L U X U R Y M A R K E T I N G

A industry report from Point to Point

LUXURY MARKETI NG
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Luxury items have been dened as anything people buy that they dont need. Need is not a precursor to purchase
in the luxury market. Luxury consumers buy based upon desirethey arent buying a thing, they are buying to
achieve a feeling, to enhance an experience or to get an emotional lift.
Luxury is about achieving a comfortable lifestyle in the material realmhaving those things that make life easier,
more pleasant and more satisfying. Having a luxury lifestyle is not about money; it is about the experiences and
feelings that having enough money can bring. People want to surround themselves with things that reflect their
personality and things that they enjoy.
In the United States, luxury observers note that there are 4 million households that have an income of more than
$1 million (ultra high-end luxury sector), and an estimated 48 million households earning between $50,000-
$150,000 (driving force behind democratization of luxury).
THE LUXURY
MARKET DEFI NED
MOVI NG FROM THE MASSES TO THE CLASSES In the
past, when luxury was first introduced to the classes it, slowly
moved to the masses. Nowadays, this happens right away. The
notion of luxury has entered peoples vocabulary in large part
because of the media. The increased availability of celebrity
magazines and TV, as well as additional coverage in more
traditional consumer publications means that more people
know what is available. Because of this increased awareness,
luxury consumers now have the desire to be a part of something
more glamorousnot to distinguish themselves from others,
but to feel part of the group.
Consumers are bombarded with stimuli encouraging them
(to buy luxury items)stores are dream palaces; websites are
windows; advertisements have perfected the vision and
language of dreaming; and dreaming is the source of innovation.
The constant bombardment leads to people being able to visualize
themselves as better for purchasing a particular luxury good.
Pressure from the most affluent consumers stimulates and
accelerates innovation at the high end, which cascades
downward to lower-priced productsmaking innovation more
affordable and available to more people.
A LUCRATI VE OPPORTUNI TY The luxury market space is a
lucrative category because many manufacturers and
marketers do not understand how to reach this market, or they
do it inadequately. Additionally, luxury purchases transcend
the volatility of the market.
According to The Boston Consulting Group, the global
market for new luxury goods is currently estimated to be $500
million and will reach $1 trillion by 2010.
LUXURY MARKETI NG
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In the past, the theory of cocooning has dominated the way of thinking about luxury consumers. A large portion of old luxury
purchasers were empty nesters who put a premium on time and on their home. Traditionally, the luxury consumer prole was:
traditional, old, rich, white, male, and inherited wealth.
Old luxury was about having and owningit was a very materialistic view. Luxury equaled exclusivity, which is no longer valid
with todays democratically minded luxury consumer. It was dened by attributes, qualities and product features, and much of the
appeal was derived by status and prestige. It focused on the thing being bought.
The old view of luxury is dying out.
LUXURY
CONSUMER TYPES
NEW VIEW OF LUXURY New luxury is completely dened
from the point of view of the consumer. It is no longer about
the thing people are buying; it is about the experience and
feeling the luxury product delivers. How the product delivers or
performs experientially is key with todays luxury consumers.
The new luxury consumer is better educated and more
sophisticated in taste. The Internet, home shows, and
affordable travel have exposed more people to other global
lifestyles that are not as fast-paced.
New luxury consumers:
| Want it all but are exhausted trying to get it.
| Are influenced by friends and cultural gures but have strong
tastes of their own.
| Dont believe in debt, but dont let money stand in the way of
buying what they want.
| Need a lot of understanding. When they get it, they are not
only appreciative they are also likely to open up their pocket
books and spend money.
A large portion of the new luxury generation is baby boomers
that are known for challenging authority, rejecting the status
quo, and making their own paths. There are 76 million baby
boomers age 38-57 entering the empty-nesting stage, which
corresponds with increased luxury spending.
Some other types of new luxury consumers are: Silicon
Valley, entertainers, professional athletes, entrepreneurs, trust
fund babies, aspirational buyers, even generation X and Y who are
willing to save in order to buy the best. Americas middle market
is also part of this group as they are trading up to luxury items.
DEMOCRATICALLY MINDED, NOT INTO EXCLUSIVITY
New luxury consumers are not into the idea of exclusivity; they
are more democratically minded these days. They are only into
exclusivity coming from their ability to express a personal point
of view, an attitude or their own uniqueness.
New luxury avoids class distinctions; it appeals more to a value
system (i.e. buying new luxury xtures in the bath doesnt say
I make big bucks; it communicates I am intelligent and
discerning.)
Todays luxury consumers believe everyone is entitled to
luxury (democratic approach); they believe luxury is for
everyone and different for everyone.
According to a recent survey of luxury consumers, 90% of
these consumers agree that luxury doesnt have to be the most
expensive thing or be the most exclusive brand.
LUXURY MARKETI NG
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New luxury consumers believe that if you dont understand
it, or cant say why it is worth it, you dont want to own it, or
experience it, even if you can afford it. Marketers must give
people a reason to believe why it is worth it to them.
New luxury consumers want products that deliver real
technical, functional and emotional benets. According to
recent research on luxury consumers (based on a two-year
longitudinal study on luxury consumers with incomes of
$75,000 and above), there are four groups that make up this
market space. They are:
X- FLUENTS = EXTREMELY AFFLUENT This group
spends the most on luxury and are the most highly invested in
luxury living. The super rich have always distanced themselves
from others, but the distance has shrunk. They want to continue
to distance themselves. The way to reach this group is through
continual innovation.
COCOONERS = OLD LUXURY Forty percent of luxury
consumers are Cocooners who are inwardly directed and focus
their time and attention on making their homes more luxurious.
They are disconnected from others and the outside world. More
than 50% of their luxury spending is on home-related luxuries.
They only spend about 65% of what Butterflies do.
BUTTERFLI ES = NEW LUXURY Twenty-ve percent of
luxury consumers are Butterflies. They are called butterflies
because they are coming out of their homes and starting to
reconnect with the outside world. They dene their
personal identity by connecting with the outside world.
| They spend nearly as much on luxury items as X-fluents.
| They are less materialistic than Cocooners or Aspirers, and
they understand that things dont bring happiness.
| They have the highest average income of any of the types
(excluding X-fluents), and they live in the most expensive homes.
| One-third of their luxury spending is on home-related
luxuries.
| They spend the most buying luxuries, about $14K on
average per year.
| They have a deep desire to nd new meaning and establish
new equilibrium in their lives.
| They feel conflicted between roles they play in their inner
and external worlds.
| They feel blessed they have so much success and have a need
to give back to society, e.g. Bill Gates, Ted Turner.
| They are not motivated by status or exclusivity when they buy
luxury goods.
| They are democratic in their view of luxury.
| They seek connections in all areas of life: political, social, etc.
| They spend the most on personal services that free them from
the drudgery of day-to-day life, so they can spend time out
connecting.
Eventually they will evolve into Cocooners.
LUXURY ASPI RERS Thirty percent of luxury consumers are
Aspirers. This group is highly attuned to brands and believes
luxury is best expressed in what they buy and what they own.
| They are driven to buy and display, but are not at the level that
theyd like to be.
| They are driven by the need to have and to own.
| Aspirers spend less than half of what Butterflies do.
BREAKOUT OF THE LUXURY
MARKET BY TYPE
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According to current luxury marketing theory and surveys,
emotions are behind 100% of consumer spending on luxury
items. There are four emotional spaces that influence the
buying habits of new luxury consumers:
1. Take Care of Me: well-being, relaxation
2. Connecting: membership, attractiveness
3. Questing: adventure, learning through play
4. Individual Style: status, uniqueness
TAKE CARE OF ME A new trend in the luxury market is
self-actualizationbuying enhanced life experiences. The
way marketers tap into this is by focusing on selling a feeling or
an experience. Cultural icons like Oprah Winfrey encourage
this by telling viewers to take care of themselves.
CONNECTI NG Marketing to luxury consumers is all about
connecting with the consumerknowing them, understanding
them and getting inside their heads and hearts.
Consumers are reconnecting with the outside world and
reaching out to establish true connections with others.
Because of easy accessibility to the Internet, tv shows and
affordable travel, consumers are connecting to different global
styles, which affect their desires, and ultimately the luxury
goods they pursue.
QUESTI NG Questing is dened as nding fulllment through
knowledge. Todays luxury consumers research products
thoroughly before buying. Again, they are exposed to so much
more knowledge in todays world and are going out more and
seeing what other people have. New luxury consumers are
drawn to new products and quest for new experiences.
I NDI VI DUAL STYLE Consumers seek products that
express their individuality (i.e. nishes, designs, etc.).
American luxury consumers value exclusivity that comes from
their ability to express a personal point of view, an attitude and
their own uniqueness. Exclusivity for the sake of exclusivity
is a European luxury ideal, not an American ideal.
Here is an example of how the emotional drivers come
togetherA woman soaking in a tub is taking care of herself,
while also preparing for a moment of connecting, wanting to
feel, look and smell good before her dinner date.
UNDERSTANDI NG
LUXURY BUYI NG
BEHAVI OR
Todays luxury marketing and behaviors are driven by a strong sense of me. It is all about the feeling consumers get from
purchasing, owning and enjoying a product. Luxury consumers want more specialness in their experience of luxury. They focus on
the experience of luxury embodied in the good or service they buy, not in the ownership or possession itself.
Luxury is tied up with creature comforts and feelings of comfort. Consumers will pay a premium to recreate a wonderful
emotional experience. All luxury consumers, up and down the income scale, gain their greatest luxury thrills from experiences.
When a consumer purchases a luxury item, there is an expectation of better quality, fine details, and better material. This makes the
luxury consumer willing to dig deeper into their pocketbooks to buy that extra feeling of confidence.
Luxury consumers dont buy luxury for status or social advancement and wont buy things they clearly cant afford. The differences
within the luxury market are more behavioral than motivational.
THE RELATI ONSHI P
BETWEEN EMOTI ONS AND
LUXURY PURCHASES
LUXURY MARKETI NG
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Based on consumer research from The Boston Consulting
Group, a major shift has occurred in the retail market.
Americas middle market is trading up to new luxury
products (products that possess higher levels of quality,
taste and aspiration). There are 48 million households in
America with incomes more than $50K that have the means
and desire to trade up to new luxury products. People are
willing to spend a large amount of their income for products
that have greater technical and emotional benets.
Consumers continually seek to achieve greater levels of
luxury. Once they have reached a level, it becomes ordinary
and they seek out new luxury fulllment (questing). Once
they have experienced luxury they cant go back.
Luxury consumers appreciate superior quality, but they get
a thrill out of paying less for the best. According to a recent
survey: 80% of luxury consumers agree that they enjoy the
feeling of buying luxuries on sale and usually search out the
lowest price or best value. They are savvy shoppers that know
how to nd a bargain.
LUXURY CONSUMERS LI KE THE
I DEA OF PAYI NG LESS
TRADI NG- UP THEORY
LUXURY MARKETI NG
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Consumers connect with brands on an emotional level.
Luxury consumers buy luxury brands because they want to,
and because they desire it emotionally (right-brain controlled).
The consumers passion, loyalty, dreams and desires are all
tied up with the brand. Connecting to the consumer on an
emotional level is the key to a brands success.
Marketers need to understand their consumers. They should
be asking themselves: What are our consumers drives and
desires? How does our brand fulll their fantasies?
Luxury product performance is now dened as the quality,
design and uniqueness, as well as how it makes the consumer
feel, and how they experience luxury.
LUXURY BRAND LOYALTY Brands that create the
strongest connection with the luxury consumer have a higher
brand loyalty. Brand loyalty is about how effectively and
completely the companys brand satises the consumers
needs, desires and dreams.
Marketers make mistakes in assuming that brand loyalty is
something a consumer does for them, when in reality, brand
loyalty is something the company and the brand do for the
consumer (the consumer knows what to expect from the
purchase). The brand is the contract between the
company and the consumer written in emotions.
BRAND AND THE
EMOTI ONAL CONNECTI ON
It is important that the quality in luxury brands must be very
good. However, the level of service, the experience and the
customer interaction differ greatly between products. This
provides a great opportunity for insightful marketers to
position their brand.
STATI STI CS A survey of 866 affluent customers done in
conjunction with Home & Garden Magazine showed:
| While brand doesnt dene luxury, it is the #1 most
powerful influencer on the luxury consumer when they buy.
The brand and/or representative of the store where the
luxury product is sold comes in at #2.
| When asked what encouraged people to buy their last
luxury item:
82% said company brand and rep
78% said store or dealer brand and rep
60% said word-of-mouth
| In luxury marketing these three things working together
most strongly influence the consumer to buy:
1. Product brand
2. Dealer/store brand/reputation
3. Price/value relationship
LUXURY PRODUCTS
AND BRANDI NG
Luxury is not defined by brand; if the product carries a luxury label it doesnt mean it is part of the new luxury market. It is only
part of the new luxury market if consumers desire it, but dont need it, and want a personal or experiential connection to it.
The brand of the luxury item is not the primary reason luxury consumers buy it; it only justifies the purchase. So, branding
still plays a critical role in luxury purchases. The more extravagant the purchase, the more justifiers needed (good name, in
fashion, last longer, etc.).
LUXURY MARKETI NG
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HOW TO MARKET
LUXURY PRODUCTS
Many manufacturers are having trouble successfully reaching the new luxury market because they fail to understand the infor-
mation listed below. For those marketers who get it, there is a ton of untapped potential in the luxury market. It is essential for
manufacturers, retailers and marketers to nd ways to connect with consumers.
SUGGESTI ONS ON HOW TO CONNECT
| Create two-way dialogues with consumers, potential
consumers and future ones.
| Build consumer feedback into marketing plans (e.g., cable
companies talk with viewers, viewers participate in polls, etc.).
| Must have two-way interconnectedness at every point of
contact for the consumer. Company websites, retail stores,
and the brands the stores carry are all connected in the
consumers mind, so make sure the marketing strategy
encompasses all these areas.
| Manufacturers must upgrade the caliber and quality of any
and all people who represent the company and interact with
customers, especially when picking retailers.
| Implement strategies that will predispose customers to talk
and share positive things about the brand (i.e. word-of-
mouth campaigns).
| Must connect why the consumer buys with how to reach them
and where to reach them.
Its about connecting with the consumer and the things they
care about. Connecting means talking less and listening more,
giving more value rather than increasing price, its about being
involved and passionate about the consumer, rather than
waiting for the consumer to come to you.
A great example of connecting is Progressive Insurance.
They offer consumers the ability to get quotes online. If a
consumer is having trouble lling out the required information,
they can click on a button that enables them to talk to a
Progressive representative. Once they click on the button, a
representative calls them within moments.
THE EMOTI ONAL CONNECTI ON,
MAKI NG THE CONSUMER
FEEL SPECI AL
Marketing a luxury good is not about selling a thing; it is
about selling an experience, and ultimately enhancing the
consumers pleasure and enjoyment. Marketers must deliver
greater exclusivity by making luxury consumers feel special and
unique, but not to the point of class snobbishness or arrogance.
The consumers passion for the product is connected to their
experience using the product, so marketers need to connect
with the consumers passion by digging deep into the
consumers psyche to understand their emotional dreams and
desires. Then they need to deliver that to the consumer with
their product.
Manufacturers must look at the world and their products
totally from the consumers point of view. They need to ask
themselves:
| How does this product help the consumer?
| How does the product create, support or enhance an
experience?
LUXURY MARKETI NG
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| Into what feelings, emotion or enjoyment does it translate?
| How does it make the person feel to use the product?
| Look at product featureswhat experience do they bring
to individuals?
The founder of Revlon once said, In the factory we make
cosmetics, in the stores we sell hope.
There needs to be a balance between emotional and rational
selling. Because new luxury consumers justify their
purchases and wont buy it if they dont understand it.
Marketers need to focus on demonstrating the emotional
benets as well as giving consumers a reason to believe why
it is worth it to purchase the luxury good/service. Again,
consumers buy things to achieve a feeling, enhance an
experience, get an emotional lift, and fulll a fantasy.
Lure customers with emotion, and then close the deal by
creating a rationale for the purchase.
KEEPI NG THE PRODUCTS FRESH
AND BRI NGI NG MORE VALUE
Luxury marketers must continually extend the bar of luxury
higher and higher to bring freshness, newness and something
extraordinary to the ever-aspiring luxury consumer. To
maintain the luxury allure, they must pump up the luxury
value of their brand.
Some of the key elements to tapping into new luxury are:
high quality, attainable price point, sought-after design and
advanced technology.
KEY ELEMENTS TO BUI LDI NG
A LUXURY BRAND
Luxury marketing is based on building a brand, communicating
its value, and using the brand as a conduit to connect to
the consumer. Brands succeed when they tap into what
consumers want as much as what they need. Marketers must
understand why people buy their brand so they can connect
with their consumers emotionally. The brand conveys a
promise to the consumer that the product will satisfy their
emotional desire.
KEYS TO BUI LDI NG A LUXURY BRAND
| A Luxury Brand must be expansivebig ideas give
marketers places to venture/opportunities to meet in
consumers personal lives.
| A Luxury Brand must tell the story behind a product to
make the emotional connection (use rich and graphic
consumer targeting).
| A Luxury Brand must be relevant to consumers needs
meet passions and desires emotionally and physically.
| A Luxury Brand must align with consumers values todays
consumers want their consumerism to provide a greater
meaning and they look to do good when they shop.
| A Luxury Brand must perform for the consumerit is
luxury if it makes the consumer feel special and unique, as
well as performing its material purpose.
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ADVERTI SI NG TO THE LUXURY MARKET (BASED
ON A STUDY OF AFFLUENT LUXURY CONSUMERS)
| Brand ads should tell a story that will be so involving that
the consumer becomes part of the brand story.
| Brand ads should be relevant (deliver meaning to
consumers lives today) to passions, desires and fantasies
of the consumer.
| The story must continually be reused, rened, reinvented
as values of the consumer change.
| The message must relate to many peoples lives and be
expansive enough that it can change with the times.
Traditional advertising and marketing does not always work
for new luxury products. Marketers need to pay attention
to cultural icons like Oprah, who say take care of yourself,
spend money on yourself, when creating messages for
consumers.
KEYS TO CREATI NG EFFECTI VE
WORD- OF- MOUTH ADVERTI SI NG
| Have a new, innovative conceptwhats hot.
| Make it a simple conceptdumb it down so ordinary
people can understand the concept immediately.
| Identify and develop dialogue with the most likely
prospects to be your brand ambassadors (those that are
most passionate about your product).
Manufacturers need to nd creative ways to meet the needs
of their best customers and make them feel special. One idea
for connecting to plumbing customers is to send a gift at 1
mo., 3 mo., 6 mo., and a yeartowel, massage brush, etc.
to their luxury customers. Connecting to the customer
encourages repeat purchases/upgrades, and encourages
word-of-mouth. Those customers will tell their friends and
create a desire for their friends to get the same treatment.
HI GH- END FOCUS GROUPS Conducting tactical
research is a great way to better understand consumers
passions and desires. It is important to be creative and to
think outside the box. First get a sense of the decisions your
target market is making across categories and segments, and
then design the high-end focus group accordingly.
Some examples of high-end focus groups are:
| Invite affluent consumers in for a private showing and
cocktail reception of an exciting new line at a favorite
boutique/specialty store. Get feedback by showing
products with different technical features, different
nishes, etc.think outside the box.
| Give away a complimentary gift with an unrelated purchase.
For example, a store like Coach, who wants to decide what
new color to start making accessories, can give away a leather
keychain in the various the colors they are considering. Let
the consumers pick which color they want. Leverage retail
relationships to conduct qualitative researchmake sure to
reward retailer partners for their help.
| Survey customers at retail locations (i.e. decorative
plumbing/hardware) to determine their satisfaction
levels. Assess degrees of customer satisfaction, causes of
customer pain, and reasons for dynamic retail experiences.
TI PS ON ADVERTI SI NG
TO THE LUXURY MARKET
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FI NDI NG AFFLUENTS There tend to be more liberals
under 40 and more conservatives over 40, so focus on
subscriber lists of conservative publications to reach
Affluents.
To reach Affluents consider Architectural Digest and
Bon Appetit. To reach Mass-Affluents consider these
publications:
| Cond Nast Traveler
| Gourmet
| Vanity Fair
| Food & Wine
| Martha Stewart Living
| Martha Stewart Living Children
| Kids: Fun Stuff to Do Together
MI SCELLANEOUS MARKETI NG TI PS
FOR THE LUXURY MARKET
| Showrooms/Displays: Showroom/displays need to be visually
stunning. Sixty percent of consumer decisions to purchase
were influenced by the retail environment and displays.
| Internet Sales: Internet sales do not play a signicant role
in the new luxury home market. Todays consumers are
smarter and more prepared. They often use the Internet
to do research, but less than 15% of new luxury products
purchased for the home are sold online. Online retailing
as yet does not deliver the emotional gratication that new
luxury consumers demand.
| Promotions: Consumers like to get luxury items on sale;
luxury consumers want to feel like theyve won or achieved
special status by saving money. Think of creative ways to
inspire shoppers (e.g., giving shoppers a special goodie bag
gives an emotional lift).
| Satisfaction: Total customer satisfaction is another key to
winning in the new luxury market.
LUXURY MARKETI NG
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| Luxury k&b Collection Show: Branding Luxury: Tips on
Marketing Brands Affluent www.kitchenbathpros.com
| Metrics for Marketing to Luxury Buyers
by Andrew Grossman
| Know-How ExchangeCustomer Behavior www.
marketingprofs.com
| Luxury Buyer Is Still Hot Prospect in Volatile Times
by Alf Nucifora
| Luxury for the MassesTrends in Luxury Item Spending,
Marketing by Bob Francis
| Luxurys Long Tail by Tim Manners
| Paradise by the Bathroom Light
www.kitchenbathdesign.com
| The Good Brand by Linda Tischler
| The Comfort Zone www.kitchenbathdesign.com
| Bathrooms to Feed the Soul www.moen.com
| Opportunity Knocks as Consumers Embrace Trading
Up www.kitchenbathdesign.com
| Special Bathroom Suite Series Part IIImpulse Buying
www.pmmag.com
| Fall Bath Remodeling Report www.kitchenbathdesign.
com
| Marketing to the Mass-Affluent by Dan Kennedy
| Intelligent Bathroom by Philips Research
| Understanding Your Brand Aligning Brand Equity to
Drive Business Value by Ray George
| Business Spotlight: Why Do People Buy What They Dont
Need by Michael Rubinkam
| 20 Ways to Enhance Your Bathroom
House Beautiful Magazine
| Splash Out Your Bathroom The Journal
| Danbury Business Changes American Design
Faireld County Business Journal
| Bathrooms Make a SplashThese Days Anything Goes

The Independent
| High-Tech Bathrooms: Electronics Final Frontier
Electronic Design
| Americas Take on New Luxury
International Herald Tribune
| A Stimulating Experience: Todays Whirlpools,
Air BathsWithout Ever Leaving Home
Kitchen & Bath Design News
| Escape to the Bathroom for a Shower of Amenities
Denver Rocky Mountain News
| American Standard Study Reveals What Americans
Love and Hate About Their Bathrooms PR Newswire
| Research and Markets: Future Trends in Luxury Market
Analyzed M2 Presswire
RESOURCES
LUXURY MARKETI NG
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| Articles by Pam Danzinger (Widely published author and
authority on Luxury Marketing www.unitymarketing.com)
| Connecting Replaces Cocooning as New Butterfly
Consumers Emerge
| Eight Things That Every Marketer Needs to Know About
the New Luxury Market
| Meet the Butterfly Consumers:
The Evolving New Affluent Consumer
| The Lesson In RetailingLet the Consumer Win
| Word of Mouth Advertising:
Entirely Too Powerful to Leave up to Chance
| Brand Loyalty Starts and Ends With the Consumer
| Tabletop Companies:
Are You Tapping Into the Consumers Passion
| The Six Myths of Luxury Branding
2006 Point to Point | 23240 Chagrin Blvd, Suite 200, Cleveland, Ohio 44122 Tel: 216 831-4421 pointtopoint .com
P O I N T O P O I N T
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216 831-4421
pointtopoint .com
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