
creating an argument for their product or service.
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