Earlier in November, the American Affluence Research Center advised luxury marketers to focus on the wealthiest one percent of the market and ignore the rest. According to an article by Luxury Daily, it based its decision on a completed study that surveyed the wealthiest 10 percent of American households.
"Luxury brands and luxury marketers should be focused on the wealthiest one percent because they are the least likely to be cutting back and are the most knowledgeable about the price points and brands that are true high-end luxury," Ron Kurtz, president of the American Affluence Research Center, Atlanta, told the magazine.
The logic is that luxury marketers need to focus on the audience that is least likely to be cutting back. They are also the most likely to be knowledgeable about the price points and brands that are at the highest end of luxury. However, while the advice might seem sound, it misses one key component of the luxury marker — obtainability.
Sometimes added value isn't the only commodity; exclusivity and identity resonate.
There are several ways to market a luxury product or service. Demonstrating value is one way, but exclusivity and identity are important. An average income household might invest in a green innovation that is generally considered a luxury item because it is an extension of their values.
And, equally likely, consumers are willing to splurge on luxury items for special occasions because, despite financial constraints, the act of purchasing the item or its rarity makes it appear more valuable. In the deepest corners of the recession, consumers were splurging while they were on vacation for very significant reasons.
In addition, the perception of a general product on any particular day can elevate its value. For example, Porsche is often associated with wealth. Cadillac used to be associated with wealth, but as it became more readily accessible to the general public, it lost some stature as a luxury purchase.
This might make an interesting topic for expanded discussion, even without all the evidence that is contrary to the advice of the American Affluence Research Center. Its research seems right, but the conclusions it draws would only drive more marketers into an extremely competitive and small market. Don't be foolish. Instead, take more time to get to know your customers.