The majority of middle-market consumers in the US are willing to pay more for better-performing products that provide emotional satisfaction, according to a national survey of Americans with household incomes of US$50,000 or more, conducted by the Boston Consulting Group (BCG).
According to BCG's research, many American consumers think of themselves as 'active connoisseurs' of high quality, higher priced goods, saying that they know how to buy quality goods without compromising their finances.
Notably, 80% of those surveyed who rated the economy and overall buying climate as "negative" still said it's worth paying more for certain premium quality products because they represent a better way to spend money in such hard economic times.
"You have to admire American consumers, who are now making choices with a lot more confidence," said Michael Silverstein, a senior partner at the Boston Consulting Group. "Today's consumers 'trade up' in categories that matter to them, such as food and home furnishings, and 'trade down' in categories that matter less."
Some 67% of the consumers surveyed think the American economy is either "not so good" or "poor". Similarly, 44% think that this is a "not so good" or "poor" time to buy things. However:
- 92% of middle-market Americans think that increased performance and better features make it worthwhile to pay more for premium quality products.
- 87% say that they're willing to economise in some areas in order to spend more on higher quality products that matter to them.
- 81% agree that even with a troubled economy, it is worth paying more for certain premium quality products because that represents a smarter way to spend money.
- 85% would rather spend more for premium-quality products that are a little nicer or better than average, from something as small as a cup of coffee to something as big as a car.
"This is a phenomenon of the same household trading up and trading down. They are choosing the products and services that are important to them and buying the best they can afford," noted Silverstein.
The survey's results also suggest that Americans spend more for better quality goods because it makes them 'feel better', making a hectic life more enjoyable, or enhancing time spent with people they care about. The respondents said they lack enough time in the day (76%), or enough sleep at night (50%), and many experience stress (54%) and are not engaging with friends often enough (53%). Consequently, 73% are willing to spend more for things like food, sit-down meals, or wine, that enhance their social life or time spent with family.
Some 68% said that when they buy premium quality products, they feel a sense of accomplishment and even excitement, and 67% said that owning a premium brand or high-quality product is treated as a reward for working hard. Moreover, 47% said that buying a premium quality product or brand helps balance out some of the stress in their life. Fully 90% agreed that the saying "you get what you pay for" is true, and that even if you pay more, it's more enjoyable and satisfying to have better quality.
"Consumers are learning how to spend to compensate for some of the pressures and anxieties of modern-day life," added Silverstein. "Many manufacturers and retailers have recognised this opportunity and are catering to the consumers' needs."
In a separate study, BCG analysed the recent sales performance of fifteen luxury companies for the goods of which consumers pay premiums ranging from 20% to 200% (e.g. US$6 for a Panera panini rather than US$3 for a regular deli sandwich, or US$28,600 for a BMW rather than US$20,000 for a Pontiac).
The luxury players posted average sales gains of 17.8%, and a median sales gain of 15.1% for the first half of 2003, compared with the same period in 2002. Meanwhile, total personal consumption expenditure in the US increased less than 5% during the same period, according to the US Department of Commerce.
"Our research proves that Americans' appetite for luxury is very strong - slow economy or not - and that this consumer behaviour shift is one of the biggest opportunities in business today - to realise high-volume sales and higher net operating margins by making and marketing products that prompt consumers to trade up'," concluded Silverstein.