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Luxury Defined: What the Affluent Will Spend for Luxury

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 .

Posted in Affluence Research.

By admin
November 28, 2008

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Affluent Show Upbeat Outlook in New Survey Despite Dismal View of Current Business Conditions

Spending Plans Stabilizing as Expectations for Business Conditions and Stock Market Rise

This new study, the fourteenth in a series of twice yearly tracking surveys by The American Affluence Research Center, indicates the affluent may feel the economy is bottoming out and that they are upbeat about improvements in business conditions and the stock market during the next 12 months.

The composite Affluent Consumer Expectations (ACE) 12-Month Economic Outlook Index of 113 rose 11 points from the Spring survey and represents a relatively positive outlook overall. Substantial increases in the indexes for future business conditions (up 24 points to 123) and the stock market (up 19 points to 124) offset a decline in the expectations for personal household income (down 10 points to 93), the third element of the composite index. Index values can range from 0 (totally negative) to 200 (totally positive), with an index of 100 being a neutral reading.

Highlights of this national survey of 552 affluent men and women can be found at www.affluenceresearch.org The survey participants have an average income of $304,000, an average net worth of $3.1 million, and average investable assets of $1.6 million.

The index of 47 for current business conditions represents only a modest drop of 5 points from the Spring 2008 survey, which had a precipitous drop of 56 points from the Fall 2007 survey. This index is at its lowest level since the Fall 2002 survey and essentially indicates the view of the affluent that the economy has effectively been in a recession for several months, as first noted in the Spring 2008 survey.

Over half (54%) of the respondents have no plans to make any of 8 major expenditures in the next 12 months. This is essentially unchanged from the historic high recorded in the Spring survey (53%). Plans to acquire a new primary residence were up slightly for both buying (3.4%) and building (1.5%). Plans for motor vehicle acquisitions (20%) and plans to cruise (14%) were unchanged from the historic lows of the Spring survey.

Of the 17 categories of products and services, for which expected changes in spending during the next 12 months are tracked, the indexes for 9 categories were up, 7 were down, and 1 was unchanged. In all 17 categories, at least two-thirds said they would spend the same or more as they did during the prior 12 months.

This survey also included a series of questions that reveal how the affluent define “luxury” by price points and brands for 37 different products and services. This ground breaking research demonstrates the ambiguity of the word “luxury” among the affluent and their apparently limited familiarity with the brands normally associated with luxury.

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 surveying online panels of people who are compensated for participating in regular and frequent surveys, our unique study is based on samples drawn at random from, and representative of, the 11.2 million households that account for the wealthiest 10% of US households based on net worth, according to the latest Federal Reserve Board research.

The 38 page, 33 table report can be purchased for $395 (or $595 with the full set of 302 pages of data cross tabulations).

Posted in Affluence Research.

By admin
November 2, 2008

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What the Affluent Will Pay for A Luxury Cruise

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

Posted in Affluence Research. Tagged with , , .

By admin
October 28, 2008

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Intentions to Cruise at Record Low among Affluent in New Survey

In the latest survey of the most affluent 10% of US households by The American Affluence Research Center, only 14% of the respondents indicated plans to cruise during the next 12 months. This is the same as the level recorded in the Spring 2008 survey and effectively the historic low for this series of twice yearly surveys, which were started in Spring 2002.

Those most likely to cruise are age 60+ (18% of this group) and those with a net worth of $6 million or more (29% of this group). Given that these surveys are representative of the 11.2 million US households that comprise the wealthiest 10% of all households, this market segment represents the potential of 1.6 million cruise buying households (for 3.2 million cruisers).

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. This survey included a series of questions for which the goal was to identify how the affluent define luxury, in terms of price points and brands, for each of 37 different products and services. The price points and brands reported in this survey for a European cruise 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.

Survey highlights are posted at www.affluenceresearch.org

Posted in Affluence Research. Tagged with , , .

By admin
October 27, 2008

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What the Affluent Will Pay for Luxury Travel

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

Posted in Affluence Research. Tagged with , .

By admin
October 23, 2008

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Obama and McCain Tied Among Wealthy in New Survey

Obama’s Support Among Women and Independents Offsets McCain’s Strength with Men

Contrary to conventional wisdom that the wealthy are staunch Republican voters, Obama and McCain each received 48% of the votes among likely voters in a new survey of the wealthiest 10% of US households. About 4% of the likely voters indicated they had not made a decision or were supporting another candidate.

With 552 respondents, the national survey is representative of the wealthiest 11.4 million households (as defined by net worth in the most recent Federal Reserve Board research) that will account for almost 25% of all votes to be cast in the presidential election. The survey was completed September 25 by the American Affluence Research Center in Atlanta.

The survey participants have an average income of $304,000 and an average net worth of $3.1 million. The respondents reported party affiliations of 42% as Republicans, 30% as Democrats (due to 39% share among women), and 27% as Independents.

Men favored McCain 59% to 36% for Obama, while women favored Obama 61% to 36% for McCain. Independents favored Obama 55% to 34% for McCain.

The source of McCain’s support was 80% from people who considered themselves Republicans, 19% from Independents, and 1% from Democrats. The source of Obama’s support was 63% from Democrats, 31% from Independents, and 6% from Republicans.

Of 18 possible issues that were listed, the five issues most important to McCain’s supporters are state of the economy (48%), war on terrorism (33%), war in Iraq (29%), long term energy program (29%), and 2001 Bush tax cuts (27%).

The issues most important to Obama’s supporters are the economy (59%), war in Iraq (55%), universal health care (28%), foreign policy (28%), and energy program (26%).

Additional data is available in categories defined by gender, age, income, and net worth and will be included in the report for The Affluent Market Tracking Study #14, a unique survey conducted twice a year to identify the outlook of the wealthy for the economy, the stock market, their personal income, and their spending plans for over 20 different products and services.

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 .

Posted in Affluence Research. Tagged with , , .

By admin
October 2, 2008

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