Trendspotting: Luxury and Emerging Markets

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Customer Experience
Customer Experience

Targeting the Fringes

The luxury and economy markets, once seen as exclusive and undesirable, respectively, have become the next growth opportunity for businesses whose middle-class customer bases are shrinking or are fully tapped. Some brands are even bridging the two extremes, introducing up- or down-market lines to appeal to both groups. Targeting the low- or high-income market presents challenges that would seem vastly different, but are surprisingly similar: Both groups are expanding as the definition of "middle class" includes fewer consumers; they don't spend needlessly (either because they don't have the money to or they emphasize high value for the price); and they want to do business with companies that understand they're not part of the mass market.

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Lifestyles of the Rich

During hard economic times, the number of consumers who shop in the luxury market becomes smaller, as those who were on the periphery curtail some of their spending. The Luxury Institute, in its Wealth Report about last year's holiday spending, found that while the luxury market showed slowing, it performed much better than the overall retail environment.

Targeting wealthy consumers means realizing why they're buying high-priced merchandise. It isn't because of exclusivity or vanity, says Pam Danziger, author of Let Them Eat Cake: Marketing Luxury to the Masses as Well as the Classes. "Companies need to embrace a customer-centric definition of luxury," she says. "These consumers want specialness, something experiential. They buy for the same reasons everyone else does. The reason they dig deeper in their pockets is because they have an expectation of superior quality, workmanship, and design; but at the end of the day they want something that's special to them."

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Moving on to the Unsaturated Market

As economic divides in the U.S. and around the globe increase the gap between the poor and the wealthy, companies find their growth depends on expanding into new markets. A report by the Boston Consulting Group, "Decoding the Next Billion Consumers," outlines the expectations of customers in emerging markets like India, China, Brazil, and parts of Africa. Among the insights gathered from the 15,000 interviews BCG conducted for the report, the authors found that the underserved one billion customers directly below the middle class place a high value on saving space, shop smartly and not necessarily cheaply, seek advice from trusted members of their community, and prefer local sellers over chain stores.

EXPERT OPINION
EXPERT OPINION