A $800 pair of Chanel sunglasses and a $35 million yacht both require luxury marketing, but their consumers are not all the same. Luxury Marketing is almost the antithesis of Mass Marketing which is taught at 99% of the universities. Luxury Industry has its own Luxury MBA. Luxury marketing is not just one single formula that fits all, but a practice that maintains the recognition of uniqueness and quality of a brand. Knowing which group your consumers falls under is paramount to success in business and it is largely (but not exclusively) based on the price point of the product or services.
There are two types of Luxury Consumers: The aspirational and the already financially arrived UHNW (Ultra High Net Worth) or HNW (High Net Worth). Each of these demographics are defined and quantified in luxury marketing, and have a statistical expected behavior. The fashion industry depends on the aspirational category for up to 80% of their sales. The private jet companies have only UHNW and so they are not as affected by downturns in the economy. The truly rich are rich even after losing half their net worth; If you are worth a Billion and loose half of it…you are not skipping any meals. The less a company must rely on aspirationals, the more insulated they are from the economic swings.
In the travel world, the top of the pyramid is owning a whole private jet, next would be fractional ownership (1/16 is the smallest amount legal), The entry point for this starts with smaller planes and smaller fractions for people with a liquid net worth around $50 million. The next step down would be the card holders that buy private time by the hours or some of the other similarly formatted options that bring the price point down so another group can participate. This group entry to this market starts at around $10 million liquid assets, not including homes and other non-liquid assets. Under that there is charter, next is commercial First/Business Class and then Coach. The farther down on that chart you go the more they will be affected by the economy as a whole. The higher up, the more autonomous they are, and even if having lost one-half their net worth….they are still incredibly rich. The very rich are also usually more internationally divested and so they take less of a punch. It is a paper loss to them until the economy turns around. So when the reporter states that the Luxury Market does not feel the swings of the rest of the economy, it depends on if they are luxury brands that rely on aspirational consumers.
Most media sources reach aspirationals; those that can sample the lifestyle, but not really live it. They can buy a purse, or a tie, take a ski trip once a year and sample several of the lower priced luxuries. They could be members of a local country/golf club, and mom and dad both have a BMW sedan. They can splurge on a $700 bottle of wine for their anniversary, but not drink one every night. Fragrances, cosmetics, skin care, fashion, sun glasses, lower level jewelry, ski coats and boots, surf boards and other sports paraphernalia are perfect examples of lower priced luxuries. These lower level luxury are very well covered in the media …the middle, upper middle class and lower upper demographics are the easiest to reach. The UHNW are the hardest to reach. They have the lowest response to advertisements and mass PR, as they know that their standards and expectations usually exceed most. They are best reached peer to peer, or by a trusted and recognized influencer in their demographic. The super riche have the unique opportunity to experience everything at the best level (not pick and choose what they can afford) and saving time has even a larger economic incentive. These people are always being solicited and so they often avoid contact with individuals that they do not already have a relationship with…including sales people. It takes more than just pretty pictures to reach the wealthiest demographic. It takes bringing them information that is relative to them by someone that they trust. It is harder to find external influencers in this group.
The UHNW demographic, just like any other group, has predictable actions and responses, it is just different than that of the mass market. Tossing the word “luxury” in your verbiage and showing pretty pictures is only going to fool the demographic that you are not seeking. Luxury marketing is very different than that of premium brands and other mass market products. The number one cause of failure by new brands in the luxury sector, is the use of mass marketing techniques. Be wary of professionals that claim to be luxury specialists, but then proceed talk about premium brands.
he higher up on the affluence level, the more “time” is worth. For example, if it took a person 1 hour to clip coupons that save them $30 at the store, than that hour was only economically well spent if they make $30 or less an hour at their work. A person that makes $100,000 annually, their hour is worth much less in dollar terms, than Warren Buffett or Bill Gates who makes more in an hour than they make in a year.
There are two aspects of time: Quantity and Quality. To successfully market to this demographic, one must address TIME not COSTS. To the UHNW, TRUST reduces the risk of the loss of time in quality or quantity. The reason that most marketers are so ineffective at reaching this demographic is that they simply cannot pull themselves out of their own middle class prejudices and limited understanding of how the upper 1% lives.
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Very perceptive as usual Lorre!
Thank you very much. So glad that you enjoyed my articles 🙂