By Rieva Lesonsky
Unity Marketing’s latest Luxury Consumption Index, which measures the spending plans of affluent Americans, shows that after a surge of optimism in October leading up to the November 2012 election, wealthy consumers are getting cautious again. The LCI lost 19.4 points in January–its second biggest loss since the first quarter of 2008.
The LCI measures the optimism that affluent consumers feel about the state of the economy in general as well as their personal financial situation. Affluent consumers are defined as the top 20 percent of U.S. households based upon income; this demographic accounts for more than 40 percent of all consumer spending, so their plans are crucial to business growth.
“Affluent consumers are starting 2013 with a dismal view of the overall economy and their personal financial situation,” says Pam Danziger, president of Unity Marketing. Here’s a closer look:
- Skeptical About Economy: Before the election, 37 percent of affluents felt the U.S. economy was improving, but in January, just 29 percent did. Although this is still higher than the 25 percent average throughout 2012, it’s not exactly a vote of confidence in the nation’s future.
- Pulling in the Purse Strings: More than one-quarter (28 percent) of affluents say their spending on luxury will decline over the next 12 months; in October, just 18 percent said they planned to cut back.
- Personally Pessimistic: The largest share of affluents since the recession believe they will be worse off financially 12 months from now. “Typically affluents are an optimistic bunch,” Danziger says. “However, in the latest survey nearly one-fourth (22 percent) predict that they will be worse off in the next 12 months as compared to today.” This is the highest this measure has been since the depths of the recession in 2008.
What does the poor outlook mean for your business? Tom Bodenberg, Unity Marketing’s chief consumer economist, offers this advice: Reposition luxury goods as a value proposition.
“That means to keep the luxury image and connotations (advertising creative, packaging, media and service), but communicate (in a very implied, almost one-to-one way) affordable pricing,” he explains.
Your goal, Bodenberg says, should be an “almost subliminal” positioning of value. “The current cultural climate can’t support showy displays of luxury,” Bodenberg warns. Affluents still want brands that offer quality and value, but they don’t want to trumpet the luxury factor—instead, they want to feel that they’re making smart buying decisions.
Image by Flickr user (Creative Commons)