Press Release

What Makes Luxury Luxurious?
The three qualities that products must have to be called luxury

Stevens, PA June 3, 2005 — Now that the Neiman Marcus deal is done and Texas Pacific Group and Warburg Pincus LLC have acquired the luxury chain, they need to develop competitive strategies to capture greater market share of the super-affluent luxury consumers (i.e. incomes of $150,000 and above that make up the top 5 percent of households by income ) that they target.

Product marketers need to be sensitized to delivering a luxury experience in the use and the wearing of their luxury products. The experience goes beyond quality to intangibles like style, design, taste, color, details, touch and feel. Rather than stressing product features in advertising, such as the exquisite craftsmanship and finest quality materials, advertising must communicate the feeling that the product will inspire in the consumers An expectation of better quality, finer details, superior workmanship and materials goes along with the purchase of luxury. But while these luxury consumers appreciate superior luxury quality, they also get an experiential thrill of paying less for the best. Over 80 percent of luxury consumers agree with the statement, “I enjoy the feeling of buying luxuries on sale and usually search out the lowest price or the best value.”

They begin by offering the ‘best of the best’ quality, but go beyond to deliver not just a great thing, but a wonderful experience to the customer. Thus the bar is raised and new luxury demands even higher levels of performance for the company to communicate with the consumer.

The concept of luxury brand performance connects both the intrinsic definitions of luxury (i.e. quality performance, design performance, uniqueness performance) with the experiential about how the luxury brand makes the consumer feel and the way they experience luxury. It is through performance that ‘old luxury,’ encompassing the noun or the thing, is transformed into ‘new luxury’ that delivers the experience, the feeling, the emotion to the consumer.

“Nordstroms is the competitor that Neiman Marcus has to beat,” says Pam Danziger, president of Unity Marketing and author of Let Them Eat Cake: Marketing Luxury to the Masses — as well as the Classes. “In our latest Luxury Tracking study of luxury consumer purchases, Nordstroms is running circles around Neiman Marcus among the super-affluent luxury consumers where Neimans focuses its marketing efforts.”

While brand awareness of Nordstroms and Neiman Marcus are virtually identical at the top end of the luxury consumer market, the actual percentage of luxury consumers that made a luxury purchase at Neimans in the last quarter is only 14 percent, compared with Nordstroms which attracted 33 percent of super-affluent luxury consumers to make a purchase, according to Unity Marketing’s latest survey among 731 luxury consumers.

“It is going to take more than just expanding their store base to make Neiman Marcus more competitive,” Danziger explains. “One of Nordstroms’ secrets of success is not only that they offer great luxury brands and provide customer service that is the best-practices’ benchmark in the retail industry, but Nordstroms is a democratic luxury leader that caters not only to the top 5 percent of U.S. shoppers, but also targets luxury consumers at more moderate income levels, from $75,000 to $149,999 which represent 22.4 million households and correspond to the top twenty percent of U.S. households.

“Nordstroms draws customers from a much wide base, while Neiman Marcus focuses almost exclusively on the 5.6 million super-affluent consumers. Despite the fact that the super-affluents spend two-to-three times more buying luxury than lower income affluents, the greater number of households ranging from $75,000 and up means that the total market potential is greater among the $75,000 to $149,999 market segment — $498.1 billion as compared with $349.2 billion among super-affluents, a 43 percent difference in favor of the lesser affluents, based on annual luxury spending data from 2004.

“The numbers favor Nordstroms with their strategy toward democratic luxury,” Danziger says.

About Unity Marketing’s Luxury Tracking Study

Unity Marketing’s Luxury Tracking Study is a semi-custom research study that reports purchase, spending and branding information from a sample of over 700 upper-income households throughout the United States. Study sponsors add key product categories and brands to the survey. The luxury consumer panel, with household incomes over $85,000 (about one-third $150,000 or more) represents one of the largest longitudinal studies of high-end luxury consumption of goods and services. Panelists report purchases of luxury goods and services over the past three months, as well as attitudinal and expectation data about luxury brands and categories, their households and the health of the economy in general.

Categories included in the luxury tracking survey include:

Home Luxuries

• Art and Antiques, including Christie’s, Sotheby’s, eBay, TruVue, Nielsen Bainbridge, Larson Juhl, among others
• Electronics and Photography Equipment, including Best Buy, Circuit City, Magnolia retailers and Dell, Sony, Bose, Panasonic, Gateway brands
• Home Decorating Fabrics, Wall and Window Coverings
• Furniture, Lamps and Lighting and Floor Coverings
• Garden and Outdoor Living Products
• Kitchenware, Cookware and Housewares
• Kitchen Appliances and Bath and Building Products
• Linens and Bedding
• Tabletop, including Lenox, Waterford, Wedgwood, Swarovski, Baccarat, Lladro, Lalique, Christofle, Bernardaud, Anna Weatherly, Moser, Haviland, Riedel, Daum, Herend.

Personal Luxuries

• Clothing and Apparel
• Fashion Accessories
• Cosmetics, Beauty and Fragrance Products
• Jewelry and Watches, including Tiffany, Bailey Banks and Biddle, Cartier, Bulgari, David Yurman, Scott Kay, Fope, Robert Lee Morris, Roberto Coin, Harry Winston, Yvel.

Experiential Luxuries

• Luxury Travel, including foreign and domestic luxury travel
• Luxury Dining
• Entertainment
• Spa, Massage and Beauty Services
• Home Services, such as Landscape and Garden, Housecleaning/Maid, Party Planning/Catering, Home Decorator, Building Contractor

Luxury Retailers

• Luxury retailers, including Saks 5th Avenue, Bloomingdales, Neiman Marcus, Nordstroms, Marshall Fields, Macy’s, Dillards.

About Pam Danziger and Unity Marketing

Pamela N. Danziger is a nationally recognized expert specializing in consumer insights for luxury marketers, whether they sell luxury to the masses or the ‘classes.’ She is president of Unity Marketing, a marketing consulting firm she founded in 1992.

Advising such clients as Lenox, Cartier, Herend, Crystal Cruises, Spring Air, Sears, The World Gold Council, The Conference Board and American Express, Danziger taps consumer psychology to help clients navigate and master the changing luxury marketplace. Her latest book, Let Them Eat Cake: Marketing Luxury to the Masses—as well as the Classes, (Dearborn Trade Publishing, $27, hardcover) is in book stores now. She is the author of the recent book, Why People Buy Things They Don't Need: Understanding and Predicting Consumer Behavior (Chicago: Dearborn Trade Publishing, 2004).

She has appeared on CNN’s In the Money, NBC’s Today Show, CNBC, CNN International, CNNfn, CBS News Sunday Morning, Fox News’ Your World with Neil Cavuto, ABC News Now, NPR’s Marketplace and is frequently called upon by the Wall Street Journal, New York Times, American Demographics, Women’s Wear Daily, Forbes, USA Today, Associated Press, Los Angeles Times, Chicago Tribune for commentary and insight.

For media, Unity Marketing can make tables, charts and graphs available about the luxury market upon request.

Contact: Pam Danziger, 717-336-1600