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 | | Ah, that “must-have” feeling | | |
Undoubtedly, mankind needs certain things to survive. Air and water, for example, just to mention the absolute basics. Food and health are next on the list of necessities, which is why we also don't view them as luxury items. We absolutely need clean air and water, we simply cannot live without food, and we are unable to withstand long-term illness for an extended period of time. There are, of course, those who adhere to the political fraction that considers clean air and water luxury goods, as they already do in some parts of the world. |
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| Luxury is really all about our most extravagant wishes, dreams and desires. And that is why, amidst war and economic crisis, terrorist attacks and environmental catastrophe, the lure of luxury still has a grip on us – maybe an even stronger one than before. Recent figures for LVMH (Louis Vuitton Moët Hennessy), including subsidiaries such as Christian Dior, Givenchy, or Veuve Clicoquot, for example, show an increase in sales of four percent to 12,6 billion Euro in 2002. |
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What makes luxury goods so enticing that they still sell, even in the face of economic turmoil? Opinions on the issue differ somewhat, but most agree that, above all, luxury has to do with rarity and inaccessibility. The less you are able to have something, the more you want it. A lot of people simply can’t afford to buy a premium watch or jewellery. Once these items become readily available, they lose their seductive appeal. If it’s not expensive, it’s not noble. Being able to purchase a high-class item at a very high price also appeals to one’s sense of individuality: you are what you buy.
In times of crisis the feeling of insecurity and the need for value are overwhelming. In a presentation at the latest Basel World Forum, Stéphane Truchi, managing director of the world-wide market research firm IPSOS France, put it this way: “In a depressed economy, people want to spend their money usefully. When you buy something, you want value for your money. People are looking for trust, for excellence, for something durable. This relates directly to the insecurity in their own life. Insecurity in life means I want to have some good, stable things around me.” |
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That factor plays a major role for all demographically relevant target groups. It applies to those over 50 as well as to young people just entering the consumer market. The main difference lies in the spending power of each group. According to a study presented by Truchi at the Basel World Forum 2003, people in their fifties today can count on living much longer than other generations before, which leaves them a lot of time to spend money. Getting old has been postponed to age 70 and beyond, which has resulted in people feeling a lot younger, acting a lot younger and spending a lot younger. At the same time, this demographic group has a higher disposable income, great purchasing power and the desire to fulfill life-long dreams. Money is not only seen as a way to guarantee security but also as a means to enjoy exceptional quality of life. September 11, the Iraq war, and global health threats like SARS are making people aware of their limited time on this planet.
Young people face their own set of insecurities and threats. A natural sense of rebellion and rejection of authority makes their personal feel-good factors different from those of the older generation, but the overall mechanism is the same . That’s important to those who manufacture and sell luxury goods, as It determines how young people are best approached. The key is to offer value, emphasising quality, durability and reliability. Pointless possession and consumerism is not cool. |
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Luxury items pluck that emotional chord in our hearts. Of course we could live without a diamond bracelet or that expensive watch – but do we want to?
Luxury is giving yourself a present, a treat, a reward. It is, oh, so satisfying to have something that others don’t have. It’s that simple – luxury is the reflection of a deep human desire, which is even stronger in bad times. There are two trends in the luxury goods market. One is to make luxury items available to more people, which challenges the rarity and inaccessibility premise. The other is a greater demand for quality than ever.
That goes hand in hand with the fact that brand awareness infers distinct features, such as impeccable quality. Tiffany’s, for example, or some German car manufacturers, convey these features. Luxury goods producers appeal directly to the need for perceived value. Quality, by comparison, extends beyond the product itself to all areas of service and support. |
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| To remain competitive and thrive as the global economy recovers, luxury brands need to be well managed and financially strong. The key to success will be innovation backed by market research and the ability to respond to changing consumer dynamics while maintaining market-established product values. As economies recover, these companies must seize new opportunities. Among the emerging growth opportunities is the concept of ‘new luxury’, which perceives middle-market consumers as trading up and paying premium prices for exceptional goods. |
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| The ‘new luxury’ phenomenon will bring enormous benefits to luxury goods companies, if they truly understand that consumers are prepared to pay that premium price for exceptional products, commented Michael J. Silverstein, vice-president of the Boston Consulting Group (BCG) in Chicago at the Basel World Forum. “New luxury consumers are driven primarily by the interplay of emotional and functional benefits. Luxury goods must not only sell at a high price, they have to offer distinct and relevant emotional and functional benefits to the consumer,” explained Silverstein. In a more practical context, new luxury has already lead to a boom in small indulgences and symbolic purchases of luxury goods and services. Consumers feel that they deserve to treat themselves to luxury. For this clientele, the benefit of luxury is not ‘value’, but the satisfaction of being able to treat themselves to anything they want, to being able to satisfy their own demand to be good to themselves: a psychological wellness trip. Most notably the travel industry has profited from the trend. Short trips, for example, within the European community, a day or two of shopping in any of the major European cities is becoming more and more popular. Along with that goes an increase in trips to spas, wellness hotels and high-class fitness arrangements, golf and gourmet food included. |
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Last, but not least, the role play women in purchasing decisions demands particular attention, as they are a key factor in boosting the ‘new luxury’ economy by their urge-to-splurge spending behaviour. Here, too, the driving force behind the purchasing power is: “I’ve worked hard, I’ve given my best, I deserve it.” It’s not shop ‘til you drop.
Diamonds, still, are a girl’s best friend.
Susanne Köhler |
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© September 2010 - European Publications GmbH
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