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How to Sell Luxury: 101

Pamela Danzinger -- Home Textiles Today, December 20, 2004

New York — Successfully marketing luxury goods is actually about selling an experience, not just who's got a better mousetrap, according to marketing guru Pamela Danziger, who addressed a meeting of the Retail Marketing Society last week.

That is not to say product quality can in any way be left off the table, rather a superior product is simply stakes-to-play when it comes to attracting the luxury buyer — getting to the next level of sales requires transforming that luxury item into a luxury experience, she said.

Danziger, president and founder of Unity Marketing and author of “Let Them Eat Cake: Marketing Luxury to the Masses … and Classes,” said there are a few things every marketer needs to know about the luxury market.

First off, she said that the concept of old luxury, where a product is defined by brand, price and materials, is dead. Today, Danziger said, the bar has been raised and the luxury experience drives buying. For example, she said most people would think that buying a Mercedes Benz is a classic luxury purchase; however, using herself as an example, Danziger noted that buying a hybrid Honda, which uses less gas, could also be a luxury purchase.

Another example she gave is that of a fine dining experience. Rather than zeroing in on the food, Danziger said study groups have shown people focus much more on music, lighting, service and other aspects of atmosphere over the quality of the food.

“Stop thinking of luxury as a noun and start thinking of is as a verb,” she advised.

Emerging into the luxury market, she said, are “butterflies” or baby boomers that have spent most of the last decade “cocooning” with children at home and paying their education bills. Now, with an empty nest, boomers are free to indulge in luxury spending, but will most likely spend on experiences, having accumulated “things” all their lives.

“The new trend will be these people searching for connectivity and reaching out,” said Danziger. “They are emerging like butterflies looking to become part of society and using their home as a hub for connectivity.”

The next luxury boom, she predicts, will come in experience-related spending areas, like spas, hotels, and cruise lines as baby boomers (ages 46-64) launch themselves on a quest for self-actualization or the desire to grow through experiences.

“The goal will be self-transformation,” Danziger said.

She defined the luxury market as covering the 25 percent of U.S. households that have over $75,000 of combined income, including those earning over $125,000 as a household (25 million) and those bringing in over $250,000 (1.5 million).

Danziger said luxury consumers are democratic in their approach to purchases, meaning the idea of exclusivity does not appeal to them. Rather, she advised, marketers should focus on a product's uniqueness.

“Americans want special, not exclusive,” Danziger said.

In addition to wanting something special, she said, luxury shoppers want it at a bargain, a desire marketers usually attribute to the masses. She said that 90 percent of luxury shoppers have risen up the ranks from the middle class and aren't about to put their newfound lifestyle at risk by making over-the-top purchases. Searching for a bargain, she said, ensures that their pocketbooks will survive to shop another day.

But though they want a good price, it can't be too good. “If it's too cheap, they don't want it,” Danziger said, noting that price communicates a message. “I suggest upping the value three times but only doubling the price.”

Three factors, Danziger said, influence luxury buys: product brand, retailer brand and the price/value equation. “The brands connect the corporate strategy with consumer psychology,” she said.

Danziger said that research has shown luxury buyers exhibit differences of degree, not of kind. Most in the luxury bracket own their homes, have about three cars, are married, Caucasian, and middle age. However, among that group there are shades of difference.

She said “xfluents,” such as Ivana Trump, look for luxury in everything they buy. The aspirers, like Jennifer Lopez, continually chase luxury items but find fulfillment elusive. The cocooners, exemplified by Martha Stewart and Donald Trump, focus on the home; while the butterflies, as in Bill Gates and Oprah Winfrey, work through charities to make the world a better place.

“Luxury is about fantasy,” Danziger said. “The experience will always trump the thing.”

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