a luxurious shift: understanding what is beyond the price...

11

A Luxurious Shift: Understanding What Is

Beyond the Price Tag for the Affluent Consumer

Q4, 2015

Annalect Research - A Proprietary Study

22

Source: A Brief History of Luxury, Hugh Thomas, Oct 2014; http://trulyexperiences.com/blog/2014/10/brief-history-luxury; The History of Luxury, Rachel K. Ward, PhD, Luxury Studies, Feb 2011; http://luxurystudies.blogspot.com/2011/02/history-of-luxury.html;

Market Analysis: A Brief History of Luxury Goods, Daxue Consulting, Jan. 2013; http://daxueconsulting.com/market-analysis-history-of-luxury-goods

Ancient/Medieval Period 1600s-1700s

Luxury started to lose

its negative connotation

Industrialization

Pre-World Wars

Modern ideas of

decadence is defined

Luxury was frowned

upon

Ideas linking luxury to opulence,

aristocracy, and socio-economic

advantage started to emerge.

Ancient Greeks and Romans were

wary of displays of extravagance.

Christianity associated luxury with lust

and degeneracy.

The industrial revolution changed

luxury from craftsmen-made products

to high-quality products that were

more accessible.

While the notion of “luxury” is as old as civilization itself, people’s perceptions

of what it means have shifted over time…

33

Source: A Consumer Evolution: OMD’s Proprietary Economic Research Study, 2009, 2010; Luxury, and How it Became Common, Harry Hurt III, The New York Times, Aug 2007;

http://www.nytimes.com/2007/08/19/business/yourmoney/19shelf.html?_r=0; The Globalization of Luxury, Globalization 101, SUNY LEVIN Institute, May 2011; http://www.globalization101.org/the-globalization-of-luxury-3/;

Back to the Future of Luxury, Dale N. Dewey, Luxury Solutions, Jan. 2009; http://static.luxurysociety.com/download/BacktotheFutureofLuxury; Combat Post-recession Luxury Drought by Understanding Cautious

Consumers: Report, Sarah Jones, Luxury Daily, Mar 2015; http://www.luxurydaily.com/combat-post-recession-luxury-drought-by-understanding-careful-consumers-report/

Post WWII-1990s

The democratization of

luxury accelerated

Mass production increased access to,

and demand for luxury. Luxury firms

moved toward mass consumption,

factory production, and global

expansion.

2000-2010

The luxury industry was severely

impacted by the global recession

Affluent consumers lost significant

wealth. They felt less secure, more

hesitant to spend, and had to cut back

on spending.

Post Recession-Present

Recessionary values

and habits have stuck

Conspicuous spending gave way to

conscientious consumption as

consumers seek better value for their

money.

…as have trends in consumer values and consumption behaviors

44

*Agility Research & Strategy is a world class research and consulting company with a core focus on the Affluent and luxury consumers for premium brands

Source: Annalect’s Proprietary Luxury Research, 2015; Agility Research & Strategy Affluent Insights, 2015

In an effort to explore the challenges luxury brands now face, Annalect

Primary Research connected with Affluents in the following manner

Research Design

Methodology

Sample

Timing

Annalect Primary Research partnered with Agility Research

on a syndicated survey* which included Annalect’s

proprietary questions

Survey was fielded among US

Affluents, defined as A18-59,

who have an annual HHI of

$150,000+

57%$150K+

26%$200K+

18%

$250K+

Total completed interviews: 309• Millennials (A18-34): 49

• Gen Xers (A35-49): 152

• Boomers (A50-59): 108

• Males: 131

• Females: 178

Fieldwork was conducted in

May 2015 – June 2015

Research Objectives

1. How is luxury defined, and what role does it play in the

lives of Affluents?

2. What are Affluents’ motivations for purchasing luxury

brands?

3. Where do they get information about luxury brands?

4. What categories make up Affluents’ share of wallet?

5. How do Affluents shop?

6. What is their luxury spending outlook for the next 12

months?

55

The meaning of luxury for today’s

Affluents, their motivations for

purchasing, sources of information,

category spend, purchase behavior,

and outlook

Detailed Findings

66

Base: Total (n=309)

Q: What does “luxury” mean to you? (Open End)

Q: How would you define the ”Perfect Luxury Experience”? Please feel free to express yourself here. (Open End)

Q: Please rate how strongly you agree or disagree with each of the following statements. (Single Select for Each Statement)


Meaning of Luxury Meaning of Luxury Experience

65%Of Affluents expect a highly

customized experience when

purchasing luxury products/

services/experiences

While Affluents associate the general idea of luxury with quality, high price,

and exclusivity, when it comes to a luxury experience, they expect even more

in order to feel pampered and satisfied

77

Base: Total (n=309); Millennials (n=49); Gen Xers (n=152)

Q: When thinking about what motivates you to purchase luxury brands, please rate how important each of the following attributes are for a luxury brand. (Single Select for Each Attribute)


NOTE: caution low base size for Millennials


Where differences exist,

Millennials and Gen Xers

are more driven by social

status and aspirational

fulfillment

One-third of Millennials (33%) are motivated by their

social circle and celebrity endorsement

One-third of Millennials (31%) and Gen Xers (31%) are

motivated by role models

Three-quarters (72%) of Gen Xers are motivated by

product differentiation

Two-thirds of Millennials (61%) and Gen Xers (61%)

are motivated by exclusivity and customization

91%

Motivation for Purchasing Luxury Brands: Total

84% 71% 64%

56% 54% 50% 47%

44% 23% 17%

Heritage

Craftsmanship

Exclusivity

Design/Styling In-store experience

Brand website

After-sales service

Ability to customize Country of origin

All my friends have it Celebrity endorsement

Affluents are motivated to purchase luxury brands because of their quality,

design, and service…

88

Base: Total (n=309)

Q: Please rate how strongly you agree with each of the following statements. (Single Select for Each Statement)



Considerations When Purchasing Luxury Brands: Total

It is important for me to get the best possible price when buying luxury brands

It is important for me that the luxury brand I use is socially responsible

It is important for me that people recognize the brand I am using

I purchase luxury products as a gift for someone

I mainly buy luxury brands when I can get them tax free

I would buy a new and unused luxury product from an individual who is reselling it

73%

49%

28%

60%

29%

48%

THREE-IN-FOURAre very selective in their

luxury purchases

THREE-IN-FIVEThink luxury does not necessarily

need to be expensive

TWO-IN-FIVEWould rather have fewer luxury

items than more non-luxury items

ONE-IN-FIVEWould rather not purchase at all, if

they cannot purchase luxury

…yet they are discerning and price-conscious consumers

99

Base: Total (n=309)

Q: In which of the following places, venues, or media do you look for or pay attention to information or advertising of products in the following categories? (Multiple Select)

NOTE: Traditional Sources of Information include print media (e.g. p, print magazines), Offline WOM (e.g. offline friends/family recommendations), and OOH (e.g. shopping malls, airports); Digital Sources of

Information include online search, brand website, and websites specific to category.


Traditional* vs. Digital

Average of Top 5 Information Sources

Traditional

30%

Digital

Watches

Traditional

29%

Digital

Automobiles

26%

Traditional

27%

Digital

Skincare

27%

Traditional

31%

Digital

Hotels

24%

Traditional

26%

Digital

Cruises

24%

Traditional

31%

Digital

Designer Retail

33%

26%

Traditional

22%

Digital

Financial Svs

21%

Traditional

27%

Digital

Makeup

29%

Traditional

27%

Digital

Jewelry

27%

Traditional

17%

Digital

Alcohol

20%

*Traditional does not include TV, since TV was not among the top

5 sources Affluents turn to for information on luxury purchases.

When gathering information for luxury purchases, Affluents rely on traditional

as well as digital means

1010

Most Influential Sources of Information when

Making a Purchase by category: Total

- Top 3 -

Base: Total (n=309)

Q: Which of the following places, venues, or media are most influential in your final purchase decision for products in the following categories? (Multiple Select)


Hotel18% Friends/family

12% Online search

11% Hotel website

Alcohol19% Friends/family

9% Online search

7% Television

Watches14% Brand website

14% Online search

11% Friends/family

Jewelry11% Shopping mall

9% Print magazine

9% Friends/family

Designer Retail13% Shopping mall

12% Friends/family

12% Brand website

Makeup16% Friends/family

11% Online search

9% Print magazine

Skincare17% Friends/family

11% Online search

9% Brand website

Financial Svs19% Friends/family

11% Online search

8% Brand website

Automobile15% Brand website

13% Friends/family

12% Online search

Cruises13% Cruise website

13% Friends/family

12% Online search

Word of Mouth equates to offline friends/family recommendations

But it is word of mouth that influences their final purchase decisions

1111

Base: Total (n=309)

Q: How much did you spend in the following categories in the last 12 months? (Open End)

Q: How many international trips have you taken in the past 12 months for the following purposes? (Single Select)


45%

4%

Travel

22%

11%

9%

6%

4%

Fashion

Entertainmente.g. movies, dining out,

etc.

Electronics &

Tech

Cars

Alcohol

Makeup

&

Skincare

14%

13%

12%

6%

Airline tickets

Travel Experiences

Hotels

Cruises

Designer Clothing

Jewelry

Luxury Watches

Designer Accessories

8%

7%

4%

3%

In-home Electronics

Tablets/Smartphones

6%

3%

Luxury Share of Wallet in Past 12 Months: Total

56% of Affluents had taken more than one

international trip for leisure in the past 12

months

25% had taken an international trip for

business in the past 12 months

While it appears that experience trumped product purchases in the past year,

where travel dominated Affluents’ luxury spending…

1212




Luxury Purchase when Traveling: Total

I travel to destinations where I can find luxury

products/brands to buy39%

I like to buy luxury items outside my home city

because of the better selection offered33%

I mainly buy luxury brands when travelling28%

When traveling, I prefer to purchase luxury items

at the airport rather than in the destination city19%

Almost half of Gen Xers (45%)

travel to luxury shopping destinations

One-in-three Millennials (33%) and Gen Xers (33%)

mainly make their luxury purchase when traveling

One-in-Four Millennials (27%) prefer to purchase

luxury items at the airport

…for many, the travel experience is a means to an end – two-in-five Affluents

use travel as an opportunity to purchase luxury products/brands

1313

Base: Total (n=309); Males (n=131); Females (n=178)

Q: When you purchase a new luxury item, how does it make you feel? (Multiple Select)


Feelings after Luxury Purchase: Total

56%

Special

34%

Proud

21%

Invigorated

13%

Guilty

13%

Entitled

9%

Indifferent

Males, significantly more so than

Females, feel invigorated (31% vs. 14%,

respectively) and entitled (22% vs. 6%,

respectively) after making a luxury

purchase

Upon making a luxury purchase, Affluents tend to feel a sense of pride, rather

than regret

1414



Q: What is your preferred payment mode when purchasing luxury items online? (Single Select)


Online & Mobile Luxury Purchase: Total

33%

50%

20%

64%

25%

50%

I research luxury products online

I purchase luxury products online in

my home country

I prefer to purchase luxury products

in store rather than online

I research luxury products on my

mobile phone

I purchase luxury products online

from outside my home country

I purchase luxury products on my

mobile phone

of Affluents say when

purchasing luxury online,

credit card is the preferred

method of payment over

other forms of payment

69%

Millennials and Gen Xers

show a significantly higher

preference compared to

Boomers for researching

and making luxury

purchases either on their

mobile device or online

Purchase luxury products online in home

country: 55% vs. 57% vs. 39%

Research luxury products on mobile

phone: 53% vs. 41% vs. 12%

Purchase luxury products online from outside

of home country: 41% vs. 27% vs. 15%

Affluents purchase luxury equally online as they do in store

1515

Base: Total (n=309); Millennials (n=49); Boomers (n=108)

Q: Which of the following would you like to see on a luxury brand’s website? (Multiple Select)


Expectations for a Luxury Brand Website: Total

- Top 5 -

58%Detailed Product Descriptions

47%Availability of Products by Store

46%Option to Purchase Online

42%Option to Select Products

Online and Pick Up in Store

34%Online Product Videos/

Demonstrations

Compared to Millennials (45%), significantly more

Boomers (65%) want to see detailed product

descriptions on a luxury brand’s website

In fact, Affluents have a set of high expectations of a luxury brand’s website –

one that provides them with plentiful information and options

1616

Base: Total (n=309)

Q: How has purchasing luxury products online generally affected your view of the brands that you have purchased? (Single Select)



Impact of Technology on Luxury Perceptions: Total

47%of Affluents say technology

plays a significant role in

purchasing luxury

products/services/experiences

45%of Affluents say technology

levels the playing field for

everyone to access a luxury

product/service/experience

45%of Affluents say the

incorporation of technology

into luxury products/services/

experiences raises the bar of

how I think about luxury

39%of Affluents say if a brand

incorporates some form of

technology in their product/

service/experience, they are

more likely to purchase that

brand

Two-thirds (66%) of Affluents say that the technology has no impact on their perception of luxury brands

One-in-Four (27%) Affluents say that technology has a positive impact on how they perceive luxury brands

Just 7% say that technology has a negative impact on how they perceive luxury brands

Interestingly, Affluents feel that technology positively impacts their perception

and consumption of luxury goods/services

1717

Base: Total (n=309)

Q: Looking ahead to the next 12 months, and comparing it to the previous 12 months, please rate how strongly you agree with each of the following statement. (Single Select for Each Statement)



Luxury Outlook for Next 12 Months: Total

- Top 10 -

39% of Affluents did not grow up with

luxury brands, but now see them as

part of life

31% of Affluents have started

purchasing luxury

products/experiences because of a life

change

27% of Affluents have grown up with

luxury brands

My investments will be worth more

Spend more on luxury experiences and less on products

Spend more on luxury in my home country

Spend more on luxury products and less on experiences

Look for a new banking relationship

Spend more on luxury items

Spend more on luxury experiences and products

Will have more disposable income

Will be in better health

More likely to upgrade my vehicle

Family life will be better

More likely to travel abroad

Value of primary residence will be higher

67%

67%

59%

51%

51%

49%

48%

41%

40%

37%

24%

24%

22%

Affluents have a positive outlook about their luxury spending…

1818

Base: Total (n=309)

Q: Which of the following have you purchased in the past 12 months or are planning on purchasing in the next 12 months? (Multiple Select)


Luxury Purchase Plan in Next 12 Months: Total

- Top 10 -

53%62% 57%60%61%

Entertainment Travel Expenses Airline tickets Hotels Alcohol

Skincare Products

50%

Designer Clothes

46%

In-home Electronics

45% 41%

Auto Jewelry

41%

…especially within the travel/tourism categories

1919

Implications for marketers

and advertisers

Learnings & Implications

2020

LEARNINGS & IMPLICATIONS

Learning: Whether for themselves or as gifts, Affluents are driven to

purchase luxury brands because of their quality, design and service,

yet they are still discerning and price-conscious when purchasing

these types of brands.

Implication: This shift toward conscious consumption within the

Affluent consumer mindset results in the need for luxury brands to

understand what is important for Affluents when discerning between

two or more luxury brands. Knowing what factors Affluents consider

beyond quality, design and service (e.g., whether or not a brand is

socially responsible), and incorporating such information in all

branding and communication efforts can lead to a stronger value

proposition.

Source: Annalect’s Proprietary Luxury Research, 2015

1

2018

2

Learning: For Affluents, the idea of luxury is more than just a high

price; luxury products are also synonymous with quality and

exclusivity, and a luxury experience is associated with even more in

an effort to feel pampered and satisfied.

Implication: By understanding the associations that Affluents have

with luxury goods and experiences (beyond the price tag),

marketers/advertisers can better tailor not just their actual

products/services, but their communication efforts as well. Many

brands can leverage these associations to produce an air of “luxury”

without the hefty price tag.

2121


3

LEARNINGS & IMPLICATIONS

Learning: Affluents turn to both traditional media (e.g., print

magazines) and new media (e.g., brand websites, online search)

when gathering information for luxury purchases, and word-of-

mouth prevails when it comes to making the final luxury

purchase decision.

Implication: Online creates new opportunities for brands to

engage with Affluents. Brands must aim to have a holistic

strategy where branding and marketing efforts are aligned

across traditional, as well as digital platforms to establish a

strong, consistent brand presence.

4Learning: With Affluents purchasing luxury goods equally online

as they do in a store, the incorporation of technology, and the

impact of purchasing luxury online, is positively perceived by

Affluents. Not only do they have specific expectations of a luxury

brand’s website, but they also feel that technology has enhanced

the overall luxury purchase process.

Implication: Luxury brands should strive to seamlessly merge

in-store and online experiences to ensure that the same brand

value and purchase experience are delivered no matter where

consumers search and shop. Marketers should provide Affluents

with the right tools when online (e.g., detailed product

descriptions, purchase options, etc.) in order to appropriately

meet their desired expectations.

2222LEARNINGS & IMPLICATIONS


5

2218

Learning: With Affluents feeling a sense of pride upon making a

luxury purchase, they are looking to the future with positivity

when it comes to their own luxury spending, especially within

the travel/tourism categories.

Implication: Brands should leverage Affluents’ optimism and

nurture their sense of self-worth and purchase intentions in their

targeted messaging and communications, which could

ultimately help to create and deepen brand relationships.

6

Learning: While travel/tourism dominated Affluents’ luxury

spending in the past year, the travel experience was a means to

an end for many Affluents who used traveling as an opportunity

to purchase luxury goods.

Implication: Because Affluents look for opportunities to expand

their luxury spending, brands should aim to engage and capture

Affluents across various markets, as well as in specific travel

locations (e.g., airports, commuter services, etc.), which will

drive growth among current and new consumers. Marketers

should also aim to target consumer touchpoints in tourism and

hospitality arenas to increase brand visibility and purchase

opportunities.

2323For questions about this research,

please contact:

Pamela Marsh, Ph.D.

Director, Primary Research and Insights

[email protected]

Priscilla Aydin

Associate Director, Primary Research and Insights

[email protected]

Sophie Pan

Senior Analyst, Primary Research and Insights

[email protected]

Thank You!

www.annalect.com

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