The President’s proposed stimulus package is intended to reduce our nation’s debt by half and get the economy and the work force back on track. Every market segment has been affected over the past year, including the robust luxury and aspirational markets, which were not immune to products and services being hit hard. Now it is time to collaborate, learn best practices and take inventory of who your business is in the marketplace, regardless of when consumers begin to stimulate economy again.
It’s not an easy year to talk about luxury as financial analysts predict that luxury spending will be down in 2009 and thirty percent of the luxury brands we know will go out of business over the next five years. However, there are ways to combat the changing nature of how the affluent are spending since new ideas and entrepreneurs are always cooking. The luxury goods and service industry will prevail in this nation, as it has already survived World Wars and the Great Depression.
Editor and President of Barron’s, Ed Finn, notes two issues with luxury spending: disappearance of wealth and psychological changes in spending. “Wealth will take some time to bounce back,” says Finn. So in the interim, if you can change your selling tactics to provide charitable donations with purchase, eco-friendly investments or products and services for the family, the wealthy will bite. Consumers want to feel good about indulging.
For the retail sector especially, it’s imperative to talk to the consumer about what they want and then figure out how to market to them – incentivize them to shop and spend. It’s more important now than ever to evaluate what ‘old’ tricks are working, what new ideas can be implemented and the tracking and measurement statistics to support your marketing budget in 2009.
Also, think multi-generational. It’s not just about capturing the affluent mature woman or the CEO; your target audience may be getting younger. With the popularity of online shopping, community forums such as myspace.com and the ever popular text messaging on phones that do everything but time travel, it might be wise to reevaluate your marketing tactics. Since Generations Y and Z are influential in how money is being spent, it makes sense to appeal to them via their preferred medium: online. That is why market research is important to understand your audience and structure your message appropriately – don’t waste marketing dollars on assumptions, it’s not worth it!
Although wealth still exists in strides, with so many Americans struggling, people who have money don’t want to be seen spending it. “The affluent are hiding their consumption; retailers are providing plain, brown bags rather than oversized totes with logos,” according to Marc Bachus, Marketing Manager at the King of Prussia Mall, the largest retail space on the East Coast.
No longer are CEOs renting private jets to fly to their home in Aspen or to the weekend sports event; they are flying business class on major airlines. This trend is not going change soon, so businesses must adapt. This is where the channel of distribution matters. Buying a necklace at retail price at the Harry Winston store on Fifth Avenue is quite different than purchasing the same heirloom at a charity auction; again it’s the psychological component of spending. Brands need to speak to their customers in many more ways – they need to educate and customize the experience based on the individual customer’s comfort level.
So what have we learned about changing tactics in challenging times? If you resist change, you will be left in the dust. Consumers identify those businesses that are trying to adapt to their needs and they are naturally drawn to them. It’s respect for the consumer and their dollar – no matter how many dollars they may have – that will win you the sale. If businesses can succeed in a down economy, they can certainly succeed in good times; hey, FedEx, Microsoft, MTV, CNN and GE all started up during recessions. So we plug along, collaborate with our peers to figure out the madness and adapt. And also, let’s hope things start to turn around in the third quarter of 2009!