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03.15.2004

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In an effort to clear the air of traditional, and at times limiting, perspectives, we offer here Part I of a two-part series highlighting important themes in the arena of luxury consumption. We begin in Part I by taking up the important question of whether or not there is a certain type or identifiable category of luxury consumer. By moving beyond the mythical/hypothetical view of the luxury consumer as an "upper-incomed consumer who spends to impress," we find that the market for luxury consumption may be far, far larger than many analysts realize.


For more Hartman Group articles on CONSUMPTION PRACTICES, click here...

December 27, 2002 "Re-Thinking Our Traditional Notion of the Mass Marketplace: The Emergence of a New Paradigm" - Part II, Harvey Hartman

December 20, 2002"Re-Thinking Our Traditional Notion of the Mass Marketplace: What Happened to the Mass Market?" - Part I, Harvey Hartman

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Rethinking Our Understanding Of Luxury Consumption

PART I. will the real luxury consumer please stand up:
moving beyond conspicuous consumption and emotion

There has been much confusion bestowed on us by dated theorizing in business and economy when it comes to luxury consumption. These perspectives are great when trying to explain why shoppers from all walks of life would crowd the parking lot of the local dollar store or drive several miles for the best price on gasoline. But what can these perspectives tell us about consumers who willingly pay price premiums in the range of 10x to 100x for goods that fulfill the same essential functions? Until recently, most explanations of luxury consumption focused on consumers such as Stephanie:

We encountered Stephanie in Chicago, where she works as an investment banker in a prominent financial institution. Stephanie, a recent MBA grad, "tired of living the student lifestyle for so long," appears thoroughly preoccupied with her newfound income. She makes no bones about her mutual love of shopping and the related "desire to impress," and the material results of those interests were evident for all to see in her house (and garage) - Prada, Pottery Barn, Rolex, Coach, Dean & Deluca, BMW, and on and on.

Analysts traditionally invoke the label "conspicuous consumption" to explain Stephanie's behavior - the idea that we incur marked premiums for goods with symbolic value (clothes, cars, food etc.) signifying our status in elite circles. And while this explanation seems to work for Stephanie, its everyday applicability is really quite limited. After all, is this what is really going on when the rest of us pay $15 for our lunch at the Cheescake Factory? Or better yet, when we choose to splurge on a $25 bottle of Balsamic Vinegar that will never even be seen outside our pantry? Are we really to believe that we are all engaged in a pretentious game of "one upsmanship" when we walk through the doors of Dean and Deluca in search of a nice block of cheese for our book club? We think not.

Towards a grounded, pragmatic approach

The difficulty with the above perspective is that they encourage marketeers to think of the luxury consumer as a certain type of consumer ("upper-incomed and out to impress") participating with the desires to satisfy deeply held, unmet emotional needs. Yet the realities of daily life paint a very different picture. Increasingly, consumers from all walks of life are turning to luxury consuming, and they are doing so for a variety of different reasons, reasons that exceed the limited scope of social status or emotional need. Consider two more consumers recently interviewed as part of ongoing consumer research:

Carolyn: In Cleveland we interviewed Carolyn, a single mom living in a cramped apartment. Carolyn "gets by" on her job at a local McDonald's, which is supplemented by intermittent child support payments. Not surprisingly, money is "pretty tight" in her household. That said, we were surprised to learn of Carolyn's unyielding passion for boutique children's clothing. What began as a casual hobby of creatively dressing her 3-year-old daughter has grown into a small obsession, with Carolyn actively involved in all aspects of the children's clothing trade on eBay. Within this framework, Carolyn has now come to view a $75 children's sweater as a "normal expense."

Martin: Next we find Martin, who lives in Chicago and is currently employed as a dishwasher. He moved to Chicago about 10 years ago from El Salto, a small town in the state of Guanajuato, in central Mexico. Despite frustration at his "not so hot" wages, we were surprised to find out that Martin shops almost exclusively at a specialty foods store across town because "they carry many of the things I like to cook with from back home." Things like tomatillos or a good selection of chiles poblanos." Aside from twice-weekly shopping trips, Martin lives what he describes as a "fairly simple life."

In both of the above examples, we find two different consumers - neither particularly "well off" and neither with obvious unmet emotional needs - participating in luxury consumption arenas, yet doing so within highly specific contexts. And it is precisely these contexts (food and children's clothing) that we believe are critical to a proper understanding of luxury consumption behavior.

A world perspective on luxury consuming.

We believe The Hartman Group's world model - which offers an empirically accurate account of consumer behavior grounded in the reality and context of everyday life - is ideally suited to a contemporary understanding of luxury consuming because it allows us to frame consumption behavior in meaningful contexts. Briefly, the world model suggests the existence of numerous distinct consumption worlds, each with their own internal dynamics (what we term dimensions of consumption) within which consumers frame their understandings and meaning.

Thus we could envision the worlds of wine, automobiles, children's clothing or food, and suggest that within each world there is a different set of principles that allow consumers to make meaningful distinctions and choices.

Additionally, we find that these sets of principles actually vary given one's relationship to the world in question, such that those closest to the center of a given world (the core) often orient themselves to different internal dynamics than those at the mid-level or periphery. In other words, serious food enthusiasts such as Martin might be paying attention to dynamics such as authenticity and taste, while less serious food fans such as Carolyn might be concerned with price, convenience and brand. Finally - and most importantly - we find that consumers orient themselves differently to assorted consumption worlds in a piecemeal or patchwork fashion. Rather than being a core consumer "across the board," consumers pick and choose their level of involvement across differing product worlds. So while Martin may be obsessive about his food (a core consumer), he may well be only peripherally related to many other worlds (automobiles, electronics, wine, recreation, etc.). This last point is crucial because it allows us to understand how many consumers whom we might not expect to be participating in luxury consumption arenas come to do so. Namely, they become embedded within a particular position within a consumption arena - typically the mid-level to the core - where esoteric (and often expensive) distinctions become meaningful, justifiable and actionable. Some of these ideas are illustrated in Figure 1.1 below:

The real power of the world perspective, then, is that it allows us to consider luxury consumption as ordinary, everyday behavior in a meaningful context. So rather than deciding that Carolyn or Martin are behaving irrationally or emotionally, we find that their behavior might be extremely rational and predictable given their relationship to the worlds of consumption to which they are embedded - in this case, children's clothing and food. And again, such relationships exist independent of one's overall income or social standing. "Absurdly" priced children's clothing and special trips to specialty foods stores are no longer the choices of an affluent class or, for that matter, of an emotionally dependent sub-segment. Instead, such choices are simply a way of life for all who are moderately (mid-level) to severely (core) embedded in the corresponding product worlds.

The logical question, then, becomes "just who is the luxury consumer?" Is it, as many have previously assumed, Stephanie, our pretentious yuppie out to impress? Or alternately, is it some combination of Martin and Carolyn, consumers who have previously gone unnoticed by many theorists and analysts, but whose actions appear to make increasing sense - especially when considered from our world perspective?

We close with three crucial insights that serve as the foundation to our luxury consumption strategies.

1) The conspicuous consumer is but a distraction to be ignored.

Of course, there remain a small cadre of Stephanie's in the world - consumers who, with a little leg work (i.e., magazine reading) and a strong desire to impress, manage to embed themselves somewhere near the mid-level of many product worlds. Yet we believe these "conspicuous consumers" are less important to luxury manufacturers and retailers than the bulk of the committed consumers comprising the core and mid-level. Again, note the shaded areas in Figure 1.1 above. In addition to being fewer in number, such "conspicuous consumers" rarely understand and espouse the core principles within a given world, rarely have any noticeable effect on larger trends and tastes within the given world and, most importantly, are markedly fickle, fair-weathered fans with significantly less commitment to given consumption worlds. So, why worry about Stephanie and her impressive credit line when you can replace her with dozens of Martins, consumers whose commitment transcends more mundane issues such as income, cash flow and expenses?

2) Significant growth opportunity in luxury consumption arenas.

Far from being limited or affected by consumer income or consumer spending, we believe opportunities for growth in the luxury sector are limited only by our ability to draw consumers closer toward the core of given consumption worlds. At face value, this proposition may seem at best optimistic, at worse far fetched, but we routinely encounter consumers such as Carolyn, consumers whose actions appear to defy all rational logic given their relative income but are imminently justifiable once placed in their proper context. Whatever judgments one cares to levy, the folks who trade in children's clothing observe very real distinctions that go unnoticed to the rest of us; and these distinctions will continue to garner consumer interest and support real price premiums.

3) Don't worry about identifying your consumer; focus instead on identifying your world

We find that far too many manufacturers, branders and retailers are preoccupied with identifying their "luxury consumer" of interest. We are happy to report that there is no single "type" or category of luxury consumer, and, again, this is a very good thing; it means the potential market is far less limited. Instead of looking at this mythical consumer through a microscopic lens, we advise clients to gaze outward into the larger world (perhaps through a pair of binoculars?) to learn how to better serve the mid-level and core of their respective product worlds.

Stay tuned for Part II on Friday (3/19)!

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