Marketers that target affluent consumers will face a challenging time, as demographics are bringing on a luxury drought, warns Pam Danziger, president of Unity Marketing.
This tends to contradict standard data about the growing gap between rich and poor, which many marketers say favors sellers of high-end items. Danziger explains she doesn’t believe luxury sales will come to a halt, but those sales will require more effort than before.
“A drought is a period of less rain,” she says. “You will have to work harder to make the rain. You will have to work harder to find the growth.”
Her conclusions stem from a Unity Marketing survey of 1,200 affluent consumers (defined as more than $100,000 in household income), which found that while high earners’ confidence has risen markedly, their spending on luxury goods and services dropped some 26.5 percent from the previous quarter.
The aging of the baby boom population poses one challenge, Danziger explains.
“Those consumers are seven, eight years older than when we went into the recession,” she says. “As people age, their desire to purchase luxury goods tends to decline. They tend to change perspective and focus more on experiences.”
Generation X is reaching peak earing power, but that group lacks the numbers to constitute a real consumer force, Danziger says.
“The millennial generation is as large as the baby boom,” she says. “They are two huge generations. Generation X is a slump between these two big humps.”
The millennial generation, meanwhile, is still struggling to make it financially, following the recession. It also takes a more skewed view of conventional luxury marketing.
“They are bringing a new style and approach and are turning away from ‘luxury,’ ” Danziger says. “They think it’s just a marketers’ label. Younger consumers want good-quality things, but they don’t care about the prestige. They are looking for functional brands. Today you don’t have to pay the premium for that prestige. You can get very good products at good prices thanks to the Internet. The Internet has been a game changer. Consumers can peel back the curtain and see reality.”
To understand the new generation, she points to Facebook founder Mark Zuckerberg.
“He has billions, and what does he choose to wear?” she asks. “Sneakers and a hoodie.”
She advises jewelry marketers to consider what items “go with tattoos.”
“For younger women, tattoos have become their jewelry,” she says. “With my generation, I had to fight my mother to get my ears pierced.”
It’s also tougher to reach younger consumers, who live in an increasingly segmented media world.
“Baby boomers grew up in a period with three television channels,” she says. “We were the mass-marketed generation. We all wanted blue jeans and there were maybe three brands to choose from. Today’s young people want jeans, but they have thousand of brands to choose from.”
“They don’t have mass media,” she adds. “That brings a real challenge for marketers: How do you reach a niche audience that has a very short attention span?”