Give Me the Lux Life
As affluence goes mainstream, thick wallets and a growing sense of being well-off lead to more restaurant visits but also growing price pressures.
By J. Walker Smith, Special to R&I -- Restaurants & Institutions, September 1, 2007
Affluence now is part of the mainstream, no longer the exclusive domain of a small group of the rich and elite. Feelings of prosperity have become an everyday expectation—and one in which consumers are quick to indulge.
Nobody aspires to middle-class tastes anymore. Up and down the income distribution, consumers expect a corner table with a water view. This is the debunking of ordinary tastes by a presumption that everyone should be able to enjoy life’s luxuries. Yesterday’s extra-special is today’s bare minimum. Premium coffee, sushi, day spas, overnight delivery, wireless phones, cosmetic surgery, golf vacations, adventure trips, boutiques and reserve wines—all are parts of everyday life and accessible to much of the population.
The mainstreaming of affluence has turned the consumer marketplace on its head. People expect not only to be able to get the very best, but also to get it at the very best price—no more trade-offs between price and quality. The status that used to come with owning top-of-the-line goods is diminishing. Luxury brands are struggling to retain cachet while merciless price competition overwhelms efforts at value-added marketing.
Rising affluence is more than an economic or demographic fact: It is a state of mind that transcends economic status. Affluence is about prosperity as the context of ordinary life for everyone—rich, poor and middle-class. Affluence has become something that everyone expects and that no one feels he or she can or should be forced to live without. A new value equation shapes the opportunities available to brands as well as consumer decisions about what to buy and where to dine.
Price remains an important driver of consumer choice, but consumers looking for the cheapest price want more than cheap fare. They want nothing less than the kind of affluent experience that used to cost an arm and a leg. Price-driven consumers are no less quality-conscious than consumers willing and able to pay any price.
Just under one-third of all respondents in the 2006 Yankelovich MONITOR mention going out to an expensive restaurant as a way to treat themselves. As seen in the accompanying table, when consumers are broken out by their attitudes toward price, those most sensitive to price are actually a little more likely to say that they treat themselves by going out to an expensive restaurant. Price shoppers are no less likely to give themselves the kinds of affluent rewards and treats they have come to expect. Everybody wants the best at the best price. Expensive no longer means exclusive or even costly; it means special, and that means finding new sources of value to justify premium pricing.
Rising affluence creates greater—not lesser—difficulty in charging higher prices. Pricing pressures become fiercer in a marketplace of greater affluence. Affluence doesn’t mean that consumers have money to burn, but it does mean that consumers are demanding even more value before they will pay extra for something. The old sources of value have become cost-of-entry.
In a marketplace shaped by rising affluence, there are three things around which value can be built. Time is the first. With more money and better prices on quality products, time becomes the new currency of value. Marketing practice is the second. With the product itself more like a luxury commodity, the only thing left for marketers to offer is advertising and promotion that provides an experience worth having. Intangibles are the third. With tangible quality a given, the intangibles of design, authenticity, transparency, relationships and social causes are key components in affluence’s new value equation.
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