I keep on reading all these articles about how this economic crisis is shaping the way we behave as consumers. In the luxury industry you keep reading articles and they all talk about the dead of Bling, the going back to the true values of “Quality, authenticity, provenance” . Also in the latest trends reports for 2010 the buzz words are functional, simplicity, real value, experiences. It seems that all the hip, over the top display of wealth, all the accumulation of things for the sake of buying with no clear purpose, all the need to show to the world how much we had is something that is not quite acceptable any longer and consumers are looking for the real thing, the true value, the true meaning.
we could say that we as consumers have mature during this crisis and what used to be important to help us define our selves in 2007 is not longer necessary and now we are looking for something different and more meaningful. But the reality is that this is not new, this consumer life cycle is continuously happening.
Sometime ago I read a report that was commissioned by American express in 2006. It was called 21st centurion living. In that report they were explaining the idea of the luxury consumer life cycle, which was divided in 4 sub-cycles. These cycles could also be applied to different regions and countries. Here it is the summary:
The Futures100 identify four distinct cycles within the existing luxury market, as it develops in tandem with the local economy and the mindset of the individual consumer. These four cycles of luxury are outlined below:
Cycle 1 – Acquisitive luxury
The first flush of wealth is defined by flamboyance. In this cycle, luxury is all about spending and display.
Cycle 2 – Inquisitive luxury
The second phase sees the emergence of critical judgement and a more considered approach to luxury. Consumers are more likely to invest time in distinguishing between products.
Cycle 3 – Authoritative luxury
Luxury consumption at this level is personal rather than subject to trends. Consumers become more proactive, demonstrating higher levels of discernment, and become archivists or collectors of the best wines, furniture or art.
Cycle 4 – Meditative luxury
Many developed economies are currently entering the fourth cycle of luxury. This is where luxury moves away from the product and into the realm of experience. Consumers at this level realise that what matters is fulfilment, and seek it increasingly through learning new skills and engaging with culture or politics on a personal level.
As you can see many of the buzz words we are hearing now as a result of the economic crisis are the words that back in 2006 defined cycle 3, and 4.
The cycles are influenced by both the socio-economic status of the individual within their regional economy, and their personal mindset. Typically, as an individual’s socio-economic status develops, so too does their attitude to luxury consumption.
In the 21st century, four key attitudes in consumer behavior are shaping the luxury market and influencing the way providers run their business:
· The desire for experience
· The thirst for knowledge
· The importance of value
· The commitment to consuming with a conscience
As consumers progress through the luxury cycles, each one of these attitudes becomes increasingly prevalent.
So, no, I don’t think the luxury industry is changing I think is following is natural curse, is following the natural behavioural pattern of the human being, and how we all as humans mature overtime thanks to knowledge, different experiences, and understanding of value and quality.
There are going to be regions in the world that will now be entering Cycle 1 and 2, we have the clear example of china. But even within that region there are going to be consumers that are already in cycle 3 or even 4. Other Regions like Europe and USA that have been called the classic markets of luxury are most likely in cycle 4 as a region but there are also going to be customers within those regions that are at stage 1 or 2 because they just got their wealth.
Also another thing to note is that although is human nature to mature overtime we all know someone around us that resists as much as they can the curse of nature and make the conscious effort to never mature, or grown up. The same will happen to some luxury consumers they will never leave cycle 1.
So with all this, we will still have luxury industry for a long time, but is extremely important for the companies operating in this area to understand their consumer; not in general terms but as individuals, each one of them will be in a different sub-cycle and we can not make the generalization of where they are coming from as country of residence as this may give us some idea but never certainty of their behavioural pattern. Consumer is king, has been king always but lately we forgot. Is about time to go back to the personal touch, to be able to understand and predict what Mr Jones wants because we know him.
In the age of instant feedback, social networking, twitter, facebook, blogs….. where our customers play in a daily basis we need to start using those tools to be closer to them, to be able to have a two-way communication. To let them get to know us, as well as us getting to know them. Making them part of our development and hopefully they will let us be part of their lives. It is extreamelly important to go back to that personal relationship that characterized the luxury industry for centuries.
But as always all these thoughts come back while I am here in my new role as an expat full-time mum. But what trigger this one in particular, was when I saw my 4-year-old daughter covered from head to toe with all her possessions (mainly custom jewelery, sun glasses, sleeping beauty high heels, two hand bags, and her princess dress). She came out of the bedroom looked at me and said don’t I look pretty? she had more than two rings per finger, and as many necklaces as she had been able to find. At that very moment i thought “who said bling is passé?” but, of course I said “you are the most beautiful princess in the whole, wide world!!!”
And I realized how true were those 4 cycles I once read, but not only for the luxury consumer but for any consumer, for any of us. My daughter will with time learn which princess is the one she likes and she will become a fan, then she will grow out of that and will get into the next big thing dictated by all the influences around her (mainly school friends) of which we will be a very small part. And then over the years she will learn to decide by herself what she likes and what she doesn’t regardless of what the friends say. And at some point she will start experiencing the world on her own and learning from her experiences and those experiences will become her most treasured possession.