Like nearly all categories, the luxury category is evolving, driven by demographic shifts, long-term socioeconomic trends and technology, which has increased accessibility as well as redefined what is considered luxury to begin with.
As the luxury landscape changes, it’s important for marketers to understand the complex new dimensions of the category in order to fully optimize potential opportunities.
Luxury purchasing is on the increase, Ipsos Affluent Intelligence’s latest research from Q4 2018 found, with nearly three-quarters of affluent consumers (73%) reporting having bought luxury goods in the past year — an increase of 9 points from 64% in Q4 2016.
With affluent consumers indicating they anticipate spending more on luxury in the coming year (15% in Q4 2018, compared to just 9% in Q4 2016), successful marketers will need to understand both the rational and emotional elements driving their behavior.
Unsurprisingly, when asked to define what both the terms “luxury” and “premium” means to them, affluent consumers put “high quality” and “cost” at the top of both lists. But that’s where the similarities end.
Our research uncovered a distinct dividing line between emotive and rational drivers in affluent perceptions of these two terms. While affluent consumers see luxury as something that makes them feel and experience something, they tend to view premium as a more general reference to the high end of a product category — something that offers more but isn’t always elegant.
Luxury is a feeling. To affluent consumers, the term has an aspirational quality that drives their desire to purchase. A large majority (69%) agreed luxury should be about making a consumer feel special, and the terms indulgence (31%) and exclusivity (31%) were two elements they used to define the term luxury.
Striving for a sense of prestige offered beyond inherent functionality also serves as a strong motivator and a key element of a luxury experience.
Affluent consumers view the term premium as much more tangible. It is something that’s measurably better, that fulfills benefits and needs and encompasses attributes you can dimensionalize.
However, that doesn’t necessarily make it uncommon or luxe. Consumers cited excellent design (40%), long-lasting (39%) and excellent reputation (38%) as key associated terms. To them, the word serves as an indicator that a premium cost is justified by something providing more features.
Another key element to consider in marketing within the current luxury landscape is the mixed emotions seen of those purchasing luxury goods. While affluent consumers absolutely enjoy being able to access an exclusive experience, this joy is often paired with a sense of guilt. And that guilt is most often expressed by female and millennial consumers.
Our research revealed 60% of affluent females feel guilty when making a luxury purchase, compared to just 49% of affluent males. Looking closely at the demographic breakdown, 67% of Millennials report feeling this guilt compared to 55% of those aged 35-49 and 42% of those over the age of 50. These consumers are most caught in the yin-yang duality of luxury purchasing.
This duality and guilt associated with luxury is a key reason the term isn’t always viewed as a positive. In fact, just 33% of affluents view the word luxury positively, compared to 51% who view the term premium in a positive way. And a whopping 16% say they are “not at all positive” towards the term luxury — vs. only 8% saying that for the term premium.
This bias can be seen in open-ended answers these consumers provided describing what luxury means to them personally. Luxury was described as “opulence that is almost over the top,” with respondents citing words like abundance, extravagance and indulgence.
However, affluent consumers also recognize the high levels of craftsmanship and extra attention to detail and comfort that luxury offers in comparison to what “mass” means — a dichotomy that provides a messaging opportunity for luxury marketers.
Offsetting that guilt is a key to marketing luxury. Combining feelings of joy with ideas like empowerment, reward and deservedness put luxury in the best light, and can help marketers position their brand, experiences or goods positively in the minds of these consumers.
This story originally appeared on MediaPost’s Marketing Insider column.