Luxury Consumers
Luxury consumers are regarded as an important group with significant spending power by many businesses that either offer luxury goods or intend to target such consumers with new products in the future. It is only when they attempt market research on such consumers that they hit a problem.
What group of people do they use for the market survey? Who do they ask the questions that will hopefully give them all the information they need to construct a business plan to meet the requirements of the luxury market. In other words, who are these luxury consumers? There are no lists and no definitions for the term, and how can you put figures to a market that is undefined, or even indefinable?
In fact, it is quite true that you cannot put figures to luxury and there is no meaningful definition of what such consumers are, other than those that purchase or use luxury products. The problem then arises of defining the indefinable. What may be luxury to one person is essential to another and unnecessary to yet another. You cannot define the term numerically or financially.
However, there are two ways to overcome this problem: be specific or change the terminology.
1. Be Specific About Your Market
Very few businesses market luxury goods in general. They will generally offer a limited range of specific items described as luxury, such as jeweler offering a range of watches, or an aviation company offering personal planes. In these cases, the business will be marketing the goods themselves, irrespective of any definition of the consumer.
Some shops market only one specific brand, and in cases such as this it is relatively easy to carry out market research to determine the market’s view of the brand or what improvements may be suggested. The consumers are liable to be wealthy, so it would make sense to define the market in terms of the wealth of the consumer rather than in terms of the goods they buy. An expensive watch might be a necessity to them rather than a luxury, so that they are wealthy consumers rather than luxury consumers.
2. Change the Terminology
The last argument leads us to suggesting changing the terminology to wealthy consumers, and then placing a numerical figure to these definitions. That could be in terms of earnings or as a proportion of the population. The latter is preferred because the former is fluid – earning increase with inflation, while the top 10% of the population in terms of earnings never changes – it is always 10% of the population!
In fact, one term currently used is ‘affluent consumers‘, defined by some as the top 10% of households in terms of earnings. Note the term ‘households’ rather than individuals – that is the more sensible definition, since it refers to the spending power of a household which may be an individual, a family, or a family and service staff.
So which of the above two options is preferred to the term ‘luxury consumers’? Much depends on the type of business you have: do you market a) expensive watches, ocean-going yachts or cashmere coats, or is your business b), marketing a range of products within a certain group, such as jewelry, clothing or electrical goods and electronics or are you c) a department store or an online shopping mall selling everything?
In the first case you need not worry about defining the luxury consumers, because all of your customers will fit the bill. You may, however, have a mixture of clients, ranging from those that use their credit card to buy a luxury $2.5 million yacht to others that take a loan for their $2,000 watch. Nevertheless, how they pay is irrelevant as long as they pay.
In the second case, you will have a mix of the indefinable luxury consumers buying the top-of-the-range goods and those buying the best they can afford. Finally, with the department store, the bulk of your business will be with ordinary people and you won’t be able to define your luxury customers.
In terms of market research, only your luxury consumers from example a) above would be a practical group for analysis of their potential future expenditure on ‘luxury goods’. In fact, it is significantly more accurate to use the definable ‘affluent consumers’ as the basis for research, since it is only that group that can be defined in financial terms.
By using the services of specialist research firms that hold verified databases of affluent consumers – your luxury consumers – you will be able to target these people with custom consumer surveys and get meaningful results on their potential future expenditure on high-ticket products and services, and the improvements they would like to see in future developments and versions of existing products in the ‘luxury’ class.