While having coffee with one of my colleagues recently, I asked for his views of the future of luxury brands and Baby Boomers. “Luxury brands are dead,” he said, flatly.
I was taken aback by this cryptic pronouncement. Probing further I asked him to reconsider such a pessimistic position. Entire companies and industries depend on middle- and upper-middle class Boomers pursuing occasional luxury splurges, whether diamond earrings or spa and golf packages at The Broadmoor, a Five-Star resort hotel.
He nevertheless remained resolute. An unprecedented economic recession had swept a pall of fear and frugality across the nation, and for this generation, it is here to stay.
In an Adweek article entitled, “Boomers Caught in Squeeze Play,” which assesses Boomer consumerism in difficult times, the future does indeed appear bleaker.
Eric Almquist, a Bain & Co. partner, observes that a very large group of preretirement Boomers are entering a lifestage of traditional economic parsimony.
The current Boomer mindset revolves around a nearly universal question: “Can I live off my savings and social security for the rest of my life?” This gnawing question leads to greater risk aversion, obsessive price shopping, and an urge to preserve financial equilibrium in the current economic situation.
Ben Kline with the Leo Burnett agency in Chicago believes that consumers are not just cutting back on spending; they’re reassessing what is important.
Also commenting for Adweek, Kline said, “We’re seeing shift from a trade-up culture to a trade-off culture.”
Kline believes that Boomers today view discretionary purchases from a newly emerging framework. They are now seeking more than value, where a product’s bundle of tangible and intangible attributes reach an optimum balance with price.
According to Kline, consumers are undertaking something akin to brand triage, where they assess discretionary purchases as either indispensable or dispensable, sensible or senseless, based on more deeply held core values.
David B. Wolfe, the late co-author of Ageless Marketing and Firms of Endearment, insisted that this behavior is being driven by more than distressed economic times and frugality. In an email to a few colleagues and me, he wrote:
“The spirit of materialism wells up in youthhood to incline behavior toward outwardly visible messages to others. It takes different forms in different cultures, from body markings and piercings to outlandish clothing and other eye-popping possessions acquired with the intention of increasing one's influence, power and wealth.”
Wolfe insisted that thriftiness in middle-age is not just a byproduct of lifestage, and in this case, Boomers sliding down the plummeting side of their career earnings curve; rather, middle-aged and older adults seek new priorities, driven at the root by fundamentals of human development.
“For most, the onset of midlife is accompanied by an ebbing of narcissism and materialistic appetites,”observed Wolfe,“because the social and vocational aspirations have typically become trimmed. Now, people begin talking about ‘simplifying’ their lives and putting their lives in balance. All in all these shifts are less rooted in volition than in our genes which anticipate the milestones of personality development. The zeitgeist (reflects) a shift away from narcissistic and materialistic values.”
There you have it. Today’s luxury industries are confronting convergence of two forceful trends: Boomers entering a stage of life when traditional materialistic values become less important, plus an unstable economy that for many has decimated their savings and idealism around retirement.
So I return to the question I asked my colleague, “What is the future for luxury products?”
I believe well-run companies producing products of true quality and uniqueness will not confront inevitable dissolution. But badly run companies are likely to tumble in any unforgiving economy. However, the rules for marketing luxury products must change, and those failing to adapt branding and advertising strategies will suffer grave consequences.
In a recent interview with Women’s Wear Daily concerning the “The Demise of Full Price,” I provided reporter Valerie Seckler with a hopeful analogy using my recent purchase of a white button-down dress shirt at Nordstrom.
First, I shopped for a white shirt, as opposed to some other color or stripe, because the current fashion climate is influencing men to return to white shirts as an outward statement of prudence and pure business focus. This trend was recently spotted by The Wall Street Journal in an article entitled “The White Shirt: A Roving Quest for Perfection.”
Second, I knew I could walk across the mall to Macy’s and find white dress shirts on sale for more than half the price of the Nordstrom product. But I justified paying double, not because I’m feeling flush but because I know Nordstrom’s products and legendary reputation for customer focus.
Third, from experience I know a Nordstrom wrinkle-resistant shirt will look new and unwrinkled even after 50 washings. When I unpack in a hotel room, the shirt will barely need touch-up with an iron before wearing, and as I wear it all day, it will maintain a crisp appearance. Should the shirt ever show a defect, such as a splitting seam, Nordstrom will replace it without hesitation.
This is the future of luxury brands: not just value but core values; not just low prices but high product longevity; and not just superficial bling but deep customer connection.
Accordingly, here are four strategies we’re recommending to purveyors of luxury products:
Build networked communities around your products. The legendary Harley Davidson has always commanded higher prices than foreign motorcycles partly because of HOG (Harley Owners Group), a network providing powerful referential reinforcement.
Differentiate with values that address emerging Boomer needs to seek higher purposes in lifestyle choices. A Breitling watch is more than an impractical timepiece when acquired as a future heirloom for a grandchild.
Make an unassailable quality and durability case. Most Boomers have been burned many times by shoddy products found at discount warehouses that seemed like a good deal but then fell apart shortly after purchase. Boomers generally believe the adage handed down from Depression-era generations: You get what you pay for.
Consider tiered pricing. Just as airlines have unveiled tiered ticket prices in coach class, luxury class products can be offered to consumers as good, better and best (not cheap, cheaper and cheapest), without compromising upscale brand stature or product differentiation.
These are but a few of the strategies we’re helping clients implement. Many opportunities exist to convert luxury into longevity and superb into sustainability — core values Boomers seek today with their discretionary dollars targeted for occasional luxury purchases.
And don’t be misled about the alleged economic power of younger generations today. Boomers spend more than Millennials by an estimated $400 billion a year. By far Boomers have greater economic clout than any other generational cohort. Eschewing this market with advertising and branding that only celebrates youthful consumers can potentially become economic suicide.
This generation’s consumer market influence is not going away soon. Boomer global spending power will hit $15 trillion by 2020, up from $8 trillion in 2010.