08th June 2010

The Luxury Market & Consumer

Introduction

• What is Luxury and how do Luxury brands work?• Case study: Prada

• Key trends in the Luxury marketplace

• Know vs. Show – the Luxury consumer defined• Audience understanding

• The Recession and the Luxury consumer

What is Luxury? Logic & Magic

• Two core tactics must be deployed to achieve success in Luxury marketing:• Logic - what makes the business ‘work’• Magic - what makes the brand ‘special’

• Logic has to play a part to justify spending a large amount of money:• Must be technically superior • Uniquely made; scarce; bespoke etc.

• For a brand to attain Luxury status there needs to be an air of magic about it:• Must represent a superior level of wealth and social status

and this comes from the way a brand behaves or conducts itself• Must promote self expression – make the consumer

emotionally linked to the brand values

PracticalConcrete

Intangible

Emotive

Case Study – Prada – Expanding a Luxury brand

• Retained brand magic & defended brand provenance by establishing Prada Sport • Spawned the ‘utility chic’ trend• Validated by technical integrity• True to core brand attributes, e.g. Sailing heritage

• Logic also becomes important when unlocking new markets, sectors or consumers

‘Massclusive’

Exclusive

Diffusion lines

Broadening (diffusing) the brand without dilution

• Allowing more rule-breaking and creative freedom • Appealing to a younger and (somewhat) more price-

sensitive customer

Using Art and Architecture to build Brand Experience

• Prada applies their design principles to everything they do – the wow factor features in everything, including their stores

• Dominating the visual and conceptual landscape…not just the strict domain of fashion

• Innovative, original and ingenious form of PR vehicle

Digitally Brave

• In-touch with how people live

• Sample sale via Ebay-style auction

• Way of artificially driving up price and collectability of Prada ‘artefacts’

Current Brand Trends

• Partnerships with more mass-market outlets whilst retaining exclusivity. Positioning collection as limited edition, limited places and creating a thrill of the hunt

• Partnerships with other luxury brands. Trading brand values, e.g. Jimmy Choo (a Show brand) and Hunter (a Know brand)Sharing consumer fan-bases e.g. Diptique & Jo Malone

• “Luxyoury*” – placing the consumer experience at the heart of the brand. Offering a more bespoke, unique, personalised experience, e.g. new Louis Vuitton destination store in New Bond St - a “Maison” rather than a “shop”

Current Consumer Themes

• Self expression through personalising

• Experiences and stories over just “things”

• Simplification of life as time is increasingly precious –online shopping for luxury products is welcomed

• Recession has had some impact. Consumers are still spending but need recommendations or justification e.g. ‘investment buys’

Who are we Targeting?

• We have analysed the Luxury audience using the Premier version of the Target Group Index survey

• The UK’s biggest lifestyle research study

• This premier version of the study only focuses on the top 10% of the

population, allowing for a greater understanding of the target market

The audience we’re focussing on for Luxury brands is:

• Social class A, 20+, personal income of £100,000+

The Luxury Audience in Detail

• There are 101,000 people in this target group• Most of them are aged between 35 and 54 (76%)• 78% of them are men• Most likely to live in the South East (36%) or Greater London

(35%)• 33% of them work in the business services sector, 20% work in

banking and 11% in the medical profession

Luxury Consumers: 2 Cohorts

Knowers

Show-ers

A.A Gill Zac Goldsmith

Sean Coombs Paris Hilton Jennifer Lopez Cheryl Cole &Victoria Beckham Christiano Ronaldo

• Sophisticated. Money has helped these people gain knowledge, including a repertoire of good quality products and taste for the finer things in life.

• Over the top show of wealth, ostentatious. Money has brought these people “stuff” and the more expensive, the better. More motivated by fashion than by quality.

Jeremy Clarkson Nigella LawsonFiona Bruce

‘Knowers’ – A More Valuable Target

• This audience considers themselves quite the connoisseurs of food and drink and places to consume them

• 65% of them claim to have a large/moderate amount of knowledge of food and wine

• 70% of them say they have a large/moderate amount of knowledge of restaurants

• They are also over 4 times more likely than the average AB Adult to say they have a large amount of knowledge of stocks and shares

More valuable because they advocate e.g. food and drink

• They are a valuable audience as over half of them (51%) are very/quite likely to convince others about food and wine

• They are 27% more likely to do this compared to all AB Adults

Work-Orientated and Time-Poor

Compared to all AB adults, they are very focussed on their career and the world of business. Having an international business perspective is important to them and they aim to get to the very top of their career. They are more likely to use smart phones such as iPhone and Blackberry.

They like to follow the stock market and tend to read the financial pages of their newspaper and think the economy is more important than the environment

They tend to use their credit cards mainly for business. They say they don’t have enough time for their family.

Quality and the Finer Things

They consider themselves in-the-know and say they are the first amongst their friends to know what’s going on. They like taking risks and spend money without thinking.

They are prepared to pay more for quality wine as well as luxury cosmetics and toiletries. They say they consider themselves connoisseurs of wine.

There are some luxuries that they just cannot do without. Needless to say, they like to stand out from the crowd!

Image Conscious

They think it’s important to look attractive to the opposite sex and like to be well dressed. Designer labels are considered to improve a person’s image.

When it comes to advertising, they like it to be entertaining and 60% of them say they refer to the internet before making a purchase.

Brands Consumed

Watches:

Cars:

Jeans:

Handbags:

Shoes:

Alcohol Brands Consumed

Gin Brands

260

160

187

201

224

Liqueur

321

121

122

126

170

172

Champagne

483

416

409

387

348

Vodka

535

216

199

146

124

Scotch Whiskey

600+

175 173164

Brandy/Cognac/Armagnac

168 156 146

Malt Whiskey

292290289 225

Gender Split: Top Brands by Category

Tanquera

y

Bom

bay

Saphir

e

Taittinger

H C

o &

Monopole

Chart

reuse

Benedic

tine

Flavo

ur

Sm

irnoff

Sm

irnoff

Bla

ck

Baili

e N

icol J

arv

ie

Teach

er’

s

Oban

Lagavu

lin

Hin

e

Mart

ell

0%

20%

40%

60%

80%

100%WomenMen

Gin, Vodka, Champagne and Liqueurs are fairly evenly split but the Whiskeys, and Brandies are very male

Source: TGI Premier 2009, All data on this chart only, based on all AB Adults 20+

Online Behaviour

Shopping• Buying flowers• Expedia• 37% regularly visit Amazon• 23% buy books• A quarter of them buy music• 18% buy their groceries• Buying beer, wine and spirits• Buying gardening equipment

For Information/Business Affairs

•Share Prices/dealings websites• Business information sites• 45% of them regularly visit news

websites (excluding newspapers)• Reuters Online• Personal Banking (55%)

The Recession’s (limited) Impact

• Brand relationship is more powerful than price or discount, despite the recession

• Half of all men spent less in 2009 than in 2008. But within this:• Confident – 16% (your target)• Considered – 55%, Challenged – 29%

• The majority of the ‘Confident’ group actually spent more last year vs. 80% of the ‘Challenged’ group forced to cut back

• The Confident feel untouched by the recession. • A third of them feel they are ‘thriving’• Only 12% ‘feel uncomfortable spending money in this recession’

• BUT 49% are ‘more likely to evaluate the quality of brands before buying’ • And 68% ‘shop around for the best prices now’

I guess I’m one of the lucky ones because, economically, it has pretty much passed my by.

I haven’t had to change my lifestyle at all.

Ian, 38 - Confident

Summary & Implications

• Success in Luxury – Power brands push the boundaries in both Logic & Magic

• Status Redefined– No longer about being just bigger, better, most expensive

• People want experiences and stories• They are looking for the new, the next and also the classic• Brands creating partnerships to reach high value consumers & deliver an experience

• Knowledge is Currency– Valuable consumers consider themselves ‘in the know’ and gravitate

to brands that support & enhance this• They are advocates (of food & drink)• They won’t or can’t do without Luxuries• Career focused, frequent travellers, commuters – time is precious; they ‘live’ online

• Recession for them is all in the mind. So far, at least..– For top-end Luxury consumers, shifts have occurred in attitudes more

than in behaviour • Still spending, just thinking twice about it first – and then buying it anyway• Those who were buying beyond their means have moved away from the sector

Appendix

Appendix Contents

• Media Consumption - Outdoor• Media Consumption - Newspapers• Media Consumption - Magazines• Online Purchasing - Clothing and Accessories

Media Consumption: They tend to be commuters and the media they heavily consume reflects that• They are more likely to see outdoor advertising and are

heavy users of the London Underground.

• They are much more likely than All AB Adults to notice adverts inside and on Taxis, at Airports, on the Underground and at railway stations.

Newspapers and Topics of Interest

Favourite topics of interest:

Business/Company NewsPersonal Finance/Investment

PropertyForeign News

EditorialEuropean News

SportCars/Motoring

Media/Marketing/Advertising

Magazines

Online shopping for Clothing and Accessories• 73% have bought clothing online

• Among those who buy designer clothing, 39% have ever bought it online

• Among those who buy high street clothing, 70% have ever bought it online

• 57% have bought shoes online

• 30% have bought luxury accessories online

Contact details...

• Kiran Kaur: kirank@polestarcommunications.com

• Megan Butler: megan@polestarcommunications.com

• Simon Mathews: simonm@polestarcommunications.com