Trading Up - Page 4
So what, specifically, has led to the rise of the trading up
phenomena? It is the result of a large number of social factors
and business factors coming together:
n American households now have more discretionary wealth
available which can be spent on premium goods. From 1970
to 2000, real household income rose by more than
50-percent. In addition, the value of investments and
accumulated wealth has grown.
n The market value of homes has increased, meaning many
homeowners are worth more today than ever before. There is
some $8 trillion in home equity, with the average homeowner
having at least $50,000 in equity. There has also been a rise in
second home ownership.
n Large discount retailers like Wal-Mart, Costco, Home Depot,
Circuit City and others have passed savings on to consumers
freeing up more money that can be spent on selectively
chosen new-luxury items. By some estimates, more than
$100 billion has been freed up in this way in 2001 alone.
n More women than ever before are working and earning higher
salaries – meaning women feel like they have a right to spend
on themselves. Furthermore, women have an excellent ability
to judge the value of goods, and are often prepared to
purchase products that meet their important emotional needs.
n The family structure is evolving. Many people are getting
married later in life and having fewer children – leaving them
more money to spend on themselves. In addition, working
mothers are increasingly prepared to pay a premium for any
new-luxury items which will lighten their workloads and soothe
their souls.
n Consumers are becoming better educated, more
sophisticated, well traveled, more adventurous and more
discerning. More Americans have college educations and
appreciate the benefits of learning more keenly. The majority
of Americans have traveled overseas, and are aware of
goods available in Europe, in Japan and other more exotic
regions of the world. These travelers then return with an
enhanced appreciation for new tastes, new looks, different
goods and loads of fresh ideas to incorporate into their own
lifestyles. In addition, the availability of the Internet gives
consumers the ability to learn about specific products and the
companies that make them.
n Consumers have picked up on the cultural signals that it’s
alright to spend. Traditionally, hard work has been highly
valued and over consumption has been frowned up within
American society. Since the 1960s, however, there have
been a barrage of messages telling consumers it’s important
to reach for your dreams, look after number one and build
self-esteem. Influencers like Oprah Winfrey and Martha
Stewart encourage consumers to live and experience more,
and to have fulfilling and happy lifestyles. The same
messages are put forward in many broadcast television
shows which regularly mix entertainment with consumption.
The combined results of all these shifts in society have given
American consumers greater purchasing power, more
knowledge, a broader range of goods to purchase and the desire
to do so. This surge in buying power is not limited to just one or
two demographics, but is widespread. Almost every consumer
with means gives himself or herself permission to deliberately
trade up to premium goods in specific categories while at the
same time trading down in many if not most all other categories
of purchases. The selection criteria most people use is a
combination of rational and emotional factors.
Generally speaking, new-luxury consumers buy goods that
engage their emotions more than simply filling a functional need.
There are four emotional spaces which characterize these
emotions quite concisely:
1 Taking care of me
Individual Emotional
4 2 Connecting
Style Spaces
3 Questing
1. Taking care of me – These consumers trade up to feel good.
They want to be physically rejuvenated, pampered, made
comfortable and even self-indulged. They want time for
themselves to reduce stress. They will buy premium personal
care products, spas, health care, gourmet in-home foods,
linens and bedding.
2. Connecting – These are consumers who had put off getting
married in order to build their careers. They want to feel
attractive and to belong. These consumers are, therefore,
willing to pay premium prices to buy new-luxury quality
clothing, dining out and home theater equipment. They are
also likely to have pets they spend money on and are inclined
to go on cruises where they’ll have opportunities to hook up
with like-minded members of the opposite sex.
3. Questing – These are the people who crave adventure. They
will buy anything that will enrich their lives, deliver new
experiences and provide some adventure. They will,
therefore, purchase premium travel services, cars, sports
equipment, computers and wine. They’re always on the
lookout for unusual things and will pay more for them.
4. Individual style – These consumers want to express
themselves by the purchases they make. They buy
new-luxury products which fit with their own personal brand
preferences and tastes. They align themselves with those
products for which they have a personal affinity as a way of
signaling what’s important in their lives. Categories which
reflect individual style include watches, cars, spirits,
accessories and lingerie.
Note these four emotional spaces are generalizations, and there
are no definitive sharp boundaries between them. Sometimes
the spaces are in conflict. At other times, a product or service
may engage the emotions in more than one space at any time.
Other elements, notably morality and values, also come into play
when consumers are making purchase decisions.
“New-luxury consumers are complex creatures. They have
wealth and sophistication. They are driven by fears but have high
aspirations. They want it all, but are often exhausted by trying to
get it. They spend liberally on themselves, but they also believe
they should do right for the world. They rocket, they trade up,
they trade down. They follow fashion and scoff at it. New-luxury
customers need a lot of understanding. They are a growing force
of consumers – one to be reckoned with.”
– Michael Silverstein and Neil Fiske