Teacup

For many of us, the closest we’ve gotten to owning products from the luxury market is oogling the shopfront through the window. But for the privileged few, the luxury market is a world of wonder where any desire can be filled with the swipe of the card.

Who is the luxury consumer?

The luxury market consists of the top 10% of the wealthiest people in the world. Despite the limited number of consumers that are able to afford the products, the luxury market is no small player. Research done by Mastercard in 2008 showed that US luxury sales topped at $891 million in September this year, up 3.4% from last year. Research by Unity Marketing also showed that in the last 3 months leading to September, the luxury consumer spent an average of $18,826 each (highest-income earners spending an average of $43,111). With an average annual income of $228,800 and so many products to choose from, you have to wonder, what tickles a luxury consumer’s fancy?

Luxury consumers are motivated by enjoyment and personal growth

Luxury consumers indulge in luxuries for two reasons: pleasure and enjoyment; and to improve the quality of life through self-actualisation. So as marketers, it’s important that we try to enhance the pleasure the consumer feels while consuming the product and provide ways for them to improve their own personal growth and life experiences through the product.

In the video clip below, marketing and advertising agency Atelier (a division of Leo Bernett) looks at how the luxury market is changing in the financial downturn. According to the guys at Atelier, the luxury consumer is no longer about status building – up until now, luxury goods signified status and glamour. Consumers today are engaging with luxury products to please themselves instead of conveying their lifestyle. They look for new forms of experiencing luxury in smaller amounts that provide an even higher quality. Instead of buying several lower-priced items, they will spend more on a single longer-lasting luxury.

They expect authentic products and a high level of ethical practice

In today’s market, luxury consumers look for exclusivity, authenticity, quality and dependability, reports Forbes.com. They also suggest that although consumers recognise ‘green washing’ (where a company overstates their environmental commitment), they expect luxury companies to uphold a high ethical standard. As consumers become more and more aware of manufacturing process and the increasing trends for goods being produced outside mainland Europe, shoppers are looking for assurance that they are getting their money’s worth. To address this, many high end companies have started releasing ‘behind the scenes’ look inside how they make their products (See Making of a Hermes Bag below).

Luxury consumers are not immune to the recession

Reporter Mirril Mascarenhas at the Canadian Marketing Association claims that there is a new sense of discretion with luxury spending. “Instead of that coveted shopping bag with an iconic brand name, some are asking for something a little less ostentatious.” Well aware of public backlash that could erupt in this economic turmoil, luxury shoppers are looking to conceal their wealth in order to be considerate of less wealthy consumers.

“Wealthy customers are asking for plain bags, no boxes, or requesting goods be delivered later. They don’t want everyone to know nor do they want to flaunt their brands. Another study argues 62% of wealthy consumers say openly flaunting wealth is out,” writes Mirril.

Like the consumers, the luxury brands are not immune to this recession either, even those that do promote quality over quantity. According to Forbes, “Even the privately owned French label Chanel–known best for $2,000 bags and $6,000 suits that last a lifetime–announced that it would cut 200 jobs this month.”

Can money really buy us happiness?

Despite its changing nature, the luxury market is not going anywhere soon. Changes in luxury consumer behaviour reflect their evolving attributes and the effects of the recession on the luxury market. But for those of us who still have a few years left before we can call ourselves a luxury consumer, I leave you with this: Journalist Benjamin Wallace trials some of the most luxurious goods in the world to try answer Can our happiness be bought?

Hmm.. when you look at some of the products… Maybe…