AA Affluence and the Meaning of Luxury

Yesterday’s Perspective

• There has historically been a symbiotic relationship between consumer affluence and the consumption of luxury goods

Far-out Historical Perspective• “The concept of luxury has been present in various forms since the

beginning of civilization. Its role was just as important in ancient western and eastern empires as it is in modern societies…

• “With the clear differences between social classes in earlier civilizations, the consumption of luxury was limited to the elite classes. It also meant the definition of luxury was fairly clear. Whatever the poor cannot have and the elite can was identified as luxury…”

• Wikipedia definition of “Luxury Goods”

Close-end Historical Perspective• ”In his 1958 classic, The Affluent Society, Harvard Economist John Kenneth

Galbraith made the argument that society as a whole had become affluent – after all most all families had tremendous modern conveniences previously known to be luxuries such as plumbing and heating, washing machines, electric stoves and refrigerators and two cars….

• “He argued that as society becomes relatively more affluent, private business must "create" consumer wants through advertising to create an artificial demand for products beyond the individual's basic needs. Given today’s economic crisis, it is hard to argue with this principle which he wrote about 50 years ago. This is a particularly relevant concept for luxury goods…”

• “Back to the Future of Luxury,” Presentation by Dale N. Dewey, CEO - Luxury Solutions to The Luxury Marketing Council & The French-American Chamber of Commerce January 22nd, 2009 - Houston, Texas

And today, there is a lot more luxury to go around

The massification-of-luxury brandsSuper Luxury

Luxury

Near LuxuryUltra Premium

Affordable LuxurySuper Premium

Premium

Upmarket • Idris Mootee, CEO Idea Couture, Inc., Luxury Brand Marketing, Presentation to Global Senior Executives Forum

So, what is “luxury” today?

Luxury Mindset

• The 2007 Conference Report entitled, The Global Luxury Market: Exploring the Mindset of Luxury Consumers in Seven Countries,” says that the most valued luxuries are:– Time (35%)– Life experiences (26%)– Products and services providing comfort, beauty,

and quality (18%)

Regarding products and services, let’s define the 3+3 of “luxury”*…

3 factors and 3 levels

*This and following four pages are excerpts from “The Eternal Principles for Creating Luxury Brands” by Dr. Dan Herman @ TheManager.org

3 factors1. Luxury is nonessential, desired but not needed2. Luxury is “hard to get” restricted by high price,

small series, exclusiveness3. Luxury is superb, inspiring feelings of wonder

and excitement

3 levels1. Signature brands: most

expensive, personal, singular creations – one of a kind

2. Supreme brands: Limited series products

3. High end brands: High quality mass production

Five Categories of Luxury

Sumptuous ProductsCars, jewelry & watches, fashion, cosmetics, fragrances, food & beverages, cigars, furniture, homewares, electronics…

Exclusive ProductsBanking, financial services, insurance, cellular, airlines, clinics, consulting…

Luscious Retail SpacesStores, chains, shopping centers, malls…

Illustrious PlacesRestaurants, bars, clubs, hotels, resorts, housing projects, offices, commercial complexes…

Prestigious OrganizationsBrotherhoods, selective memberships…

16 Usages for Luxury Products1. Feel special and apart from the crowd2. Feel superior and privileged3. Full of value and importance4. Exercise ability and freedom (“I can afford it”)5. Reward themselves for efforts and achievements6. Console one and recuperate from setback or misfortune7. Signal status and command acknowledgement and respect8. Demonstrate refinement, connoisseurship and/or perfectionism9. Delight the senses and create an infrastructure for favorable experience10. Participate in a certain group and lifestyle11. Signal affiliation and belonging12. Remind oneself of one’s real/aspired identity13. Enflame hope and mobilize motivation and energy14. Indulge and pamper oneself, take care of oneself15. Feel loved, taken care of and even spoiled16. Show feelings of gratitude, admiration or great affection

With all that as backdrop, we will focus our comments on the luxury of high-end brands of sumptuous products

So, let’s talk about black folks…

2010 Census…

Reports that the current US black population is at…

42 MillionFrom 12.3 % of U.S. in 2000

To 13.6% of U.S. in 2010

Top 10 AA Cities: Size and Growth

Top 10 AA Metropolitan Areas

AA Population 2004 (000)

AA Population 2010 (000) Percentage +/-

New York 3,808 3,574 -6.1%

Atlanta 1,399 1,785 +27.6%

Chicago 1,738 1,755 + 0.9%

Wash DC 1,376 1,491 +8.4%

Los Angeles 1,497 1,356 -9.4%

Philadelphia 1,372 1,286 -6.3%

Miami 853 1,175 +37.7%

Detroit 1,128 1,037 -8.1%

Houston 966 1,015 +5.1%

Dallas 843 955 +13.3%

2010 Census American Community Survey

Atlanta replaces Chicago as the #2 AA market in size and leads all metropolitan areas in growth

The “Reverse” Migration • Per the 2010 Census, the black population in the South is close

to 60%,which is the highest its been since 1960

• Black population grew by 11 % in large southern metropolitans but by 15 % in adjacent smaller counties, suggesting a strong movement of blacks to the suburbs

Source: Many U.S. Blacks Moving to South, Reversing Trend Published: NY Times March 24, 2011

Who They Are

• Blacks that are relocating to the South are typically– Twenty one - forty (21- 40) years old– College Educated– Singles / young families– Professionals & Entrepreneurs

• Primary reasons for relocating – First time home buyers– Employment opportunities– Better quality of life / Cost of living– Better education for children– Cultural (getting back to their roots)

Source: Many U.S. Blacks Moving to South, Reversing Trend Published: NY Times March 24, 2011

Back in the 1950’s, when Galbraith first made his comments about affluence, they would have only applied to black entertainers and athletes, and a handful of black professionals and entrepreneurs

• Judy Foster Davis, Realizing Marketplace Opportunity: Early Research on the Black Consumer Market by Mainstream Marketers: 1930-1970, CHARM 2011 Proceedings

But since the passage of the Civil Rights Act in 1964, now for the 1st time in America, the Census shows that African Americans have an

Affluent Class

The Growth of An Affluent African American Segment

1990 2009 % Difference$50K+% of Whites 40% 52% 23%% of African-Americans 21% 33% 36%$75K+% of Whites 20% 33% 39%% of African-Americans 8% 17% 53%$100K+% of Whites 10% 21% 52%% of African-Americans 3% 9% 66%

– Source: U.S. Census,http://www.census.gov/hhes/www/cpstables/032010/hhinc/new06_000.htm 2009

Affluent African Americans*

• 2.4 million affluent African Americans (HHI over $75K)– Average income $122,000

• Affluents are 17% of all AA households– Control 45% of total $1 Trillion AA buying power

* African American Market in the U.S., Package Facts, 2008

Affluent African AmericansBrand Selection

• African Americans are more likely than their counterparts to choose a brand based on emotional satisfaction: 60% vs. 46%

• They also feel that it is more risky to buy a brand you are not familiar with…49% vs. 38%

• Affluent African Americans like to buy brands that have badge value

2005 Yankelovich MONITOR Multicultural Marketing Study

What does “luxury” mean to Affluent AA’s*

Characteristics of Luxury• Quality• Value• Reliability• Exclusivity• Exceeds expectations at all

touch points

Top 7 Purchasing Categories• Luxury Travel• Fine Dining• Luxury Automobiles• Personal Services• Luxury Home Items• Designer Apparel• High End Wine/Liquor

• Uptown Magazine 2008 Online Lifestyle Survey/Qualitative Research

A summary of the common lifestyle drivers from Uptown Magazine’s 2008 online lifestyle survey provides an overview of the market:

• Luxury: They surround themselves with luxury items and experiences

• Travel: They are frequent domestic and international travelers

• Entertainment: They are interested in finding the best in fine dining and related social scenes

• Vocation: Their entrepreneurial drive is strong and they view personal and professional networking as essential

• Vehicles: They believe in experiencing an important “trade-up” item in their luxury experience

• Status: They are independent and have a propensity to besingle/divorced with no dependents

Note on Affordable Luxury

• For affluent AA’s Affordable Luxury is the combination of “quality” and “deal or discount”

• Uptown Magazine 2008 Online Lifestyle Survey/ Qualitative Research

In this world of massification-of-luxury, what has been

the general market reaction?

Advice to Luxury Brands: Put on the White Gloves

• “The time of luxury goods has not passed. There is nothing wrong with Hermes, Graff, Porsche, and Frette. Luxury brands like these have always existed. They only became brown-bag brands

after people who shouldn't have been spending money on

them started snapping them up in a free-spending frenzy. The luxury category was inflated by those who weren't true luxury buyers

• “The marketing strategy I'd advise for long-time luxury brands, those with a history of exquisite

products and gracious service? Make sure the consumers you want to attract, those worth attracting, consider your brands worth the exquisite price point. Wealthy consumers will not pay for luxury unless the products are well worth it and unless they, as capable buyers, are treated well

• “With the competition heating up, it's time to become even more exclusive. Put on the gloves--the white gloves, that is. Offer a level of service beyond expectations. Reestablish your right to be in the stratosphere. Establishing a middle position will only muddy the waters. You're better off as a brilliant niche brand than a middling mass-market brand”

» Marketers Struggle To Reignite Badge Brands, Allen Adamson, 04.10.09, Forbes.com

AA’s and Luxury Brands• What the foregoing excerpt makes clear is the “elitist

class” relationship that the GM traditionally has had with luxury goods continues…i.e., – If they can’t afford it, they should not own it

• The question arises:

Now that there is an affluent segment of African Americans, how do they (and African Americans in general) feel about

luxury consumption?

AA’s and Luxury Goods

• What Shane White and Graham White, the authors of “Stylin, African American Expressive Culture,” make clear is that, from the beginning of the time African Americans have been in America, their engagement with luxury goods is more than a signal of class membership; it is also about the unique expression of their individual character

+Class = GM luxury Class Character = AA Luxury

2 Different Paths for Luxury

• GM: Class– Luxury items are

stratified by having money/capital • It is only appropriately

experienced by those who can realistically afford it and who have learned how to appreciate it

• AA: Class and Character– Luxury items are used to

project an AA’s unique image of themselves• This regardless of

whether others think that person should be buying them given other more pressing life priorities

African American Culture:A Look Behind Closed Doors

• The Way We Are: Double Consciousness– W.E.B. DuBois: African Americans understand that we are seen as group

members in America but amongst ourselves we are judged as individuals• Having this dual consciousness means that we put on one face to function

in America at large but in our own communities we are free to be our truer selves

• To truly understand AA behavior you must know/understand their public and private faces and when each applies

Double Consciousness Psychology• Having this dual perspective has led to

different ways in which to cope with the challenges of framing the world

Time perspective is one those challenges

Some AA’s have adopted a short-present orientation while others are more long-term future oriented

Locus of control is another challenge

Some AA’s see the world using their own internal compass as their guide while others use external voices as the stars to guide their behavior

Summary of AA Luxury

Multifaceted definition of luxury is held in common with GM

Purpose of luxury for AA’s plays out in defining their class (like the GM) but uniquely also in their expression of their character

The ways luxury plays out in the AA community is either:-Conspicuous Consumption-Materialism-Legacy-Experiential

DEFINITION PURPOSE PERSPECTIVES