Luxury market is divided into two groups, the Aspirational and the UHNW (Ultra High Net Worth)

http://luxguru.typepad.com/lorre_white_the_luxury_gu/2010/08/luxury...

Luxury market is divided into two groups, the Aspirational and the UHNW (Ultra High Net Worth)

Not all luxury companies were hit hard. Why? There are two types of Luxury Consumers: The aspirational and the UHNW (the already arrived). The fashion industry
depends on the first category for up to 80% of their sales. The private
jet companies have all UHNW and so they are not as affected by the slow down in
the economy. The truly rich are rich
even after loosing half their net worth; If you are worth a Billion and loose
half of it…you are not skipping any meals. The top 2% of the world population controls
50% of the world’s wealth. All the stats
are showing that it is the wealthy that are leading our economy out of
recession and their spending is back to prerecession levels. The less a company must rely on aspirationals
the more insulated they are from the economic swings.

In the travel world, the top of the pyramid is owning a whole private jet, next would be fractional ownership (1/16 is the smallest amount legal), The entry point for
this starts with smaller planes and smaller fractions for people with a liquid
net worth around $50 million. The next step down would be the card holders that
buy private time by the hours. This group entry to this market starts at
around $10 million liquid assets, not including homes and other non liquid
assets. Under that there is charter, next is commercial Business Class and then
Coach. The farther down on that chart you go the more they will be
affected by the economy as a whole. The higher up, the more autonomous
they are, and even if having lost one-half their net worth….they are still
incredibly rich. The very rich are also usually more internationally divested
and so they take less of a punch. It is a paper loss to them until the
economy turns around. So when the
reporter states that the Luxury Market does not feel the swings of the rest of
the economy, it depends on if they are luxury brands that rely on aspirational
consumers

Most media sources reach aspirationals; those that can sample the lifestyle, but not really live it. They can buy a purse or
a tie, take a ski trip once a year and sample several of the lower priced
luxuries like a blue chip brand Vodka. They
probably are members of a local country club, and mom and dad both have a BMW sedan.
They can splurge on a $700 bottle of wine for their anniversary, but not drink
one every night. Fragrances, cosmetics, skin
care, fashion, sun glasses, lower level jewelry, ski coats and boots, surf
boards and other sports paraphernalia are perfect examples of lower priced
luxuries. These lower level luxury are
very well covered in the media …the middle, upper middle class and lower upper demographics
are the easiest to reach. When I am
asked to do a TV show for these lower demographics, these are the types of
little items that I will choose for them.

The higher up on the affluence level the more “time” is worth. For example, if it took a person 1 hour to clip coupons that save them
$30 at the store, than that hour was only economically well spent if they make
$30 or less an hour at their work. A
person that makes $100,000 annually, their hour is worth much less in dollar
terms, than Warren Buffett or Bill Gates who makes more than that per working
hour. The uber riche have the unique opportunity
to experience everything at the best level (not pick and choose what they can
afford) and saving time has even a larger economical incentive. These people are
always being solicited and so they often avoid contact with individuals that
they do not already have a relationship with…including sales people. If John Smith is ignorant about a topic no
one cares…if Bill Gates sounds foolish it makes the evening news. The reason that most marketers are so ineffective
at reaching this demographic is that they simply cannot pull themselves out of
their own middle class prejudices and limited understanding of how the other 2%
lives.