The Difference Between Luxury Consumers and Affluent Consumers

Luxury consumers and affluent consumers are not the same, but are different sets of the consumer market for two fundamental reasons. It is important for many businesses that they can distinguish the difference between the two, because the subtle differences involved can have a significant impact on your future manufacturing and marketing strategies, and even on the future success of your business.

Here are two fundamental ways in which luxury consumers and affluent consumers differ:

A. Not Only Affluent Consumers Enjoy the Luxury Market

It is not just the affluent that enjoy luxury goods, and many ordinary people will splash out now and again on luxury items, particularly for special occasions and at certain times of the year. Birthdays, anniversaries and traditional celebrations such as Christmas and Hanukkah are often associated with splashing out on small luxuries - some not so small!

Weddings, engagements and so on are also associated with luxury, and although it is certainly agreed that what is a treat or a special purchase for most of us is commonplace to the wealthy, it nevertheless means that luxury consumers and affluent consumers are not synonymous.

B. Luxury is Indefinable, Affluence is Not

It can easily be shown that while luxury cannot be defined, affluence can be. Consider the term 'luxury'. Can you put a figure to that? No - in fact it is impossible to measure luxury in any meaningful way. You can't say anything over $20,000 is luxury, because you can't get a luxury car for that, but you can sure get some luxury ice cream!

What is luxury to you may not be to Bill Gates, and your idea of a luxury ski-boat might not be good enough for the billionaire next door with his $50 million luxury cruiser. This isn't frivolous: it's a simple way of demonstrating that luxury is in the eyes of the beholder and cannot be measured, and hence it cannot be defined.

Affluence, however, can be defined, and in the USA it is generally taken as being the top 10% of American households, enjoying an annual income of at least $250,000, responsible for 36% of the nation's total household income and almost 50% of its consumer spending. Now, 10% of households cannot use up 50% of total consumer spending on everyday items and food! So the affluent market spend a lot of money on what we refer to as 'luxuries' and they refer to as sometimes 'necessities' and sometimes 'extras',

C. How to Assess the Affluent Market

The 'extras' are the high-ticket products beyond the reach of the vast majority of us. They are not' luxuries' to us, because we will never own them, no matter how hard we save. However, businesses that make these goods, and even those that make the less expensive high-end merchandise, still have to carry out market analysis and consumer surveys if they are to be able to assess their competitors and the potential market in the future.

Unlike most market surveys, historical data from affluent consumers, and perhaps we could also use the term luxury consumers, even though we are involved in just a small part of the market, cannot be used with any degree of accuracy to create a forecast for the future. That's largely because the spending habits of the wealthy change with the wind - or, more accurately, with the trading markets - and also they tend not to purchase high-end yachts every year.

Affluent consumers must be approached personally and asked how they foresee their consumer spending going next year and farther into the future. Many will offer you answers because they understand that they have to cooperate with the designers and manufacturers if their needs are to be met. Not all their spending is on off-the-shelf items, and it is important to auto designers to get a feel for the higher end of their market before committing to new models for affluent consumers. Where luxury consumers are concerned, they will generally take up the slack left by the wealthy, who will still need those lower-priced luxury items and not all developments are affordable only by the rich.

Take car design, for instance. Many of the refinements in auto-technology developed for affluent consumers and tested in Formula motor racing eventually work their way down to cheaper models - luxury models, but not as expensive as the high-end market products. The difference between affluent consumers and luxury consumers is vast when the extremes are compared, but there is an overlap of the luxury and affluent markets which you often get when one is definable and the other is not.

More details on the differences between affluent consumers and luxury consumers together with important information on custom affluence research is available on the Affluent Research website AffluenceResearch.org.

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The Affluent Market: Benefits Of An Affluent Survey

The affluent market is a definable market that can be used to give valuable information to businesses and even governments due to the amount of disposable cash at its command. By carrying out an affluent survey you can gain an insight into what is in the minds of the wealthy: how they intend to spend their money, whether they intend to invest or spend and what they are looking for in the form of tangible luxury goods.

Although affluence can be defined in a number of ways, most in the USA regard affluent households being the top 10% with the highest disposable income - which is currently $250,000. That figure will change as people get richer or less rich and as inflation takes its toll on the worth of money. However, the affluent 10% is responsible for nearly 50% of all consumer spending across the USA.

What you can read into that figure is that it's not all going to be spent on standard consumer goods and that there are going to be quite a few luxury goods included in it. Naturally, what's luxury to one person is an essential commodity to another, but even though that is one reason why the term 'luxury' cannot be defined, it still represents expenditure on luxuries that will interest those businesses responsible for providing them.

The affluent market is therefore a very powerful one, so it goes without saying that an affluent survey is going to offer many businesses some very useful information - but what form should this survey take? A normal consumer survey will offer people multiple choice questions to determine their spending habits, what goods they buy and on what criteria they make their purchasing decision.

This is not so with the affluent market, particularly with their expenditure on luxury goods. You only buy one luxury yacht, jet or mansion once in a decade or so, and the past purchasing decisions of the wealthy may have nothing whatsoever to do with their future decisions. If you intend to survey the affluent market you need a custom affluence survey, designed just for your business or products, and asking questions directly to the wealthy people likely to use your product.

It doesn't matter if that is tangible, such as high-end jewelry, luxury transport or expensive clothing, or non-tangible such as high-ticket luxury vacations or corporate events: a custom affluent survey can provide you with information that could affect your development and marketing for years to come.

By asking rich people:

What they think they will spend their money on over the next few years, If they have any projects in mind, What improvements they would like to see in products they currently use, Do they intend to spend at all next year or just wait? If there is something they wished they could buy but can't because it doesn't exist

You can get an insight into what's in their minds, and how your firm could best meet their projected needs.

Keep in mind that affluent consumers do not go around buying luxuries all day every day: they frequently live frugally, eating at home and buying basically what you and I buy. Only every now and again they make a luxury purchase. However, their major purchases - the yachts, Rolls Royces and jet planes - tend to be planned in advanced, and their purchase arranged so as to cost s little as possible, making use of investment income or tax savings.

If you have this sort of information in advance over a broad range of products, then you can make use of the results of a survey of the affluent market to plan your business strategy to take advantage of these planned expenditures.

Will they tell about them? Maybe, maybe not, but while many wealthy people refuse to take part is such surveys, many do, because they know it is to their advantage. They are more likely to have their needs met if they make these needs known. They didn't get where they are today by being stupid!

One person seeking to purchase one new product two years down the road won't help you much, but if there are several, and particularly if you can spot a trend in the intentions of the affluent market, then you may be able to plan accordingly and make a killing - because you were ready to supply when they were ready to buy!

By commissioning a custom affluent survey, you may be able to get the jump on your competition in this respect, and be in a position to take advantage of the intentions of the affluent market because you were proactive. Retrospective analysis generally fails with affluent consumers, but if you can look ahead...

It is possible to survey the affluent market and get useful information on the future purchasing intentions of the wealthy. More information on carrying out a custom affluent survey is available from AffluenceResearch.org.

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