"The definition and perceptions around luxury have changed a great deal over the years and brands need to understand the nuances to succeed," says Mark Potts, Head of Insights, Mindshare North America. "While there are certain fundamental and immutable human motivations around luxury, our research shows that consumers' luxury behaviors are shifting due to everything from changing demographics to evolved values and priorities to new influencers."
"There are different reasons people buy luxury. One is a pure aesthetics. Some things are just more joyous to look at, to smell, to taste. Another is signaling – we sometimes buy luxury items to show things to other people, and what we're trying to show is a really complicated question. And third is the idea of essentialism – we're not just sensitive to how things look, but to beliefs about their creation. Some luxury items resonate not merely because of aesthetics, or signaling, but because pleasure's deep," says Paul Bloom, Professor of Psychology, Yale University, who Mindshare NA consulted with on the research.
Surveying the Luxury Buyer
Mindshare NA's proprietary research identified five main types of luxury consumers, segmented across different age groups, psychological motivators, media habits, and more. Of the 1,600 luxury consumers surveyed:
1) 24% are Strivers: they see luxury as the evidence of success.
This is one of the youngest groups surveyed: 57% are between the ages of 18-34, which is the highest percentage of millennials across all five groups. They also have the highest percentage of people specifically ages 25-34 – they make up 47% of the Strivers total.
Strivers are also more ethnically diverse than three of the other groups; approximately one-third (34%) identify themselves with an ethnicity other than white. In addition, they also have the highest percentage of men of all five groups, coming in at 58%. As far as income goes, Strivers are mostly middle to upper middle class at the moment, because they're still early in their careers – but they will eventually work their way into the more elite income brackets.
When making purchases, Strivers are most likely to be influenced by social media influencers, family members, and TV shows. When asked about their recent luxury purchases, they were most likely to have bought Liquor, followed by Fashion, Auto, and Travel.
Strategic considerations for marketers: for Strivers, focus on communicating "the dream" and aspirations of your brand. Show that your brand isn't easily obtainable for just anyone. And of course, make sure that you're targeting multicultural consumers.
2) 16% are Trendsetters: they see luxury as a way to set themselves apart.
Similarly to the Strivers, this group has a heavy demographic tilt towards younger consumers, with 46% falling into the age group of 18-34. This group also has the highest percentage of multicultural consumers, with 40% of Trendsetters identifying themselves with an ethnicity other than white. The Trendsetters also have the highest percentage of consumers from the southern parts of the U.S. of all five groups, at 36%.
When making purchases, Trendsetters are most likely to be influenced by social media influencers, shopping websites, and their friends on social media. When asked about their recent luxury purchases, they were most likely to have bought Fashion, followed by Liquor, Auto, and Travel.
Strategic considerations for marketers: for Trendsetters, it's very important to communicate to them early on. Show that your brand can help them retain their leading-edge status, and put a particular emphasis on influencer marketing in your media plan.
3) 17% are Aesthetes: they define luxury as the pinnacle of aesthetics and design.
Demographically, this group is where both the age ranges and incomes start to climb higher. Only 19% of Aesthetes are between the ages of 18-34. Instead, there's then an even split among the other age groups: 20% are ages 35-44, 21% are ages 45-54, 21% are ages 55-64, and 20% are ages 65 or higher. This Aesthetes group also has the highest percentage of women across all five groups, at 62%.
As far as incomes go: one-third of Aesthetes (33%) have an annual HHI of $100-$149,000. After that, the next highest income grouping for Aesthetes is at $150,000 or higher, for 28% of the group.
When making purchases, Aesthetes are most likely to be influenced by brand websites, online reviews, and search. When asked about their recent luxury purchases, they were most likely to have bought Travel, followed by Auto, Fashion, and Liquor.
Strategic considerations for marketers: for Aesthetes, it's very important to communicate the exemplary design and craftsmanship of your products. Brands should associate themselves with artists and other influences in creative fields, and put a particular emphasis on engaging older consumers.
4) 23% are Only the Best: they see luxury as unsurpassed quality and service
Demographically, this group has some similarities to Aesthetes, except that they start to skew even older: more than one-fourth (26%) are ages 65 or older. A little over one-fifth (21%) are ages 45-54, and then 20% are ages 55-64.
As far as incomes go: 28% of this group has an annual HHI of $150,000 or higher. After that, 27% come in at $100,000-$149,000, and then 26% at $75,000-99,000.
When making purchases, they're most likely to be influenced by search, online reviews, and recommendations from their friends. When asked about their recent luxury purchases, they were most likely to have bought Travel, followed by Auto, Liquor, and Fashion.
Strategic considerations for marketers: it's crucial to communicate the performance and leadership of your brand. Focus on your product or service's experience in its respective category, and put a particular emphasis on engaging older consumers.
5) 19% are Comfort First: they see luxury as a meaningful way of life.
Demographically, this group has the highest percentage of people ages 65+ out of all five groups, at 42%. Following that, only 9% of this group is ages 18-34—the lowest millennial percentage across all five groups. The Comfort First group first also has the highest percentage of white consumers across all five groups, at 81%.
As far as incomes go, they also have the highest percentage of consumers with an annual HHI of $150,000 a year or higher, with more than one-third (35%).
When making purchases, they're most likely to be influenced by online reviews and brand websites. When asked about their recent luxury purchases, they were most likely to have bought Travel, followed by Auto, Liquor, and Fashion.
Strategic considerations for marketers: unlike some of the groups, brands can and should downplay status and image as part of their communications. Instead, they should focus on communicating the comfort and ease that their products or services provide. And of course, they should engage older consumers.
Larger Trends for the Future of Luxury Marketing:
In addition to breaking out five types of luxury consumers, Mindshare NA used those insights and others to identify five larger trends impacting luxury brands today, and what that means for marketer strategies.
1) What's big is small
"Luxury used to be about being well made. Now things are expensive but made horrendously cheap." – one of the high-earning women surveyed in Mindshare NA's focus groups.
Perceptions of quality have become a big sticking point for luxury consumers, which is particularly an issue as the divide between premium and luxury products blurs. In Mindshare NA's research, 73% of luxury consumers said that they would buy "premium, mid-priced products if they offered the same level of quality as luxury products."
What's more is that there's a backlash against some of the mass market production of luxury goods, creating the perception that these products aren't as special anymore. Younger consumers are feeling this in particular. When surveying luxury buyers:
- 55% of millennials say that "big luxury brands have lost their personal feel" vs. 46% of Gen X consumers and 47% of Boomers.
- Half of millennials say that "I prefer to buy lesser known luxury brands" vs. 41% of Gen X consumers and 23% of Boomers. The data indicates that millennials are more willing to take risks with luxury, banking on the social currency of being first to a trend while older generations tend to stick with the more tried-and-true.
For big luxury brands, marketers should focus on addressing these perceptions within their products and start "acting small." For example, there are opportunities to communicate the product development story to consumers.
2) Changing Signals
Keeping up with the Joneses is real. According to research from the Federal Reserve in 2014: "A household's position in the income distribution relative to its close neighbors is positively associated with its expenditures on high status cars, its level of indebtedness, as well as the riskiness of the household's portfolio…"
However, today more and more American neighborhoods are homogenizing—larger percentages of high income consumers tend to cluster together,1 which creates less pressure to 'keep up' financially. This decrease in pressure to compete with one another on resources has led to a new form of striving: Competitive Altruism. Coined by evolutionary psychologist Charlie L. Hardy, competitive altruism refers to individuals attempting to outcompete each other in terms of generosity and altruism to enhance their status.
This shift is signaling changes in what consumers want from brands. For example, data from BAV Consulting looked at people with an annual HHI of $100K or higher in 2001-2002 versus 2015-2016, and showed that the following qualities and attributes have declined in relevance for them: charming, glamorous, sensuous, and stylish. Conversely, these traits have seen the biggest growth in relevance: leader, kind, helpful, reliable, and trustworthy.2
Luxury marketers should consider incorporating a softer side to their brands, focusing on attributes such as kindness, empathy, or purpose. For example, over the past few years, some luxury brands have launched or sponsored programs to empower women and help veterans, or have taken political stances.
3) The New Consumer
American demographics are also changing. Data from Pew shows that Hispanic, African American, and Asian demographics are all growing substantially, while the percentage of white consumers decrease. This has created a shift in which demographics are driving luxury sales, as supported by data from MRI.
For example, in 2017:
- 29% of multicultural consumers owned or purchased luxury brands in fashion, vs. 20% of white consumers.
- 25% of multicultural consumers owned or purchased luxury brands in spirits, vs. 19% of white consumers.
- 17% of multicultural consumers owned or purchased luxury brands in perfume, vs. 8% of white consumers.
- 8% of multicultural consumers owned or purchased luxury brands in auto, vs. 8% of white consumers.3
Luxury marketers should ensure that they're targeting multicultural consumers, and consider dynamic creative optimization to speak to different demographic motivations and needs.
4) Modern Scarcities
Todays' consumers believe that the definition of luxury has become less about scarcity, and more superficial. When asked specifically how the definition has changed, more than one-fourth (27%) said that today's luxury is more accessible – it no longer implies that something is exclusive or hard to obtain. Sixteen percent said that it's become more about show than enjoyment; 15% said that it's more expensive. And another 15% talked specifically about decreases in quality.
With luxury products opening up to the masses, Mindshare NA identified today's new types of scarcities for consumers. Marketers should look for new ways to leverage these qualities:
- Quietness and wellness: getting time to oneself to relax and recharge.
- Uniqueness: like say, a luxury treehouse that one can rent for $970 per night.
- Space: one example would be first class on a plane, instead of being packed into coach.
- Impermanence: for example, Black Tomato's Blink brings five-star pop up hotels wherever luxury travelers may go.
5) New Power Centers
Luxury was once defined by the ruling class. Kings and queens dictated the luxury standard for fashion, activities, and even language. These power centers haven't gone away, but they've shifted to new influencers and new arbiters of luxury: media and celebrity.
In the 20th century, celebrities like Audrey Hepburn effectively made the fashion houses, and the Oscars became the most important marketing vehicle for luxury fashion. Then along came the stylists as the new power centers, like Rachel Zoe.
That then opened the door to today's social media influencers. They're meant to be amplifications of consumers' best friends, but Mindshare NA's focus groups found that many consumers see influencers as wearing big brands that are inaccessible to them.
Luxury marketers need to focus on identifying the power centers and status leaders in their respective categories—and how they're changing today.
In the end, marketers also can't ignore that luxury markets are closely tied to the upturns and downturns of the economy. Long-term pressures on luxury sales mean that investing in brand building now is critical, by addressing the changes in perceptions and consumer desires around the world of luxury. Those that do so will find that stronger brands are more resilient and bounce back quicker in downturns – and set themselves up for success in the future.
Mindshare NA's Insights team combined proprietary research with third party resources for an in-depth look at the luxury landscape. The proprietary research included a survey 2,000 U.S. consumers (1,600 luxury consumers and 400 non-luxury consumers) across the U.S, ages 18 and up. The team also conducted four different focus groups with luxury consumers, and consulted with renowned Yale psychologist, Paul Bloom.
1 Source: Pew
2 Source: BAV Consulting
3 Source: MRI