The top ten myths about luxury consumers
A great amount of mythology and popular lore now surrounds the wealthy consumer and the affluent lover of luxury consumption. While many marketers are happy to perpetuate those myths and put their own customers' loyalty at risk, the US-based Luxury Institute has researched and answered what it believes to be the top ten such myths along with ways to move past them.
The institute's top ten myth list is a well-timed research study that aims to provide luxury marketers and retailers with insights into how luxury consumers really think and behave.
Top ten myths
- The wealthy made their money easily and spend their money easily Not true. Most wealthy individuals spend far more hours working, embrace far more risk, and create far more value for society than their mainstream counterparts. Even today, for most, 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. As a luxury provider, you need to recognise and acknowledge their achievements, deliver compelling emotional benefits, and position your offer as a complete experience that delivers a fitting reward.
- The wealthy are conspicuous consumption machines living in another reality Not true. The minority of wealthy individuals who live ostentatious, opulent lifestyles are often portrayed as stereotypical wealthy consumers. In reality, most wealthy consumers are value creators, who seek quality and value, including authentic prestige, in luxury goods and services. Like many of us, some of their biggest concerns include taking care of aging parents and raising well-educated, generous 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 wealthy can't really define luxury Not true. Put a list of brands in front of the typical wealthy consumer and she, or he, will not only be able to articulate the attributes that constitute a luxury brand, but will also discern differences between brands better than any luxury marketer. The ability of wealthy consumers to define true luxury, individually, and as a group, is laser-accurate. Ensure that your brand is truly unique and exclusive and worthy of being rated a luxury brand.
- Luxury goods are a far larger industry than luxury services Not necessarily true. Luxury goods such as couture fashion, watches and jewellery, get all the attention, yet, are dwarfed by the size of luxury services such as wealth management, travel and leisure, security, etc. Innovative services, including those as basic as nanny services, concierge services, and medical services, aimed at the wealthy, will grow faster and more profitably in the future. Many luxury goods firms are busy transforming themselves into services, or adding services to add value. It may be time to rethink the luxury business model, or invent a new service- oriented offering.
- The wealthy don't participate in consumer satisfaction surveys Not true. Wealthy consumers provide feedback and respond to surveys, sometimes more that the general population. Most wealthy consumers are highly educated businesspeople. They recognise the value of feedback and will provide theirs candidly to brands they trust. No metric is more highly correlated with financial success than customer satisfaction. Brands that fail to solicit and measure their customers' feedback and continuously seek to improve customer satisfaction will certainly suffer competitively.
- The wealthy don't use the internet as much as other consumers Not true. A recent survey by the Luxury Institute found that the vast majority of wealthy consumers are regularly online. The wealthy work long hours, are more time-starved than the general population, and use the internet more heavily for researching luxury goods and services, and conducting transactions. If you are not selling your full luxury offerings online, you are giving your competitors an edge.
- The wealthy don't use ratings and reviews to make purchasing decisions Not true. A recent survey by the Luxury Institute found that over 80% of wealthy consumers use ratings and reviews sites to facilitate purchasing decisions. While the wealthiest may rely on a few trusted experts, many have middle class values and lead regular lives that include seeking information from ratings and reviews sites and publications. The difference is that these savvy consumers steer clear of biased websites and publications and "best of" lists that pretend to provide non- conflicted advice. Keep your brand clear of conflicted and biased recommendations that will turn off savvy wealthy consumers.
- Luxury marketers should be targeting only the wealthiest clients Not true. Luxury brands that seek to serve only the US$100 million+ net-worth consumer are usually small and often have fairly low profit margins. The truly under-served wealthy, in luxury goods, and, especially in luxury services, are households with a net worth from US$1 million to US$50 million. Their 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. They are the core customers of most luxury goods and services firms. Ignore them, or treat them badly, at your peril.
- Wealthy clients do not give referrals Not true. Research with wealthy and ultra-wealthy consumers indicates that the vast majority are willing to refer trusted brands to friends and family. Yet, ask luxury goods and services CEOs what their client referral rates are, and the answer is usually well below 50%. This disconnect is due to the fact that most luxury goods and services firms rely on individual salespeople for referrals rather than creating a company-wide referral programme. It is one of the greatest revenue opportunities in luxury today.
- Wealthy consumers are not very loyal since they can go anywhere Not true. The majority of wealthy consumers are among the most loyal customers. But their loyalty must be earned with great service. Ratings show that most luxury goods and services firms have yet to internalise what brands such as Ritz-Carlton, Nordstrom, Neiman Marcus, and Bessemer Trust inherently know: That the entire customer experience, from A to Z, must be at a level that makes customers happy to do business with the brand. This is the greatest, and easiest to implement, opportunity for luxury goods and services brands globally today.