Part 2: How to capitalize on the three trends that were transforming the luxury home furnishings market - even before the recession hit.
In the June/July issue of FURNITURE WORLD Magazine we brought you up to date on the latest research available on the luxury market for home furnishings (If you missed it, visit the marketing management article archives on the www.furninfo.com website). Now you are ready to look at what Unity Marketing's Home Furnishings and Décor Report 2008 does best: Translate the data into information that furniture executives can use to find a pathway to success in the future.
Someone once said to me that a good market research report must give you three things: The What, the So-What, and the the Now-What. In the first part of this series we shared the latest research (the what) and also why the findings matter to furniture retailers and product executives (the so what). Now it is time to look at actions you can take today so that you will thrive in the emerging economy that will arise after the recession (the now what).
But know this first: once the recession ends, the luxury market is never going back to the way it was before.
Never The Same Again
A lot of people are enjoying the illusion that once the recession ends, everything will go back to 'business as usual.' It would be nice to return to those heady days of the luxury boom, but that won't happen. Unity Marketing has identified three trends that were transforming the luxury consumer market even before the recession hit. Today's recession is actually the tipping point that is intensifying the long term effects of these trends. The three trends are:
- A new frugality in the mindset and behavior of luxury consumers.
- The emergence of a new type of consumer who simply doesn't see luxury as a part of their lifestyle.
- The evolution of a caring, sharing, saving, culture.
These trends will mean big changes for luxury furniture marketers and retailers not just today, but tomorrow. Once the current economic crisis is resolved, a more conservative, careful affluent shopper with a temperate approach to luxury goods and luxury brands will remain.
After all, the affluent didn't get affluent by spending all their money. Their affluence came from careful management of their resources. This current recession has hit the affluent especially hard since they have been largely using their perceived wealth rather than their real incomes to support their luxury lifestyles. Thus as the value of their homes tanked and their stock portfolios fell through the floor, they are being forced to make sacrifices which are bringing them back to their senses. As a result, marketers and retailers who sell to the affluent consumer will face a new, more careful, selective and thoughtful shopper in the future.
What can furniture marketers and retailers do today to get ready for life after the recession?
Since there is virtually nothing that you can do about the current economic crisis, which is primarily due to problems in the nation's housing and banking sectors, you must wait it out like everybody else through this difficult period. But while you are waiting for a turn around on a national scale, there are steps that can be taken to help you through this period.
So, with our eye to the future, here are some ways to get ready today to prosper in the luxury market after the recession ends.
Enhance the shopping experience – Give affluent shoppers what they want most
In Unity's latest home study, three factors were found to be most important to the affluent home consumers when it comes to the places where they like to shop. They highly value good prices, with an emphasis on stores that offer good value including those that have deep discounts and frequent sales. Therefore, furniture retailers need to communicate with their regular customers about special sales or discount offers, not just by advertising, but through personal invitations to shop delivered by mail, telephone or even better, by email. This will go far in attracting the best customers into stores.
Affluent furniture shoppers are also strongly
influenced by store merchandise. A retailer that offers a wide selection of high quality and attractive styles has a winning ticket for the luxury shopper. It is important to note that the home shopper favors attractive styles more than the latest trend-setting styles, so home merchants should avoid pushing their local customers too far too fast with new design trends, but stick to designs and styles that are in keeping with the preferences of the local community. Further, while stocking popular brands is important to these shoppers, the brands are not as important as product quality, selection and good price. None of this should be a surprise to FURNITURE WORLD readers.
Home shoppers are also strongly influenced by service features of the store. Retailers should work to enhance the level of service in their store, especially by having knowledgeable sales people who can help the customer realize their home decorating dreams. The store's return policy is also of critical importance to the home shopper. They want to be confident that an item that they buy to try out in their home can be returned for cash back or credit if it simply doesn't fit.
Home shoppers also look to the retail store for decorating inspiration so home retailers should make an effort to offer interesting merchandise displays that combine products, colors and styles in interesting and creative ways.
Affluent shoppers tend to be more mature, so work that demographic to your advantage
In the furniture market, income is not as good a predictor of high levels of spending as age. For example, in 2008 the ultra-affluent furniture buyers (the highest income segment at $250,000 and above) spent only about 1.5 times more than the lowest income segment (called the comfortable affluents at $100,000-$149,999). By contrast in terms of total luxury spending, the ultra-affluents spent more than three-times as much as the comfortable affluents.
What is more powerfully linked than income to one's likelihood to purchase a premium or luxury brand of furniture is age: those over 40 years old have a greater propensity to buy more luxurious items including the high-end luxury furniture brands. That means furniture retailers and marketers need to communicate differently about their products and brands depending upon the age of the shopper. For the more mature, messages that focus on quality, specifically the attributes that make a brand higher quality, such as workmanship, materials, engineering, and so forth, are called for. More mature consumers are more inclined to pay more for luxury quality, while younger consumers are less likely to find the luxury value propositions as compelling in their purchase equation.
Respond to Affluent Consumers' Changing Behavior
In the current recession, affluent consumers are making changes in their shopping behavior in order to save cash. One of the most popular money saving strategies they employ is to simply stay out of stores. That way they resist temptation and stay out of harm's way.
Therefore savvy retailers must give them new in-store experiences they simply can't ignore in order to get them to shop. Take, for example, the cash-back rebate sale recently offered by Neiman Marcus and its sister store Bergdorf Goodman. Rather than giving an across the store 10 or 20 percent sale, they offered shoppers a rebate tied to how much they spent.
The brilliance in the NM/BG offering was that by offering shoppers very generous cash-back rebates (up to 20 percent for shoppers who spent $2,000 or more), the retailers got a second chance to entice and delight the customers when they came back to the store to redeem their rebate card. Just offering a one-time sale doesn't maximize the opportunity to sell two-times to the same affluent shopper, like the cash-back card does.
Further, retailers need to look strategically at their product assortments and price ranges, since affluents are widely choosing to trade down from the ultra-luxury brands to less expensive, but still good quality premium brands in order to save money. So a retailer that offers more accessibly priced alternatives to the very high-end brands gives the more cautious shopper a chance to pick and choose good quality for less. A useful example of extending price ranges can be seen in the fashion world where Vera Wang offers her ultra-premium priced ready-to-wear line along with the more accessible, yet still very luxurious Vera Wang Lavender Label. Then at the mass market level she has Simply Vera Vera Wang, sold at Kohls.
By extending the Vera Wang design sensibility across a wide range of price points, the designer gives shoppers a number of different ways and different price points through which to participate with her brand. This model could be easily adapted by home furnishings marketers as well.
Translate product features into experiences for the customer
Home retailers need to focus less on selling consumers more product and more on selling experiences. That means they need to emphasize not just product features, but show how a particular piece of furniture can measurably and meaningfully enhance the consumers' experience, enjoyment, pleasure, and satisfaction in their home. Superb quality, expert workmanship and incomparable product materials – all product features – translate into longer life, greater comfort and pleasure – experiential values – to the home consumer.
When we survey affluent shoppers, we find consistently that they are more likely to define luxury as a way they experience their lives, rather than the things that they have and they own. So retailers selling to the affluent need to put forward an experiential definition of luxury, that is luxury as more about what you do and experience, than the products or brands you buy. Positioning a product to a potential customer simply as being better than the rest based upon material product features is no longer enough. Furniture marketers must translate their products features and benefits into experiences that align with the home consumers' priorities.
Value is the secret to selling to the luxury shopper
Finally, furniture marketers and retailers need to give their luxury-leaning customers what they want; and what they really want is value. They didn't become affluent by spending foolishly or haphazardly. When affluents shop, they are looking to maximize the value they get from the money they spend. So rather than think about how to cut costs or discount your products, retailers can benefit more from finding unique and creative ways to give shoppers more value, like offering a free coffee table with the purchase of a premium sofa or a gift certificate for $250 off one's next purchase. Hardly spendthrift, the affluents are careful money managers in a constant search for value.
Furniture retailers also need to boost the value messaging in their marketing efforts to help justify the expense of paying a premium for their goods. For today's resistant yet affluent shopper, luxury brands that focus their marketing messages on quality and value, rather than on image or status, will attract careful shoppers. In today's marketplace the old advertising maxim 'Sell the sizzle, not the steak,' no longer applies. Rather in the new value-driven luxury market, high-end marketers and retailers need to sell the 'steak' once again, not just the sizzle.
Pamela N. Danziger is an internationally-recognized expert specializing in consumer insights, especially for marketers and retailers that sell luxury goods and experiences to the masses or the 'classes.' She is president of Unity Marketing, a marketing consulting firm she founded in 1992.
Advising such clients as PPR-Gucci, Diageo, Google, Stearns & Foster, Tempur-Pedic, Waterford/Wedgwood, Lenox, Prudential Fine Homes, Moen, Orient-Express Hotels, Marie Claire magazine, Meredith, The World Gold Council and The Conference Board, Danziger taps consumer psychology to help clients navigate and master the changing luxury consumer marketplace.
In recognition of her work in the luxury consumer market, Pam received the Global Luxury Award presented by Harper's Bazaar for top luxury industry achievers in 2007.
Her latest book is “Shopping: Why We Love It and How Retailers Can Create the Ultimate Customer Experience,” published by Kaplan Publishing in October 2006. Her other books include “Let Them Eat Cake: Marketing Luxury to the Masses—as well as the Classes,” (Dearborn Trade Publishing, $27, hardcover) and “Why People Buy Things They Don't Need: Understanding and Predicting Consumer Behavior” (Chicago: Dearborn \Trade Publishing, 2004). She is currently working on a new book about the changing luxury market.
Questions about this article can be directed to Pam care of firstname.lastname@example.org. You can also visit www.unitymarketingonline.com for more information.