The Forum Shops at Caesars Palace in Las Vegas, a destination for mass affluent shoppers. Image by Andy via Flickr.

The Forum Shops at Caesars Palace in Las Vegas, a destination for mass affluent shoppers. Image by Andy via Flickr.

Back in 2003, Boston Consulting Group’s Michael Silverstein and Neil Fiske (now at Billabong) noticed a trend among upper middle-class Americans. More and more people were choosing to pay a premium for a few high-end goods and sacrifice other parts of their lifestyle for the privilege.

Think fewer vacations, upgraded to five-star resorts, or a curated selection of top shelf wines enjoyed at home with an inexpensive dinner. The duo covered the phenomenon in a book called Trading Up, in which they predicted the growth of the affordable luxury market in the U.S.

While much has changed since their book was published, upper middle-class America’s taste for luxury hasn’t. A recent survey of mass affluent households reveals these aspirational consumers are still splurging on indulgences – and are changing how marketers approach the category as a result.

So, what is luxury, anyway?

Luxury marketers have found it to be good business to entice people eager to play the mass affluent card, while being careful not to dilute their brand promise too much.

Today, we have a plethora of “affordable luxury” products at our disposal: We can buy Michael Kors perfume at Target, we can stay at affordable boutique hotels that are located inside traditional luxury resorts, or we can join Gilt Groupe’s six million members who clamour for private sale discounts on luxury goods.

And then there’s the rise of the values-driven DIY movement, where items are sold as much for the “why” as for the “what.” Lisa Gansky, author of The Mesh suggests the trend dates back to the economic downturn: “the recession has caused us to rethink our relationship with the things in our lives relative to the value.”

Today a rising number of Americans with disposable income consider their homemade Etsy fashions and bar stocked with locally made spirits to be a true badge of honour, even if these brands might not fit the classic luxury stereotype.

Luxury, diffused

Do these changing consumer sensibilities mean that any non-traditional brand can go luxury or vice versa, that any luxury brand can launch its own diffusion line? It depends.

Mercedes-Benz has had success courting a younger audience using their “popluxe” marketing concept to sell less expensive lines. As Jay Owen, the brand’s senior marketing manager explains, “it’s more a convergence of quality and elements of luxury rather than everything being luxury.”

The logo of Taco Bell's spinoff chain, U.S. Taco Co.

The logo of Taco Bell’s spinoff chain, U.S. Taco Co.

In practice, though, it seems to be easier to go down the ladder than up. Consider Taco Bell’s flopped attempt at launching a gourmet Chipotle competitor.

As Jordan Weissmann, a writer at Slate put it: “It can be incredibly profitable for upscale brands to slum it by releasing a line of mass-market merchandise… However, it is much, much harder for a downscale brand to suddenly act posh and reach out to wealthier clientele.”

Either way, the biggest risk is depleted brand value: “If the diffusion label doesn’t attract a large enough new audience/market, brand equity is damaged,” Marie Driscoll, CEO and chief consultant at Driscoll Advisors told Luxury Daily.

Perhaps that explains why, even as brands are experimenting in the affordable luxury space, prices for high-end labels continue to rise.

What marketers need to know

As marketers attempt to make sense of changing tastes and evolving definitions, the tough reality is that there are no hard and fast rules. That’s why I think Lisa Gansky’s comments reflect something that marketers should focus on instead: Building connections.

Luxury has been, and always will be, about how a product makes us feel. In my opinion, successful consumer brands like Apple or Disney don’t worry about definitions of luxury.

They understand that the aim is to create a bond with people that runs deeper than a “Like” on Facebook. Their success with “luxury” is about the resulting customer experience, not about market segment definitions.

In the end, luxury brands that have a strong connection to their customers’ lifestyles will always thrive, regardless of the product or price.

As marketing genius Seth Godin put it in a blog post, “as the differences get smaller, the purely functional reasons for premium goods fade away, and instead they are purchased for the reason we’ve always purchased luxury goods: because of how they make us feel, not because of what they actually do.”

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