If we hold sacred to the DNA of this industry, we are indeed a high-end premium service — a genuine luxury. Take that seriously and you are at the right place at the right time.
Looking ahead, expect the world’s best education to produce the next generation of luxury consumers. University students number 19 million in China, 16 million in the U.S., 11 million in India, and 8 million in Russia — places where demand for luxury and premium service is likely to grow the fastest, forecasts Michael Silverstein, an expert in consumer markets and a senior partner at Boston Consulting Group.
“People in all four countries will have a voracious appetite for luxury goods and premium services in the coming years,” Silverstein says. But they won’t be the only ones. By 2025, developing nations such as Brazil and Pakistan also will be home to a burgeoning cadre of consumers clamoring for all things “premium.” In the meantime, China will likely arrive as a travel destination considered as special as Europe between now and 2017, predicts Patricia Pao, chief executive of strategic consultant Pao Principal.
In the next five to 10 years, people occupying the 9 million or so wealthiest U.S. households will keep demanding more top-drawer goods and services. A bigger piece of the country’s population, typically the 29 million households with an annual income of at least $80,000 (the top 25% of wage earners) will consume mostly premium and some super-premium goods and services.
Last year, consumption of those products in the U.S. came to $720 billion, up from $670 billion in 2005. Makers of the priciest items will have to offer something distinctive about the way they are experienced to meet people’s rising expectations, advises Ron Tentel, founder of brand consultant Consumer Eyes. The act of purchasing high-end luxuries is itself becoming “a way to distinguish oneself in light of the proliferation of middle-brow luxuries,” he says.
“Eighty percent of how to differentiate luxury brands will be how you treat your customers,” advises Milton Pedraza, chief executive of the Luxury Institute. In addition, companies will need to get customer feedback and do so frequently. Pedraza adds that luxury marketers will be facing a “consumer on steroids,” armed with the speedy proliferation of critiques posted in cyberspace by fellow customers. As the country’s wealth continues to concentrate in the households of the nation’s 78 million Boomers, the affluent half or so of the cohort are expected to engage in fulfilling activities such as exotic vacations; fractional ownership of yachts, jets, and sports cars; education; fitness; wellness; and volunteerism.
At the same time, the well-heeled among the 42 million Gen-Xers are likely to begin acquiring high-endgoods and services at an accelerating clip. Gen-Xers in households in the top 25% of the country’s earners have been spending about two times more than Boomers with similar incomes on personal luxuries, according to The Luxury Report 2007.
“Most people have an average life expectancy of 80, so people who are 50 may be asking themselves what they want to do with the next 30 years,” notes Pamela Anzinger, president of Unity Marketing. “Generally, it is not to buy a diamond ring or a mink coat. It’s to have life-changing experiences.” For now, Boomers and Xers are shelling out about the same amount for special experiences — an average of $22,000 per person in 2006.
“The lives of the wealthy consumers are super complicated because they’ve accumulated so much,” the Luxury Institute’s Pedraza says. He predicts that people will want to simplify their lives and move beyond the mode of maintaining all their “stuff” to that of doing fun things. Among the services expected to flourish are concierge medicine and a broader range of financial services.
In the next five years or so, the luxury market will target younger clients, those in their 20’s and even their teens. Clearly, the luxury consumer is no longer limited to the country club set.