The Difference Between Luxury Consumers and Affluent Consumers

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Luxury consumers and affluent consumers are not the same, but are different sets of the consumer market for two fundamental reasons. It is important for many businesses that they can distinguish the difference between the two, because the subtle differences involved can have a significant impact on your future manufacturing and marketing strategies, and even on the future success of your business.

Here are two fundamental ways in which luxury consumers and affluent consumers differ:

A. Not Only Affluent Consumers Enjoy the Luxury Market





It is not just the affluent that enjoy luxury goods, and many ordinary people will splash out now and again on luxury items, particularly for special occasions and at certain times of the year. Birthdays, anniversaries and traditional celebrations such as Christmas and Hanukkah are often associated with splashing out on small luxuries – some not so small!

Weddings, engagements and so on are also associated with luxury, and although it is certainly agreed that what is a treat or a special purchase for most of us is commonplace to the wealthy, it nevertheless means that luxury consumers and affluent consumers are not synonymous.

B. Luxury is Indefinable, Affluence is Not

It can easily be shown that while luxury cannot be defined, affluence can be. Consider the term ‘luxury’. Can you put a figure to that? No – in fact it is impossible to measure luxury in any meaningful way. You can’t say anything over $20,000 is luxury, because you can’t get a luxury car for that, but you can sure get some luxury ice cream!

What is luxury to you may not be to Bill Gates, and your idea of a luxury ski-boat might not be good enough for the billionaire next door with his $50 million luxury cruiser. This isn’t frivolous: it’s a simple way of demonstrating that luxury is in the eyes of the beholder and cannot be measured, and hence it cannot be defined.

Affluence, however, can be defined, and in the USA it is generally taken as being the top 10% of American households, enjoying an annual income of at least $250,000, responsible for 36% of the nation’s total household income and almost 50% of its consumer spending. Now, 10% of households cannot use up 50% of total consumer spending on everyday items and food! So the affluent market spend a lot of money on what we refer to as ‘luxuries’ and they refer to as sometimes ‘necessities’ and sometimes ‘extras’.

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C. How to Assess the Affluent Market

The ‘extras’ are the high-ticket products beyond the reach of the vast majority of us. They are not’ luxuries’ to us, because we will never own them, no matter how hard we save. However, businesses that make these goods, and even those that make the less expensive high-end merchandise, still have to carry out market analysis and consumer surveys if they are to be able to assess their competitors and the potential market in the future.

Unlike most market surveys, historical data from affluent consumers, and perhaps we could also use the term luxury consumers, even though we are involved in just a small part of the market, cannot be used with any degree of accuracy to create a forecast for the future. That’s largely because the spending habits of the wealthy change with the wind – or, more accurately, with the trading markets – and also they tend not to purchase high-end yachts every year.

Affluent consumers must be approached personally and asked how they foresee their consumer spending going next year and farther into the future. Many will offer you answers because they understand that they have to cooperate with the designers and manufacturers if their needs are to be met. Not all their spending is on off-the-shelf items, and it is important to auto designers to get a feel for the higher end of their market before committing to new models for affluent consumers. Where luxury consumers are concerned, they will generally take up the slack left by the wealthy, who will still need those lower-priced luxury items and not all developments are affordable only by the rich.

Take car design, for instance. Many of the refinements in auto-technology developed for affluent consumers and tested in Formula motor racing eventually work their way down to cheaper models – luxury models, but not as expensive as the high-end market products. The difference between affluent consumers and luxury consumers is vast when the extremes are compared, but there is an overlap of the luxury and affluent markets which you often get when one is definable and the other is not.

More details on the differences between affluent consumers and luxury consumers together with important information on custom affluence research is available on the Affluent Research website AffluenceResearch.org.