Luxury Consumers Often Misunderstood

Wealthy consumers are not just “consumption machines living in another reality,” but hard-working, potentially loyal consumers who often seek guidance for their purchases, according to a new report by The Luxury Institute.

Among the facts the Institute found:

The wealthy do not make or spend their money easily. “Most wealthy individuals spend far more hours working, embrace far more risk, and create far more value for society than their mainstream counterparts,” the institute said. “Even today, it still takes years of immense sacrifice to achieve wealth. Wealthy consumers are therefore very value conscious and discerning when they buy luxury goods and services.”

Like many of us, wealthy consumers’ biggest concerns include taking care of aging parents and raising children. “When marketing to them, acknowledge their basic human values and show you understand them as the well-rounded and balanced individuals they really are,” the institute said.

Luxury services are a bigger industry than luxury goods. While luxury goods attract attention, luxury services such as wealth management, travel and leisure, and security represent much more business. “Many luxury goods firms are busy transforming themselves into services or adding services to add value,” the institute said, suggesting that luxury companies should rethink their business models or invent service-oriented offerings.

The wealthy shop online. The vast majority of wealthy consumers regularly go online, especially since they work long hours and are more time starved than the general population. In addition, over 80 percent use rating and review sites to facilitate purchasing decisions.

Luxury marketers shouldn’t target only the wealthiest clients. Households with a net worth from $1 million to $50 million are underserved, the institute said, noting these customers’ “lives are busy, and often complex, and require many types of trusted advice. There are far more of these individuals globally, and growing in numbers. … Ignore them, or treat them badly, at your peril.”

Wealthy clients are loyal and give referrals. While wealthy clients often refer friends to businesses they favor, client referral rates for luxury firms are usually well below 50 per-cent, because those referrals are generated by individual salespeople rather than companywide programs. This “is one of the greatest revenue opportunities in luxury today,” the institute said.

Finally, although wealthy consumers are loyal, the institute warned that loyalty is based on great service.