The spending patterns of the wealthy are shifting, forcing luxury brands to reevaluate their marketing tactics. Why the urgency? “According to the American Affluence Research Council, the wealthiest 10% of U.S. households account for almost half of the consumer spending and represent about one-third of total GDP,” says a white paper from Ad Age Insights titled “The New Wave of Affluence.” If the marketing campaigns of luxury brands aren’t in sync with what elite consumers want, brands could sustain massive losses.    

Why the Shift?

Prior to the most recent recession, a fairly large portion of the population had gotten into the habit of spending on luxury goods and services, a behavior pattern that came to be known as “mass affluence.” 

“Buoyed by a surge in home equity and easy credit, a larger swath of consumers felt wealthy (even if their incomes didn’t actually reflect it) and they increasingly indulged in luxury products. In turn, luxury marketers and retailers such as Coach, Burberry, Dolce & Gabbana and Saks Fifth Avenue began to cater to a wider range of consumers, including younger people and those in a lower income bracket,” notes the white paper.     

But when the real estate bubble plunged and the stock market took a tumble, a healthy percentage of the mass affluent found themselves in tight financial circumstances. Consequently, the bulk of these consumers were forced to rejoin the ranks of the middle class, and their luxurious spending came to an abrupt halt. That forced luxury brands to redirect their focus to a smaller, but still lucrative, segment of the buying public – the actual elite.       

Serving a Shrinking Market...

As the mood of the world has changed, so has what this more elite market is seeking in luxury goods. Exclusivity and value have become a priority for wealthy people in spending on luxury goods and services.  “A period of belt-tightening by high-net-worth individuals as well as the advent of public parsimony has put an end to the age of conspicuous consumption that characterized the pre-recession years.... Luxury consumers have become less interested in acquiring status symbols and more interested in the actual worth of products,” the white paper adds. That means fewer in-your-face labels and more quiet quality.

In addition luxury marketers have to consider the differences among the wealthy in various geographic regions. Contrary to popular belief, the ultra rich don’t just cluster in large metropolitan cities, such as New York, Los Angeles or Miami. Many reside in smaller state hubs, such as Austin, Texas.; Kansas City, Mo.; Memphis and Knoxville, Tenn.; and Columbus and Cincinnati, Ohio. Luxury brands must analyze regional differences in cultural values and spending habits  to determine the optimal positioning for their marketing campaigns. (For more, see Where the Ultra-Wealthy Live in America.)    

...With Ever-More-Exclusive Products

As mentioned earlier, luxury brands know that those in their target market are sticklers for quality and exclusivity. Therefore, many brands have done away with multi-product lines or less-elite products that were commonplace in the era of mass affluence and risked making the brands less desirable to high net worth consumers. 

Luxury products are now positioned, according to, as the unique creation of a particular brand, which personalizes the brand-customer relationship.” The article adds that scarcity is also used to maintain “the illusion of exclusivity. And selective distribution has the added benefit of allowing the brand to control its message at every stage of customer interaction.” 

The Bottom Line

Although luxury brands still make a statement, that's not the driving force for their purchase. “[The wealthy] don’t want to buy luxury because it’s flashy, but because it’s heirloom quality, or it’s going to last a long time, or it will have a lower cost of upkeep, or it will hold its value better,” says the white paper. One could also say that it gives those with the wherewithal a more sober reason to buy the best. And quiet quality isn't wrapped in logo-bedecked leather that screams "this purse cost $3,000" as its owner walks into a restaurant.

Keeping luxury brands profitable means companies must continue to analyze the spending habits and cultural values of the wealthy consumers they are attempting to target – and hope that customer numbers continue to grow (which may not be true of the very richest; see The Shrinking Number of the Ultra Rich). It also means that less wealthy consumers who want to splurge on an occasional luxury item must be prepared to pay more than ever.



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