Luxury Consumer Confidence Bounces Back as Affluent Consumers Spend More on Luxury Indulgences

Luxury consumption index up 2 points as affluent consumers feel more confident about their financial status, but spending is not yet as strong as one year ago    

Stevens, PA  April 27, 2007 --  Luxury consumers' confidence rebounded in the first quarter of 2007, rising two points to reach 100.2, up from its lowest level at the close of the fourth quarter 2006.  This is good news for companies that market and sell luxuries, as well as for those that invest in these companies.

Renewed confidence in the first quarter encouraged affluent consumers to spend more buying luxury goods and services.  Luxury consumers spent on average $14,024 on luxury, an increase of 8 percent over the average amount spent on luxury in the fourth quarter 2006.  Increased spending on home luxuries, especially kitchen appliances and cookware, accounted for much of this quarter's increase.

These findings are based upon Unity Marketing's Luxury Tracking survey of 1,003 affluent consumers conducted at the close of the first quarter 2007 (average income $159,000 and average age 46.4 years).  

Commenting on the first quarter results, Pam Danziger, president of Unity Marketing and author of Shopping:  Why We Love It and How Retailers Can Create the Ultimate Shopping Experience says, "I advise my luxury clients to remain cautiously optimistic about the positive trend in the index and spending.  The fact is luxury consumer confidence at the end of first quarter 2007 lags far behind where it was at the end of first quarter 2006, when it reached its historic high of 113.2 points. 

"Corresponding with luxury consumers' optimism last year, luxury consumers spent on average $14,800 in 1Q2006, which was 5.5 percent more than this year.  By contrast, I would have expected luxury consumers spending to rise even higher this year, since the average income of our survey respondents was 9 percent greater in 1Q2007.  So while there is a positive trend in affluent consumers' confidence and spending, we still have a long way to go to get back to where we were in early 2006,"  Danziger explains.

Commenting on the Luxury Consumption Index, Thomas Bodenberg, Unity Marketing's economic forecaster, said,  "Luxury consumers continue to be pessimistic about the financial direction of the country.  Some 42 percent of affluent consumers feel the country is worse off now compared with three months ago.  Only 13 percent feel the country is in a better position.  At the same time, nearly 60 percent of luxury consumers feel their financial status will improve in the next twelve months, which gave a boost to this quarter's Luxury Consumption Index." 

1Q2007 Special Investigation: 

Luxury Consumers & the Loyalty Factor

This quarter's special investigation was into the role of loyalty and reward programs and how much they influence luxury consumers in brand choices and purchases.  The research included whether or not the affluent consumers were members of the following: 

• Airline Frequent Flyer Program
• Credit Card Rewards or Loyalty Program
• Hotel Points Program
• Retailers Rewards/Points Program

Nearly 80 percent of all affluent consumers surveyed -- and an even higher percentage of the super-affluents with household incomes of $150,000 or more -- were found to be members of one or more programs. 

Members of each program were asked to what extent their membership influences the brand choices they make.  The answers provide powerful justification for luxuy marketers in all sectors to evaluate a loyalty program for their best customers. 

Not only do rewards and loyalty programs encourage the affluent to buy your brand again and again, members of loyalty programs also spent in excess of 50 percent more on luxury in the study period. 

Another key finding from this research:  Loyalty programs are even more influential among the young affluents -- the emerging market of affluent consumers 40 years and younger.   Membership-holding young affluents spent nearly twice as much as the over forty affluent consumers on luxuries in the study period.