Last Friday, I attended the annual L2 Generation Next conference in NYC. It showcased a diverse, enthusiastic mashup of speakers to discuss the state of luxury — from a 15-year-old fashion blogger to seasoned branding professionals. Speakers explored subjects from health to making love not porn to gaming and fashion. Among the line-up, Sterling Lanier, President of the market research consultancy Chatter, piqued my interest for his incredible market insights. Sterling provided a glimpse into the psychology of tomorrow’s affluent buyers based on his research of upper-class Gen Yers. Here are several of his insights:
Investing in Timelessness
To Gen Y, luxury is an investment. As such, luxury products should be timeless. Not in the way Boomers consider luxury timeless. Unlike its generational counterparts, Gen Y is less concerned with heritage than exceptional quality. Heritage brands, such as Mercedes, might find it difficult to market its spot in history to turn on Gen Y. Instead, luxury brands need to dial-up the longevity, both in quality and style, of its products to make their brand a long-term investment.
To justify buying a $10,000 watch or spending $15,000 on a Four Seasons beach getaway, Gen Y rationalize indulgence spending. “I work really hard, and I need to invest in myself,” is the typical rationale for affluent Gen Yers. Sterling also found affluent Gen Yers to be very creative in their rationalization. Luxury brands can take this as a cue to make that “rational leap” for the Gen Y consumer by creating “investment stories.” Answer the question: why does Gen Y deserve this product. This will help them bridge the gap and feel better about spending exorbitant amount of money on themselves.
Equal Opportunity Buyers
In Sterling’s study, he asked affluent Gen Yers to create a collage of luxury brands that represent their parents and themselves. The brand balance was off-kilter to say the least. Only a handful of brands populated their Boomer parents section and their side of the collage was inundated with similar brands, but many, many more of them. This disparity suggests affluent Gen Yers seek more niche brands. Their closets are a mashup of Louis Vutton handbags, D&G belts, Gucci trousers, Armani suits and Dior perfume.
For Gen Y, there is a different brand for nearly every luxury item. The rise of niche luxury questions product expansion opportunities. Are affluent Gen Yers that fall head-over-heels for Empirio Armani suits likely to stay at the brand’s new resort hotel in Dubai? Sterling’s research suggests the fashion brand name will have little effect on Gen Y’s hotel preferences.
All in the Details
The majority, or 2/3 of affluent Gen Yers thrive on “the secret handshake.” In other words, they seek exclusivity by purchasing luxury items only those that are “in the know” would know. It’s about being a member of an esoteric, secret society. A recent study of luxury handbags, featured in Psychology Today, suggests once the price exceeds $300, the logo size is reduced. Indeed, in one of Sterling’s audience testimonials, a Gen Yer said he purchases shirts from a Scottish designer with around three small stores in Europe. With only a small colored tag to identify the designer, he gets gratification seeing others wear the Scottish brand.
Love of the Deal
Part of justifying a purchase is knowing you obtained it through the best deal possible. Sterling found affluent Gen Yers to thrive on deals. In fact, discount luxury providers, such as Gilt Groupe, are thriving. Gilt expects to pull in $500 million in revenue in 2010. Sterling also notes the distinction between deals and sales. Sales cheapen the item. Sales are what you get at Walmart. Deals are what you get a Gilt Groupe.
If there is one main take-away from Sterling’s presentation, it is rationalizing. Gen Yer’s need to rationalize why they indulge and choose a niche brand. They venture to exotic lands on expensive vacations because they’ve worked so hard; they buy only Louis Vuitton bags because they are timeless, both in style and quality; they buy a niche Scottish designer brand because they need to be “in the know”; and they buy it because it was the best deal. Successful luxury brands tomorrow will help affluent Gen Yers justify their purchases and make investment cases for them.