Free Book Summary : Trading Up The New American Luxury Author : Michael J. Silverstein and Neil Fiske Publisher : Penguin Books, 2003 ISBN : 1 59184 013 9 Pages : 316

Why do people happily pay $6 for a Panera Panini instead of $3 for a sandwich at the deli?

Or $28 for a Victoria’s Secret bra instead of $12 for a generic brand?

Or $30,000 for a BMW instead of $20,000 for a Chevy?

Trading up has become a fact of life.

Consumers today are willing to pay a significant premium for goods and services that are emotionally important to them and that deliver the perceived values of quality, performance, and engagement. But in other categories that aren’t emotionally important, they become bargain hunters: a passionate Mercedes driver will shop at Target every weekend; a construction worker who splurges on a $3,000 set of Callaway golf clubs will also buy store-brand groceries.

NEW LUXURY IS MORE THAN MARKETING

New Luxury good cannot be imagined, developed, manufactured, distributed, or marketed following conventional middle-market business attitudes or practices – although many business assume they can be.

Companies assume that the New Luxury consumer will be seduced by a high price point, but New Luxury consumers do not automatically assume that if it costs more, it must be better. They are sophisticated enough to evaluate the technical and functional benefits of a product and to trust their own emotional reactions to it. We heard over and over again from consumers that the most expensive entry in a category is not always the best.

New Luxury is much more than a marketing exercise, although marketing is, of course, a key part of the process. But New Luxury goods are not created solely in the marketing. They are created through all the management disciplines – and often through unconventional marketing methods.

THE PRACTICES OF NEW LUXURY

New Luxury leaders and their companies follow a set of management practices that are different from those of conventional or Old Luxury goods creators. Using them, New Luxury companies have shattered conventional beliefs in nearly all aspects of product creation and distribution, including ideas about price ceilings, price ranges, brand extendibility, consumer sophistication, market stability, and the innovation cascade.

1. Never underestimate the customer.

2. Shatter the price-volume demand curve.

3. Create a ladder of genuine benefits.

4. Escalate innovation, elevate quality, and deliver a flawless experience.

5. Extend the price range and positioning of the brand.

6. Customize your value chain to deliver on the benefit ladder.

7. Use influence marketing; seed your success through brand apostles.

8. Continually attach the category like an outsider.

Just as New Luxury has arisen as the result of the confluence of social changes and business capabilities, its spread will be further enabled by a number of factors:

TRENDS IN NEW LUXURY

Greater globalization and influence of overseas markets. As the European Union continues to expand and accept new member nations, and as China and other Asian countries become increasingly welcoming to both businesses and travellers, the trading-up phenomenon will become more globally influenced. Consumers will discover new tastes and styles, ideas and interests, and look for their Americanized versions back home. Businesses will have greater access, at lower cost, to ideas and supply chain services in countries throughout the world.

Heightened role of the Web and e-commerce. E-commerce is currently a minor source of revenue for New Luxury creators, but it is growing fast and contributing to sales and brand growth in many ways beyond the direct sales of brick and mortar stores.

Influence of solo females. Young singles rocket in a relatively small number of categories, but divorced women told us they rocket in as many as thirty different categories.

Seniors as heavy spenders. Seniors represent an enormous potential market that New Luxury goods creators have yet to fully tap. There is an opportunity to better serve the senior travel market with clothing, luggage, health care products and services, food supplements, photo and electronic imaging systems, travel planning and support services, and more.

Next-generation consumers: smarter and more sophisticated than ever. It is the “juniors” aged six to eighteen, however, who represent the greatest potential for continuing and expanding the trading-up phenomenon. They are interested in learning, travel extensively, and are highly attuned to brands and products.

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