Luxury Marketers Need to Understand Consumer Psychology
Income and Assets Measure One's Success in Business and Career - Happiness Measures One's Success in Life
Just because affluent consumers have lots of money doesn't mean they are going to spend it buying more luxuries. That is why luxury marketers need psychological insights into the mindset of the luxury consumer market. Only by understanding the affluent consumer's underlying psychology can marketers tailor their marketing and branding strategies. As a consumer insights consulting firm specializing in the luxury market, Unity Marketing is taking the lead in providing not just facts and figures, but psychological insights for luxury marketers that will yield more loyal and more successful long term customer relationships with their affluent consumers.
In the world of luxury marketing, the key metric that is focused on is income and assets. People's affluence -- whether their income is within the top 20 percent of U.S. households or they have investible assets of $1 million or more -- is a number that tells about the individual's ability to purchase luxury goods and services, but it reveals absolutely nothing about their inner life and their propensity to indulge in a luxury lifestyle that their ample cash reserves allow.
Luxury marketers that desire to forge a more meaningful connection with affluent consumers need a deeper understanding than simply the size of the target customers' bank accounts – they need other measures to help them understand their consumers' psychology and mind set.
Understanding affluent consumer psychology is critical to success in luxury brand marketing
Pam Danziger, president of Unity Marketing and author of Shopping: Why We Love It and How Retailers Can Create the Ultimate Customer Experience, says, "People's level of affluence only measures their success in their business life, not their personal life. So my company recently surveyed luxury consumers to measure their happiness. What we wanted to find out was whether these affluent people who have 'made it' in the world's terms of career, income and accumulation of assets also feel they have made it in their personal lives. In essence, how happy are they?"
She explains, "What we found was very simply that these highly affluent, successful people are also fairly high in happiness, as measured on a possible 35-point scale.
"Further overall happiness increases with income, so the happiest people were also the ones with the most money. But the differences in people's happiness scores wasn't anywhere near as significant as the differences in their income. This suggests that while the most successful and financially well-off people are also happiest, it may be that the effort it takes to achieve such high levels of financial success aren't worth all that much in the grand scheme of things, Danziger comments.
The luxury consumers scored 25.99 points in the satisfaction with life scale (SWLS) developed by Psychologist Ed Diener. This places them in the second highest classification of happiness (score of 25-29 points); by contrast 30-35 points measures those at the very highest levels of happiness. Some 20 percent of affluent people surveyed fall into that category. This is based upon a survey of just under 900 luxury consumers (average income $175,000).
Money does buy happiness -- but an increase of 2.5 times more money only gets you 10 percent more happiness
Indeed, people's levels of happiness increased with income. Those with incomes of $250,000 or more, the ultra-affluents who correspond to the top 2 percent of households, averaged 27.63 points on the satisfaction scale, while those at the lowest income levels, the comfortably affluent consumers with incomes $100,000-$149,999, have a happiness rating of 25.1, also placing them in the high level of happiness.
What is important to note is that the highest income luxury consumers still rank within the same overall level of happiness as those with incomes of $100,000. They didn't jump a notch to the next level of happiness, so that everyone over $100,000 has the same average happiness rating.
Further the differences in average happiness scores between the highest and the lowest income luxury consumers differ only by 10 percent, while the ultra-affluents have an income at least 2.5 times higher than the comfortably affluent.
The new luxury consumer is adopting a 'less is more' lifestyle
"The conspicuous consumption lifestyle as typified by 'he who dies with the most toys wins' thinking is giving way to a new appreciation for a simpler, less materialistic approach," Danziger says. "All around us we see signs in the culture that affluent people want to make the world a better place and that means giving back through charities and foundations and going green in order to have a smaller 'carbon footprint.'
"The aging of the Baby Boomers is also a factor in turning toward a less materialistic approach to the luxury lifestyle. Americans today have an expected life span of roughly 80 years and once you reach 50 or 60 years of age, the question comes down to 'what do you want to do with your remaining 30 or 20 years?' Increasingly maturing affluents are not using their accumulated wealth to buy another diamond ring or mink coat. Rather they want to do something more meaningful with their money than spend it and do something more rewarding with their time than working 80-hours per week.
"Further, if younger luxury consumers discover that all the hard work and time spent on the job in order to push their income to the next level doesn't result in a commensurate increase in personal happiness and fulfillment, they may well opt for a new 'less is more' approach to life, which means spending more time with family and friends and opting to trade down to less prestigious, but perfectly functional material goods."
Danziger to webcast "The Coming Luxury Drought"
On May 21 at 9:00 a.m. eastern Pam Danziger will present a one-hour webcast for luxury marketers entitled "The Coming Luxury Drought: What Luxury Marketers Need to Know and What They Can Do About It." The webcast will examine the cultural factors that are causing affluent consumers to cut back on their luxury spending. It will present ways that luxury marketers can tap the shifts in consumer psychology to overcome a newly resistant affluent consumer and create a loyal relationship with them.
- Pam Danziger's webcast "The Coming Luxury Drought" May 21 9:00-10:00 a.m. (other webcasts tbd)
- How the Affluent Will Vote in the Upcoming Presidential Election -- The Gender Factor
- Green Marketing and the Luxury Consumer
- Release of Luxury Report 2008 with special report on a newly emerged luxury consumer personality -- the Temperate Pragmatist
- Latest trends and directions in the giftware and home decorative accents market