Affluent consumers are joining in the national skittishness about spending money during a deep recession. Here’s AdWeek with the report:
With affluent consumers joining in on the national skittishness about spending money during a deep recession, discounts have become a fact of life in the luxury sector. But while this may have kept sales from grinding to a halt, the ploy is not without its long-term costs. For some retailers, says Luxury Institute chief executive officer Milton Pedraza, offering discounts “was a matter of survival.” And, indeed, the institute’s August polling shows wealthy consumers are not immune to the lure of a bargain (relatively speaking). Twenty-eight percent said discounting has increased their overall expenditures on luxury goods and services, while 14 percent said it has decreased their outlays. The Luxury Institute’s polling numbers were quite different, though, when affluent consumers were asked how discounting has affected their “perception of the value of luxury goods and services.” While 17 percent said their perception of luxury brands’ value has been “improved” by such discounting, 29 percent said it has been “lowered.” (The rest said their perception hasn’t changed either way.) “It does dilute the value in the minds of luxury consumers,” Pedraza says of discounting. “If an item that used to cost $1,200 is suddenly on sale for $800, you’ll never pay $1,200 for it again.” The marketer may get a sale now, “but you lose your opportunity to price in the future,” Pedraza adds. Greg Furman, chairman of the Luxury Marketing Council, concurs: “Radical discounting is a disaster,” he says. “It tells people how big the margins were.” – from Adweek