Affluent Consumers Long for the Experience
Affluent households increased their luxury expenditures slightly in 2005, but the real growth stemmed from a penchant for luxury experiences, not materials, according to Unity Marketing's "Luxury Consumer Tracking Study." The consultancy segments luxury spending into four categories: automobiles; home luxuries like art, electronics, and flatware; personal luxuries like apparel, fashion accessories, jewelry and watches, pet luxuries, and wines and spirits; and experiential and luxury services, which include dining, entertainment, spas, and travel.
According to Unity, there are 30.2 million households with incomes of $75,000 or more, which Pam Danziger, president of Unity Marketing, classifies as affluent, but the average income of that segment is $137,500. "That's a comfortable lifestyle, but it's hardly rich," she says. On the higher end of the income spectrum, 1.7 million households pull in incomes of $250,000 or more, with that cluster's average income at $438,338 per year.
The average amount spent by an affluent household on luxuries grew from $50,640 in 2004 to $52,588 in 2005, a moderate increase of 3.8 percent, while the households spent 4.6 percent less on home luxuries, dipping from $20,948 to $19,990. Automobile outlay shot up 18.5 percent, from $36,043 to $42,696, and personal luxury spending grew 5.6 percent, from $9,474 to $10,007. The largest boom, however, came from expenditures on luxury experiences, things that one does, not things that one has or owns. Spending in this segment nearly doubled, pulling in an average of $22,746 compared to $11,632, a 95.5 percent upsurge.
The motivation for the shift, according to Danziger, parallels psychologist Abraham Maslow's hierarchy of human needs. "You have the needs [for] food, clothing, shelter, and then you have socialization needs, fulfillment that you get from your position in society, rewards for accomplishment. Luxury consumers have satisfied all those lower-level needs. They have jobs, [marriage, and family] that give them those rewards. What they're really trying to do is create a more actualized self and bring about this personal transformation so that you can become the ultimate expression of who you are and what's your value system. That's the drive in the luxury consumer market."
Danziger cites examples like something as small as a trip to the bookstore or larger-scale experiences like taking children to Disney World. "Buying another mink coat or another diamond ring or another Jaguar isn't really going to do it for you at that stage. That's going to be something that we'll be seeing the Baby Boomers doing more and more of."
Additional results of the study show that 90 percent of the affluent consumers surveyed have middle-class backgrounds. "What we see with those affluent consumers is, they bring their middle-class values into the luxury market, so they're really the middle-class luxury class," Danziger says. "They are looking for discounts and sales, and they buy the majority of their luxury goods on sales or [at] discount. They have this middle-class orientation and they know how to save money."
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