For several years, luxury retail and marketing consultants have fed the media with anecdotal research about the luxury market as though the purchases of $700 Manolo Blahnik shoes, $1,000 Prada hand bags, and $250 True Religion jeans are common place among luxury consumers.

But the affluent women in a survey of the wealthiest 10% of US households by The American Affluence Research Center (AARC) report they are more likely to spend less than $120 for nice shoes, less than $100 for a purse for every day, and less than $75 for a pair of women’s jeans.

“Luxury is a very ambiguous word that is used very loosely”, according to Ron Kurtz, President of AARC, who observed that “the definition of luxury varies considerably by individual and by product, as clearly demonstrated by our survey. In this survey, the affluent defined luxury by price point and brand for 37 products and services”.

Affluent Report the Most They Could Imagine Spending for 37 Products

In AARC’s ground breaking research on the definition of luxury among the wealthy, the survey respondents were asked to specify the most they could imagine spending for 37 different products and services. They were also asked to name the brand they would most likely purchase for each of the items.

The profile of the 552 affluent men and women in the national survey sample is: $304,000 average household income, $3.1 million average household net worth, and $1.2 million average value of their primary home. The average age is 55 while 86% are married and 60% are males.

Both men and women  were asked to provide a price (the median value of the price reported by men/women is shown in parenthesis)  and a brand for a new auto ($40,000/$35,000) for personal use, a room in the winter in a Caribbean resort ($300/$250 per night), a European cruise ($300/$300 per person per night), a hotel room in New York City ($300/$300 per night) for a vacation, a refrigerator ($1,500/$1,500), an original painting $3,000/$3,000), a washer/dryer set ($1,500/$1,500), a king size mattress ($1,000/$1,500), a set of linens for a king size bed ($200/$150), wall to wall carpet ($20/$20 per square foot), a watch for dressy occasions ($1,000/$500), a watch for every day ($130/$150), a bottle of wine ($40/$30) for a special dinner at home, frames for sun glasses ($125/$150), and a large 24” wheeled garment bag ($200/$150).

Women were asked to provide a price (median value shown in parenthesis) and a brand for a dressy suit ($250), shoes ($120) to go with the dressy suit, a cocktail dress ($200), shoes ($100) to go with the cocktail dress, a pair of jeans ($75), a pair of diamond stud earrings ($1,000), a purse ($100) for every day, skin rejuvenation cream ($50 for 1.7 ounces), liquid make-up/foundation ($25 for one ounce), a bottle of perfume ($60 for 1.7 ounces), and lipstick or gloss ($15).

Men were asked to provide a price (median value shown in parenthesis) and a brand for a business suit ($500), shoes ($200)  to go with the business suit, dress shirt ($75) to go with the business suit, a tie ($50) to go with the suit, a tuxedo ($500), shoes ($125) to go with the tuxedo, shirt ($75) to go with the tuxedo, a sport coat ($250), slacks ($100) to go with the sport coat, a dressy long sleeve sport shirt ($75), and dressy short sleeve sport shirt ($50).

For a more detailed summary of the findings of this research and its implications, visit our blog post at AffluenceResearch.org entitled “Popular View of Luxury Spending Debunked in Survey of the Wealthy.”

Tags: Affluence Research, affluent market, conspicuous consumption, consumption habits, discreet luxury, high net worth, luxury, luxury consumers, luxury market, luxury research, luxury shame, millionares, stealth wealth
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Luxury Defined: What the Affluent Will Spend for Luxury Price Points and Brands for 37 Products and Services

For several years, luxury retail and marketing consultants have fed the media with anecdotal research about the sales of $700 Manolo Blahnik shoes, $1,000 Prada hand bags, and $250 True Religion jeans as though such sales are common place.

But the affluent women in a survey of the wealthiest 10% of US households by The American Affluence Research Center (AARC) report they are more likely to spend less than $120 for nice shoes, less than $100 for a purse for every day, and less than $75 for a pair of women’s jeans.

“Luxury is a very ambiguous word that is used very loosely,” according to Ron Kurtz, President of AARC, who observed that “the definition of luxury varies considerably by individual and by product, as clearly demonstrated by our survey.”

Affluent Report the Most They Could Imagine Spending for 37 Products

In AARC’s ground breaking research on the definition of luxury among the wealthy, the survey respondents were asked to specify the most they could imagine spending for 37 different products and services. They were also asked to name the brand they would most likely purchase for each of the items.

The profile of the affluent in the survey sample is: $304,000 average household income, $3.1 million average household net worth, and $1.6 million average household investable assets. The average value of their primary home is $1.2 million. The average age is 55 while 86% are married and 60% are males. The national sample represents 33 states plus the District of Columbia.

In this study, both men and women were asked about the same 15 products and services. The wealthy women were asked about an additional 11 gender oriented products and the affluent men about an additional 11 products.

Both men and women were asked to provide a price (the median value of the price reported by men/women is shown in parenthesis) and a brand for a new auto ($40,000/$35,000) for personal use, a room in the winter in a Caribbean resort ($300/$250 per night), a European cruise ($300/$300 per person per night), a hotel room in New York City ($300/$300 per night) for a vacation, a refrigerator ($1,500/$1,500), an original painting $3,000/$3,000), a washer/dryer set ($1,500/$1,500), a king size mattress ($1,000/$1,500), a set of linens for a king size bed ($200/$150), wall to wall carpet ($20/$20 per square foot), a watch for dressy occasions ($1,000/$500), a watch for every day ($130/$150), a bottle of wine ($40/$30) for a special dinner at home, frames for sun glasses ($125/$150), and a large 24” wheeled garment bag ($200/$150).

Women were asked to provide a price (median value shown in parenthesis) and a brand for a dressy suit ($250), shoes ($120) to go with the dressy suit, a cocktail dress ($200), shoes ($100) to go with the cocktail dress, a pair of jeans ($75), a pair of diamond stud earrings ($1,000), a purse ($100) for every day, skin rejuvenation cream ($50 for 1.7 ounces), liquid make-up/foundation ($25 for one ounce), a bottle of perfume ($60 for 1.7 ounces), and lipstick or gloss ($15).

Men were asked to provide a price (median value shown in parenthesis) and a brand for a business suit ($500), shoes ($200) to go with the business suit, dress shirt ($75) to go with the business suit, a tie ($50) to go with the suit, a tuxedo ($500), shoes ($125) to go with the tuxedo, shirt ($75) to go with the tuxedo, a sport coat ($250), slacks ($100) to go with the sport coat, a dressy long sleeve sport shirt ($75), and dressy short sleeve sport shirt ($50).

Conspicuous Consumers Only 10% of Affluent Market; Most Affluent Not Familiar with Luxury Brands

“The research results support two important observations about the affluent market and their spending on luxury items,” according to Kurtz.

First, the affluent market is composed primarily of people with middle class backgrounds who continue to pursue a somewhat middle class lifestyle with middle class values. Kurtz emphasized that “about 90% of the affluent, or 10 million households, are not conspicuous or ostentatious consumers. They spend conservatively and save carefully. America’s current credit and economic problems might have been avoided if these affluent people, with their conservative spending and saving habits, had been recognized as role models. They have demonstrated the importance and value of living within your means.”

Second, only about 10% of the wealthy, or the 1 million households that account for less than 1% of US households, might be considered conspicuous consumers. With the exception of this relatively small niche segment, the affluent market does not appear to be very knowledgeable about the pricing and brands of products that are generally recognized by marketers as being in the higher price points associated with the luxury category. This seems to create an opportunity to substantially increase the market for high end luxury products if the affluent market can be educated about why they should consider buying them and the brands that offer them.

False View of Luxury Market Created by Anecdotal Research Provided to the Media

None of this is new news or indicative of a new trend. The conventional wisdom is that the US has witnessed increasingly conspicuous and ostentatious consumption by an increasingly affluent market for a period of about 30 years, which has been interrupted by brief interludes of retrenchment during the occasional recession and the 9-11 tragedy. This popular perception of the luxury market and the wealthy has resulted from anecdotal “research” provided to the media that used examples such as a young Wall Street attorney spending $50,000 of a year end bonus for a new watch or a secretary spending $1,000 for a new hand bag.

Other examples of conspicuous consumption among the wealthiest 1% have created the impression that there were many hundreds of thousands of people making a million dollars a year or more among the ranks of the entertainers, professional athletes, Wall Street bankers and attorneys, Fortune 500 executives, real estate developers, and entrepreneurs who have taken their company public. In fact the latest IRS data shows less than 400,000 US households in this income bracket.

The actual size and spending patterns of the affluent market are well documented by the data from the Internal Revenue Service and The Federal Reserve Board and the research of the affluent by former Georgia State University Professor Thomas J. Stanley that began in the 1970s and led to “The Millionaire Next Door” and a series of related books beginning in 1996. Dr. Stanley’s research produced similar conclusions regarding the lifestyle, values, spending, and savings profile of the affluent as that suggested by the AARC research. In fact, since AARC’s inception in 2002, the results of its research have been consistent with Dr. Stanley’s research.

No Long Term Changes in Spending Evident Among the Affluent

Contrary to assertions by some luxury market consultants that the current economic problems are creating longer term changes in their lifestyles and reductions in spending on luxury and conspicuous consumption by America’s wealthy, most of the affluent are behaving like their normal, rational, and frugal selves. Their careful spending is not a new trend.

While the concepts of “stealth wealth” and “luxury shame” are now being advanced by the retail and luxury consultants and futurists through anecdotal research about cut backs in the spending on ostentatious luxury, Kurtz feels “the sale of luxury goods and services, as defined by the majority of America’s affluent, is not subject to much change in 2009, just as it has not shown much change over the past 30 years.”

Kurtz emphasized that he “doesn’t see any evidence that the majority of the affluent are showing major long term trend changes in their spending patterns and attitudes. They have never been ostentatious or conspicuous consumers. They have always been careful shoppers and savers who look for quality and value in their purchases, the brands they buy, and the stores where they shop.”

The affluent market in the US is cutting back and deferring expenditures, according to AARC research in early 2008, due to current economic conditions, especially given the reduced values of their homes and stock portfolios. However, these expenditure changes should not materially affect the sales of the high end products and brands normally associated with ostentatious “luxury” because most of the people in this market have not represented a substantial source of the sales of such products. “They will not suddenly be switching from Manolo Blahnik to Stuart Weitzman shoes, from Prada to Coach purses, or from Four Seasons hotels to Marriott,” according to Kurtz, “because they were not supporting those brands previously.”

The sales of the high end “luxury” products appear to be derived primarily from international “new rich” consumers and by the small segment of the wealthiest 1% in the US, as previously noted. A portion of the sales have apparently also been derived from those stretching their resources (especially their credit) to achieve a taste of luxury.

A segment of the small niche market of conspicuous American consumers will have to change their spending and saving behavior. The Wall Street investment bankers, attorneys, and others in related activities are experiencing large reductions in income and net worth. Many of the younger people in this group don’t have substantial net worth to fall back on, as they were spending what they were making (and perhaps even more). Changes in the spending of these people, as well as among the wealthy “new rich” citizens of the countries now experiencing recessions and declines in oil and commodity prices, will contribute to the decline in sales of the ostentatious “luxury” brands.

Concepts such as “discreet luxury,” in Kurtz’s view, are creations of some retail and luxury consultants who invent terms such as “mass affluent,” which he considers to be an oxymoron, to promote new consulting work. In his opinion, “some of these consultants are prone to invent such terms to describe changes in behavior among a small group of people as major trends. These trend projections are often based only on anecdotal or “managed” research.”

2 Important Aspects of the Research Methodology

The results of this research demonstrate that surveys that attempt to measure spending on “luxury” items are useless, at best, and dangerously misleading, at worst, if “luxury” is not precisely defined by specific price points. The same appears to be true for surveys that attempt to identify “luxury” brands without specifying price points to define “luxury.”

Unlike other affluent and luxury market research that is based on online surveys of panels of people who are compensated for participating in regular and frequent surveys, AARC’s unique mail surveys are based on samples drawn at random to be representative of the precisely defined population of affluent households, consistent with the research of the Federal Reserve Board. Confident of their anonymity, the respondents to AARC’s surveys are typically more affluent and more open in providing confidential information.

The 43 page, 74 table report is available for $595 including a complete 302 page set of tabulations (or $395 without the tabulations).

AARC provides marketing research, mailing lists, and consulting services to businesses that focus on the affluent. For more information: Ron Kurtz at KurtzGroup@comcast.net or 770-740-2200.

Tags: Affluence Research, affluence surveys, luxury research, survey of the affluent
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New Survey Identifies Price Points and Brands for 37 Products and Services

“Luxury” is a very ambiguous word that is used very loosely. Perceptions of luxury vary by individual and by product.

In new ground breaking research, a national survey of the wealthiest 10% of US households reveals how the affluent define “luxury” by price points and brands.

The survey respondents were asked to specify the most they could imagine spending for 37 different products and services. They were also asked to name the brand they would most likely purchase for each of the items.

The results of this new research demonstrate that surveys that attempt to measure spending on “luxury” items are useless, at best, and dangerously misleading, at worst, if “luxury” is not precisely defined by specific price points. The same appears to be true for surveys that attempt to identify “luxury” brands without specifying price points to define “luxury”.

Unlike other affluent and luxury market research that is based on online surveys of panels of people who are compensated for participating in regular and frequent surveys, our unique mail surveys are based on samples drawn at random to be representative of the precisely defined population of affluent households, consistent with the research of the Federal Reserve Board. Confident of their anonymity, the respondents to our surveys are typically more affluent and more open in providing confidential information.

The profile of the survey sample is as follows: $304,000 average household income, $3.1 million average household net worth, and $1.6 million average household investable assets. The average value of their primary home is $1.2 million. The average age is 55 while 86% are married and 60% are males. The sample represents 33 states plus the District of Columbia.

In this study, both men and women were asked about the same 15 products and services. Women were asked about an additional 11 gender oriented products and men about an additional 11 products.

Both men and women were asked to provide a price and a brand for a new auto for personal use, a room in the winter in a Caribbean resort, a European cruise, a hotel room in New York City for a vacation, a refrigerator, an original painting, a washer/dryer set, a king size mattress, a set of linens for a king size bed, wall to wall carpet, a watch for dressy occasions, a watch for every day, a bottle of wine for a special dinner at home, frames for sun glasses, and a large 24” wheeled garment bag.

Women were asked to provide a price and a brand for a dressy suit, shoes to go with the dressy suit, a cocktail dress, shoes to go with the cocktail dress, a pair of jeans, a pair of diamond stud earrings, a purse for every day, skin rejuvenation cream, liquid make-up/foundation, a bottle of perfume, and lipstick or gloss.

Men were asked to provide a price and a brand for a business suit, shoes to go with the business suit, dress shirt to go with the business suit, a tie to go with the suit, a tuxedo, shoes to go with the tuxedo, shirt to go with the tuxedo, a sport coat, slacks to go with the sport coat, a dressy long sleeve shirt, and dressy short sleeve shirt.

The research results support two important observations about the affluent market.

First, the affluent market, as defined by the wealthiest 10% of US households, is composed primarily of people with middle class backgrounds who continue to pursue a somewhat middle class lifestyle with middle class values. They are not conspicuous or ostentatious consumers. They spend conservatively and save carefully.

Second, with the exception of a small niche segment, this market does not appear to be very knowledgeable about the pricing and brands of products that are generally recognized by marketers as being in the higher price points associated with the luxury category. This seems to create an opportunity to substantially increase the market for high end luxury products if the affluent market can be educated about why they should consider buying them and the brands that offer them.

None of this is new news or indicative of a new trend. The popular perception is that the US has witnessed increasingly conspicuous and ostentatious consumption by an increasingly affluent market for a period of about 30 years, which has been interrupted by brief interludes of retrenchment during the occasional recession and the 9-11 tragedy. This perception has resulted from anecdotal “research” in the media that uses examples such as a young Wall Street attorney spending $50,000 of a year end bonus for a new watch or a secretary spending $1,000 for a new hand bag.

The media has created the impression that there are hundreds of thousands of people making a million dollars a year or more among the ranks of the entertainers, professional athletes, Wall Street bankers and attorneys, Fortune 500 executives, real estate developers, and entrepreneurs who have taken their company public. This, together with the purchases of luxury goods by international visitors leveraging the weak value of the dollar, has given a distorted view of the size and nature of the true affluent market in the US.

The perception of the size and spending patterns of the affluent market created by the media is inconsistent with the data from the Internal Revenue Service and The Federal Reserve Board. The research of the affluent by Professor Thomas J. Stanley that began in the 1970s and led to “The Millionaire Next Door” and a series of related books beginning in 1996 produced similar conclusions regarding the lifestyle, values, spending, and savings profile of the affluent as that suggested by the AARC research. In fact, since AARC’s inception in 2002, the results of its research have been consistent with Professor Stanley’s research.

The 43 page, 74 table report can be purchased for $595 (including a set of 302 pages of data cross tabulations). Place your order by clicking on Order Luxury Defined Report or calling  770-740-2200.

Tags: Affluence Research, affluence surveys, luxury research, survey of the affluent
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In the latest of the twice yearly surveys of the most affluent 10% of US households by The American Affluence Research Center, the respondents were asked to specify the most they could imagine spending for 37 different products and services if they were to purchase the item during the next 12 months. They were also asked to name the brand they would most likely purchase. The goal was to identify how the affluent define luxury, in terms of price points and brands, for each of the products.

The minimum and maximum price points reported in this new survey, though realistic for many of the products, should probably be dismissed as being rather “extreme”. The median value, which is the mid point (not the average) of all the values/prices reported, seems to be very realistic for all 37 products and services, if not a bit low, given the affluence of the respondents. It is important to note the relative degree of consistency between women and men in the median values for most of the 15 products where they both gave opinions.

For a European cruise, the median value was $300 per night per person. This was true for the responses of both males and females. The lowest price suggested was $60 (men) and $100 (women). The highest price was $10,000 (men) and $20,000 (women).

Less than a quarter of the respondents named the cruise brand they would most likely purchase. Among those that did, the most frequently mentioned brands were Royal Caribbean (18%) and Princess (17%).

The AARC research has consistently shown over the years that the affluent represent over 3 million cruisers per year and that most of their cruises are with companies that would be considered premium or contemporary brands. The price points and brands reported in this new survey are consistent with prior survey findings.

The Fall 2008 Affluent Market Tracking Study #14 is a national survey representative of the wealthiest 11.2 million households (as defined by net worth in the most recent Federal Reserve Board research). The 552 survey participants have an average income of $304,000 and an average net worth of $3.1 million.

The results of this research demonstrate that surveys that attempt to measure spending on “luxury” items are useless, at best, and dangerously misleading, at worst, if “luxury” is not precisely defined by specific price points. The same appears to be true for surveys that attempt to identify “luxury” brands without specifying price points to define “luxury”.

Survey highlights are posted at www.affluenceresearch.org

AARC provides marketing research, mailing lists, and consulting services to businesses that focus on the affluent. For more information: Ron Kurtz at KurtzGroup@comcast.net or 770-740-2200.

Tags: Affluence Research, affluence surveys, luxury travel
Posted in Affluence Research, Cruises, Luxury Defined, Luxury Market & Goods, Vacations | No Comments »

In the latest of the twice yearly surveys of the most affluent 10% of US households by The American Affluence Research Center, the respondents were asked to specify the most they could imagine spending for 37 different products and services if they were to purchase the item during the next 12 months. They were also asked to name the brand they would most likely purchase. The goal was to identify how the affluent define luxury, in terms of price points and brands, for each of the products.

The minimum and maximum price points reported in this new survey, though realistic for many of the products, should probably be dismissed as being rather “extreme”. The median value, which is the mid point (not the average) of all the values/prices reported, seems to be very realistic for all 37 products and services, if not a bit low, given the affluence of the respondents. It is important to note the relative degree of consistency between women and men in the median values for most of the 15 products where they both gave opinions.

For a room in the winter in a Caribbean resort, the median value was $300 for men and $250 for women. The lowest price suggested was $50 (men) and $60 (women). The highest price was $3,000 (men) and $1,500 (women).

Only a third of the respondents named the brand they would most likely purchase. Marriott (20%) and Ritz Carlton (9%) were the two mentioned most frequently.

For a hotel room for a New York City vacation, the median value was $300 for both men and women. The lowest price was $50 for men and $100 for women. The highest price was $1,000 for both men and women.

Only a third of the respondents named the hotel brand they would most likely buy. Marriott (27%) and Hilton (16%) were the two brands mentioned most frequently.

For a European cruise, the median value was $300 per night per person. This was true for the responses of both males and females. The lowest price suggested was $60 (men) and $100 (women). The highest price was $10,000 (men) and $20,000 (women).

Less than a quarter of the respondents named the cruise brand they would most likely purchase. Among those that did, the most frequently mentioned brands were Royal Caribbean (18%) and Princess (17%).

The AARC research has consistently shown over the years that the affluent represent over 3 million cruisers per year and that most of their cruises are with companies that would be considered premium or contemporary brands. The price points and brands reported in this new survey are consistent with prior survey findings.

The Affluent Market Tracking Study #14 is a national survey representative of the wealthiest 11.2 million households (as defined by net worth in the most recent Federal Reserve Board research). The 552 survey participants have an average income of $304,000 and an average net worth of $3.1 million.

The results of this research demonstrate that surveys that attempt to measure spending on “luxury” items are useless, at best, and dangerously misleading, at worst, if “luxury” is not precisely defined by specific price points. The same appears to be true for surveys that attempt to identify “luxury” brands without specifying price points to define “luxury”.

Survey highlights are posted at www.affluenceresearch.org

AARC provides marketing research, mailing lists, and consulting services to businesses that focus on the affluent. For more information: Ron Kurtz at KurtzGroup@comcast.net or 770-740-2200.

Tags: Affluence Research, luxury travel
Posted in Affluence Research, Luxury Defined, Luxury Market & Goods, Travel, Vacations | No Comments »