May 15, 2012
Approximately 38 percent of high-end consumers are planning to spend less over the next 12 months, according to findings from a study by Boston Consulting Group.
In BCG’s most recent study, it was discovered that marketers should expect a bit of resistance as luxury consumers are still worrisome about the economy and saving for the future. There is a steady increase in desire for quality, so marketers may want to emphasize craftsmanship, quality and design as part of their ad strategy.
“The majority of consumers are still planning to spend less over the next 12 months, and high-income consumers say they will cut back over the next 12 months,” said Michael Silverstein, Chicago-based senior partner at The Boston Consulting Group. “Even wealthy consumers are concerned about the economy - they will need to be pried free from their money.
“They appreciate the finer details of the best goods," he said. "However, high-income consumers will trade up selectively.
“They will look for brands to provide them with innovation, new styles and new materials."
BCG’s 11th annual Consumer Sentiment Survey is based on 15,000 consumers in 15 countries.
Most consumers blame the government for the debt crisis. In fact, 94 percent say that the government should hold a good share of blame for debt.
Many consumers, even the wealthy, are insecure about their financial futures.
Indeed, 47 percent of respondents say that they are financially insecure or in trouble.
Younger consumers are the most anxious. Approximately 57 percent of millennials and Generation Y respondents are insecure about their financial futures in contrast to 46 percent of baby boomers.
In addition, 43 percent of consumers agree that the economy will not improve for the next several years, according to the study.
Interestingly, consumers in China seem to be more optimistic than their U.S. and European counterparts.
For example, where only 21 percent of U.S. consumers believe that the next generation will have a better life than theirs, 83 percent of Chinese consumers believe this.
In addition, only 16 percent of Chinese consumers felt financially insecure.
“Consumers want more money, less stress and more security,” Mr. Silverstein said. “Consumers believe savings, health and value for money are much more critical, and luxury and status has dramatically dropped as a value for consumers.”
There have been mixed reports as to whether or not consumers are willing to spend in the future.
On the one hand, the top 10 percent of United States households are expected to spend approximately $244 billion across 13 categories this year, a 3 percent increase from last year (see story).
On the other hand, although leading luxury conglomerates, automakers and retailers have posted stellar results for the first quarter, there is reason to believe that the rest of 2012 will not be as strong (see story).
There is one thing that companies can do to keep up with the ever-turbulent economy, and that is to create relationships with and produce quality products.
Even if consumers are reluctant to spend on luxury items, they will be more likely to buy well-made, quality products that will last a while rather than cheap products.
Indeed, brands should always focus on these for marketing efforts on quality of craftsmanship, heritage, legacy and emotional value, since these attributes are what differentiate luxury brands from other marketers.
"Expect headwinds," Mr. Silverstein said. "Increase your level of innovation and merchandising and make every purchase experience worth telling a friend about.
"Badge your goods for visibility and a mark of sophistication, and do not cut back," he said. "Increase spending to take higher share of total spend.
"Also, deliver emotional values and help the consumer ladder-up in a troubled world."
Rachel Lamb, associate reporter on Luxury Daily, New York