How Well Do You Know Your Luxury Customer? Luxury Institute Causes a Stir at World Luxury Congress

Market Wire, November, 2007

The Luxury Institute co-chaired Terrapinn's World Luxury Congress in London this past week joining luxury brands from all over the world to discuss wealthy consumers and their habits, as well as the rapidly evolving luxury landscape. Milton Pedraza, CEO of the Luxury Institute, led an interactive session, engaging the attendees and sparking interesting debate on how well they really knew the wealthy consumer. Using handheld polling devices, Milton was able to get real-time responses from more than 80 luxury executives who answered a series of questions the way they believed wealthy consumers in the U.S. had responded. Executive results were shown in real time, followed by consumer results from WealthSurveys that are available exclusively to Luxury Board community members ( www.luxuryboard.com ). There were some interesting and healthy differences of opinion, and some preconceived notions were shattered.

When asked what percent of the wealthy feel that luxury quality is declining, the luxury executives said they thought that 51% of consumers felt that way. In reality only 38% of consumers polled felt that way. Ironically, luxury executives were far more bearish on this issue than consumers. However, when asked what percent of the wealthy feel that luxury brands are becoming a commodity, the luxury executives answered 52%, while wealthy consumers answered 63%, far worse that executives thought.

Luxury executives were more bearish than consumers when asked what percent of the wealthy feel that the customer service of luxury firms meet expectations, (WLC executives 44%, consumers 53%). Further, 45% of the luxury executives thought that wealthy consumers had a problem requiring resolution in the past twelve months whereas only 29% of consumers answered affirmatively. Still, the high numbers of wealthy consumers who responded negatively to these questions is most disturbing.

Discussion followed along the lines that with luxury becoming muddled in all sorts of pundit-driven terminology, and many major luxury brands going down-market, or expanding to the levels of mass-market brands, truly wealthy consumers are rebelling by seeking truly unique and exclusive brands, especially custom-made and one-of-a-kind products that deliver superior quality and great service too. It seems some in luxury are forgetting the fundamentals that made luxury worthy of a premium price in the first place.

By far the greatest disparity in voting occurred when the luxury executives were asked to say what percent of wealthy consumers buy luxury products and services online. Luxury executives answered 47% while Luxury Institute research tells us that 98% of wealthy consumers purchase luxury products and services online. Leading experts on Web 2.0 such as Guy Salter, Deputy Chairman of Walpole, and Dee Salomon, Senior Vice President of Style.com, led segments demonstrating that luxury can, and should be, leading the charge on the Internet, given the wealthy consumer's addiction to this channel for both research and shopping.

Following are the results for all questions:

                                             Luxury      Wealthy    Points
                                          Executives    Consumers  Diff  /-

What % of the wealthy feels that luxury
 quality is declining?                            51%          38%      13

What % of the wealthy feels that luxury
 quality is declining?                            51%          38%      13

What % of the wealthy feels that luxury
 brands are becoming a commodity?                 52%          63%     -11

What % of the wealthy feels that
 customer service of luxury firms meets
 expectations?                                    44%          53%      -9

What % of the wealthy had a problem that
 required resolution with a luxury brand
 in the past 12 months?                           45%          29%      16

What % of the wealthy feels that
 celebrity endorsements positively
 affect their own purchase behavior?              39%          24%      15

What % of the wealthy feels that social
 responsibility positively affects their
 purchase behavior?                               46%          57%     -11

What % of the wealthy buy luxury
 products and services online?                    47%          98%     -51

About the Luxury Institute

The Luxury Institute is the uniquely independent and impartial ratings, reviews and research institution that is the trusted and respected voice of the high net-worth consumer. The Institute provides a portfolio of proprietary publications and research that guides and educates high net-worth individuals and the companies that cater to them on leading edge trends, high net-worth consumer rankings and ratings of luxury brands, and best practices. The Luxury Institute also operates the Luxury Board ( www.luxuryboard.com ), the world's first global, membership-based online community for luxury goods and services executives, professionals and entrepreneurs. To reach the Luxury Institute, please call 646-792-2669 or go to www.luxuryinstitute.com .