November 11, 2010
Well-heeled consumers consider leisure experiences more valuable than luxury goods or services in today’s economy, an executive at Luxury Institute said.
Affluent households with an average annual income of $332,000 and a net worth of $3.3 million were surveyed by the Luxury Institute. The study showed that consumers prefer leisure activities such as vacations, extended time off from work, working from home and vacation homes to other luxuries.
“I think there is more emphasis on the experiential,” said Milton Pedraza, CEO of Luxury Institute, New York. “The economy has shifted consumers’ values.
“Before, experiential products were popular, but they are even more popular now,” he said. “These experiences enhance their lives and they don’t want to live without them.”
Luxury Institute released a study last month stating that although 41 percent of wealthy consumers plan to cut back on spending, 17 percent plan on increasing their leisure travel spending (see story).
Since the Luxury Institute conducted its last survey in 2008, it has seen little change in the tastes of affluent consumers.
Aspirations for electric cars and jewelry have significantly dropped, indicating that consumers are less inclined to display their wealth. Consumers did show a steady desire to indicate their status via philanthropy.
High-end resorts and hotels are likely to see a benefit from the shift from consumer’s value in products to leisure activities, the study indicates.
Luxury marketers looking to play to this shift are advised to turn their focus to experience.
“I think, for example, if you are a luxury retailer and you are showing a product in a venue, you need to make it far more experiential and far more entertaining,” Mr. Pedraza said. “In a way Gilt has done that.
“More and more, you’re going to have to make the experience value extremely high,” he said.
While luxury goods have been supplanted to some degree by luxury services offering travel and leisure, Mr. Pedraza laid out some best practices for regaining some luster.
Brands are advised to stop thinking about their products as the focus and being to incorporate the entire experience into their sales approach. Companies such as Apple have already embraced this model.
“They realized their product could not be sold in the typical store,” Mr. Pedraza said. “The ambiance and experience you get in the Apple store is above and beyond what you get in the AT&T store.
“It is beyond the products and into the experience and it needs to delve into shoppertainment and create an experience into the acquisition of the product and thereafter,” he said.
“Experiences are created by both the venue and the people.”
Kaitlyn Bonneville, editorial assistant at Luxury Daily, New York