Defining the luxury market is not easy, while the concept of the affluent society is one that can be defined in terms of earnings as a proportion of the average in the USA or any other country. Luxury may be definable in terms of its availability to the population as a whole, where the division between social classes could be in their consumption of luxury goods. What I cannot afford and you can is luxury!
That is a very subjective definition, and not one on which business can draw up strategic business plans. What are the benefits of being able to define these terms, and how does it affect the American manufacturing and service industries?
In order to make luxury available to the middle classes and other luxury consumers that want it, referred to as the ‘aspiring class,’ some luxury products were created just for that purpose. This achieves nothing but to confuse the definition of the term ‘luxury market’ and is one reason why it is indefinable.
Definition of Luxury Market?
Professor Bernard Dubois defined luxury as a ‘specific tier’ in terms of price of any service or product type, but this is not been generally accepted and there have been many other attempts to define ‘luxury’ – none of them realistic or accepted. It is probably best not to try to define a term that is non-definable because it is relative to the group trying to define it.
To somebody that normally travels coach, a Business Class seat is luxury. To others, a First Class seat is commonplace. So luxury cannot be defined other than in relation to individuals. The American Affluence Research Center (AARC) has defined the luxury market as consisting of the wealthiest 1% of American households. This is an attempt to place a figure on a relative quantity, and you can use that if you wish.
Definition of Affluence?
More acceptable is the AARC definition of the affluent society as being the top 10% American households in terms of income. In order for a definition to be accepted, not only should people be able to understand it, but they should also be able to associate themselves as belonging to it or not belonging.
In that sense, both luxury and affluence are definable, even though one may be ambiguous and the other definitive. The answer to any unacceptable definition is to offer another, and there has been no other accepted definition of the ‘luxury market’. So it comes down to a choice between the price-based definition of Prof. Dubois, or the earnings-related definition of the AARC.
In one sense the two are closely related, because only the highest earners should be able to purchase the highest priced products. Price can only be included in any definition if it relates to products within a category, and not price as an absolute figure. Thus, members of the luxury market may be able to afford a luxury car, but not a basic private plane. Others have attempted to overcome this problem by relating luxury to the individual experience, bringing us back to ambiguity.
Affluence is Easier to Define
These various attempts to define the term indicates only that there is no universally agreed definition, and that the luxury market is therefore indefinable across a broad population – but can perhaps be defined within social classes. It is therefore difficult for those supplying the luxury market to define their market: it is far easier to define the ‘affluent society’ in terms of income or ‘disposable’ income, which is why it has been defined in the USA as the top 10% of American households in terms of income.
The manufacturing and service industries then have a measurable target population to reach, and can plan accordingly rather than use what is more of a conceptual group than a measureable one in the luxury market. A luxury item, on the other hand, can be defined in more concrete terms. The demand for a ‘necessity’ remains the same irrespective of increases in disposable income, while demand for a luxury increases disproportionately with income.
Can Luxury be Defined by Price?
A luxury brand such as Armani is only such due to price. Should average earnings reach a point where most of the population can afford Armani, then the firm would feel obliged to increase prices to retain the sense of exclusivity. This is where luxury becomes price-related, and not value-related. An Armani suit does not improve in quality by increasing the price to retain exclusivity.
By carrying out consumer research and analyzing the spending patterns of the affluent society, suppliers will find it easier to meet their needs. By determining the future purchasing intentions of that market, particularly in what are regarded popularly as luxury goods, those that produce and market such goods will be in a better position to meet these demands when they are made.
It is important therefore, that whether the term ‘luxury market’ can be defined or not, manufacturing industry identify its preferred target market and determine its future buying intentions. Whether this involves luxury goods or not is immaterial. It is being ready with the right products at the right time that matters, luxury or not. In that respect, identifying the affluent market is more important than defining ‘luxury’.