Trading up: The New American Luxury

Citation

Warrington, T. (2004), "Trading up: The New American Luxury", Journal of Consumer Marketing, Vol. 21 No. 2, pp. 157-158. https://doi.org/10.1108/07363760410525731

Research conducted by Silverstein and Fiske has identified a pattern in consumer behavior – really a new business opportunity. Consumers are trading up and paying more for products and services that offer greater value. “America’s middle‐market consumers are trading up. They are willing, even eager, to pay a premium price for a remarkable kind of goods that we call New Luxury products and services that possess higher levels of quality, taste, and aspiration than other goods in the category, but are not so expensive as to be out of reach” (p. 3). These products the authors refer to as New Luxury goods are traditionally believed to be beyond the means of typical consumers. However, the authors’ research shows that consumers are willing to pay more in some categories (trading up) to achieve better value, while paying less (trading down) in other categories. “Almost every American engages in this practice of ‘rocketing’ spending a disproportionate amount of one’s income in a category of great meaning. The combination of trading up and trading down leads to a ‘disharmony of consumption,’ meaning that a consumer’s buying habits do not always conform to her income level” (p. 8). This book investigates the trading up phenomenon what drives it, how choices are made, who is most likely to trade up, which brands are already taking advantage of this new consumer behavior, and which categories are prime for the trading up phenomenon.

The book is well organized. Part I: “Trading Up to New Luxury” explores the supply‐and‐demand side of the trading‐up phenomenon. Chapter 2: “The Spenders and Their Needs” offers statistical evidence of the demand‐side; while Chapter 3: “The Creators and Their Goods” explores the role of the entrepreneur, the dynamics of retailing, and lower‐cost global resources as support for the supply‐side. Part II: “The New Luxury Players” explores the emotional drivers in the categories of New Luxury goods, citing examples from several important categories. Chapter 4: “Categories of High Emotion” reports on the primary and secondary emotional drivers. Chapters 5 through 11 discuss the success of companies currently providing New Luxury goods, including Victoria’s Secret, Panera Bread, Trader Joes, American Girl dolls, Sub‐Zero and Viking appliances, and more. Chapter 12: “A Cautionary Tale: The Fall of An American Icon” shows the decline of Cadillac an Old Luxury good gone wrong. Part III: Excelsior provides suggestions for moving on this business opportunity with Chapter 13: “The Opportunity”, Chapter 14: “A Workplan”, and Chapter 15: “A Call to Action”.

Silverstein and Fiske define three major types of New Luxury goods: Accessible Super‐Premium products, Old Luxury brand extensions, and Masstige goods. Accessible Super‐Premium products are relatively low‐priced goods that sell at the top of their category (Belvedere vodka is given as an example). Old Luxury brand extensions are lower‐priced versions of extremely high priced products (the $26,000 Mercedes is provided as an example). Masstige (mass+prestige) brands are priced well below the extremely high‐priced Old Luxury brands but above conventional products in their category. (Kiehl’s line of bath products is mentioned here.) New Luxury goods fall between the Old Luxury products purchased for status, class, and exclusivity (such as Rolls Royce), and the traditional middle market goods that are bought based on price, functionality, and convenience. New Luxury products must connect with consumers emotionally and deliver on a “ladder of benefits”. According to Silverstein and Fiske, New Luxury products “must have technical differences in design or technology or both … must contribute to superior functional performance … and must engage the consumer emotionally” (p. 8).

Throughout the book, the authors use appropriate and well‐known brands as examples. In each case they explore how the example follows the eight practices evident in successful New Luxury products. These eight practices include never underestimating customers, shattering the demand curve, creating a ladder of genuine benefits, escalating innovation/elevating quality/and delivering a flawless experience, extending the price range and positioning of the brand, customizing value chains to deliver on the benefit ladder, using influence marketing and seeding success through brand apostles, and continually attacking the category like an outsider.

The opportunity to serve consumers interested in New Luxury goods is evident, and the common behaviors and demographics of consumers is reported. Single working people, empty nesters, divorced women, and dual‐income couples are among the most likely to trade up. The research (which included surveys of 2,200 American consumers) also identified “four important ‘emotional spaces’ that affect consumer buying behavior and that are closely linked to the purchase of New Luxury goods” (p. 45). These four emotional spaces are Taking Care of Me (rewarding one’s self), Connecting (being with others), Questing (seeking new adventures), and Individual Style (being unique). Each example is explained in terms of the eight practices and four emotional spaces previously mentioned.

Whether Victoria’s Secret or Callaway golf products, consumers are increasingly responding to the emotional benefit provided by New Luxury goods. “It is a time of great opportunity for consumer businesses, and New Luxury creators who connect with their core consumers and trade them up are achieving high profits, fast growth, and high market valuations” (p. 259). Through the course of this book, Silverstein and Fiske define the consumer shift, give evidence of the growing market, provide a working definition, give plenty of examples, and suggest to readers how to proceed in a marketplace ready to trade up!

Trading Up: A New American Luxury is the result of quantitative and qualitative research findings, providing solid evidence of this changing consumer behavior. Marketers and entrepreneurs from every dimension will find this book insightful, interesting, and important to developing marketing strategy.