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- 8 Nov 2010
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Sound Strategy or Dumb Advice?


Pam Danziger, president of Unity Marketing, challenges the recommendations put forward by the AARC, that luxury marketers should focus their efforts on the wealthiest 1% of the market.

The Atlanta-based American Affluence Research Center has released its most recent survey of the wealthiest 10 percent of American households, and in spite of an overwhelming trend to pessimism about the economy and their own personal income, the AARC believes it has found a bright spot. “For the most part, [the wealthiest 1 percent] are going to continue to spend,” says AARC president Ron Kurtz.

The AARC recommends: “Luxury brands and luxury marketers should be focused on the wealthiest one percent because they are the least likely to be cutting back and are the most knowledgeable about the price points and brands that are true high-end luxury.” (as reported in Luxury Daily)

“This is just plain dumb advice for luxury brands,” says Pam Danziger, president of Unity Marketing which conducts four in-depth surveys of 1,200+ luxury consumers every three months. To think that the answer to slow growth and flagging sales in the luxury sector is for marketers to focus only on the top one percent is incredibly short-sighted.

 Smart shopping and targeted money-saving strategies are the new status symbols with luxury consumers today 

“First of all, the numbers don’t add up. The top one percent of the market (about 1.2 million households with average incomes of $500,000 and above) simply can’t carry the entire weight of the luxury industry. And with everybody racing to the pinnacle of the luxury market, a lot of brands and companies will ultimately fall off and crash and burn. The only hope for luxury brands in the present and coming economic climate is to get real about their customers, what they want, what they will pay for and where and how they are buying,” Danziger says.

In her new book, Putting the Luxe Back in Luxury, Danziger suggests the solution for challenged luxury marketers is three-fold:

• Integrate deep consumer insights into the corporate culture, using tools like Unity Marketing’s quarterly Luxury Tracking Study to discover the real value of the brand or product.

• Innovate marketing and branding messages using consumer insights as a springboard to discover innovative new customer experiences, new product ideas.

• Inspire customers, employees, retailing partners and other brand constituencies with new experiences and new values.

Danziger explains, “The demographics of the affluent market are essential facts about the luxury consumer that every luxury marketer must integrate into their marketing strategy in order to innovate their marketing and their brands so that they will inspire the customer.”

“Out of the nation’s 117.5 million households, there are 23.5 million affluent households at the top 20 percent of the market. Luxury marketers future depends upon engaging these ‘heavy lifters’ in the consumer economy who together account for more than 50 percent of all income and earnings and more than 40 percent of all consumer spending,” Danziger continues.

Demographics of affluent consumers points to more long-term potential at the lower-income levels of affluence

Marketing starts with understanding the consumer and understanding the consumer starts with demographics, Danziger says. “Even a basic understanding of the demographics of affluence can set luxury marketers on the right course in terms of identifying their best potential customer market.” She explains that there are really only two income segments that really matter in the current luxury market:

• HENRYs (a term coined by Fortune writer Shawn Tully which stands for High Earners Not Rich Yet, incomes between $100,000 and $249,999);

• Ultra-Affluents – The top two percent of households with incomes of $250,000 and above.

“There are 10 HENRY households for even one ultra-affluent household. And while the typical ultra-affluent household typically spends three-to-four times more than a HENRY on luxury goods and services, targeting only the ultra-affluent will never make up the shortfall of ignoring the still affluent and high-spending HENRYs behind,” Danziger explains.

“The greater number of affluent households at this lower income range means more opportunity for luxury marketers; there simply are fewer ultra-affluent households, and the competition for their dollars is much more fierce,” says Danziger. “Restricting marketing efforts to just these potential big-spenders is foolish in the extreme.”

Danziger urges luxury marketers to target the much larger HENRY population, but she advises them to do so with care. “Back in the day, luxury consumers gained power by the amount of money in their wallets and the status symbols they owned. Today, consumers gain power by how smart they are. This is particularly true for the HENRY population, which is cautious about how it spends money. These consumers are willing to pay for superior quality and performance, but when all things are equal, they won’t spend a penny more just to wear or own a name brand.”

 Restricting marketing efforts to just these potential big-spenders is foolish in the extreme. 

“Smart shopping and targeted money-saving strategies are the new status symbols with luxury consumers today. Marketers must understand the new behaviors and new psychology of the HENRY segment of consumers. The marketer who successfully speaks this consumer’s language is the one who will make the sale. Our most recent Luxury Tracking Study conducted in October 2010 gives up-to-the-minute details on who the HENRY is, how he behaves, and the marketing messages that will resonate the most.”

About Unity Marketing’s Luxury Tracking Study

Launched in January 2004, and every three months thereafter, Unity Marketing has measured the pulse of the affluent consumers in a longitudinal survey of 1,200+ affluent consumer households. One-third of each survey is comprised of ultra-affluents (HHI $250,000 and above).

Each quarter the Luxury Consumer Tracking Study reports what luxuries they bought during the past quarter, how much they spent, where they bought, the luxury brands they became aware of and used, and how they felt about their current and prospective financial status. A total of 22 major categories of luxury goods and services are included in the poll, including clothing, fashion accessories, home luxuries, travel, dining and jewelry.

Based upon the results of the survey, Unity Marketing also publishes a Luxury Consumption Index which tracks how luxury consumers feel and helps marketers anticipate consumers spending in the coming quarters.

In addition every quarter a special investigation of key trends in the luxury market are studied. In the current quarter luxury consumers and their values are studied. The findings of this special investigation is available as a separate trend report) or as part of the full Luxury Tracking Report.

Special Investigation: Luxury Consumers & What They Value Most

As each wave of tracking studies is fielded, special topics of interest to luxury marketers are researched in more depth and published in a separate trend report. In the third quarter 2010 Unity Marketing’s Luxury Tracking Study investigated luxury consumer values.

The special investigation questions were designed to help luxury home marketers and brands understand their affluent customers better, included:

• How important shared values are when choosing those with whom the affluent consumer socializes, works or buys. Surprising news, shared values are more important when choosing an employer than when choosing a company with which to do business.

• Values that are most important when it comes to patronizing a company, such as behaving ethically, being environmentally responsible, treating employees well, offering high quality products and services.

• Importance of key issues in affluent’s every day life, including health and wellness; society and politics; family and emotional health; career and finances.

• Key values that are important to an affluent’s daily life, including security, warm relationships with others, fun, self-fulfillment. Among the key findings is that affluents put the greatest importance on security, including financial security, which has important implications for financial and insurance marketers.

Pam Danziger, President of Unity Marketing


Pamela N. Danzinger is an internationally recognized expert specializing in consumer insights for marketers targeting the affluent consumer.

She is president of Unity Marketing, a marketing consulting firm she founded in 1992, which uses qualitative and quantitative market research to learn about their brand preferences, shopping habits, and attitudes about their luxury lifestyles.

Pam received the Global Luxury Award for top luxury industry achievers presented at the Global Luxury Forum in 2007 by Harper’s Bazaar.