My new article in Daily News and Analysis

The High Land of Opportunity
Alex Gofman

Hundreds of years ago, the Earth was different, a huge mass of land known as Pangea. Then the continents separated, and began to move apart further and further to leave vast oceans between them. To follow the allegory, the modern distinct ‘continents’ of mass-produced products and luxury are moving apart as well – as ever more products become cheaper and more accessible to the public, while extreme luxury flies higher and higher into the stratosphere of unimaginable excess. Yet this trend differs radically from the geological example, for the modern process leaves between the ‘continents’, instead of water, a huge, fast growing ‘land’ of masstige – a term created from merging the words ‘mass’ and ‘prestige’. While there are many names for the trend (among them mass affluence, premium, and new luxury), I prefer to call it High End. Much like its analogous “the land between”, High End has many inhabitants, and plenty to keep them occupied.

People used to keep up in their consumption with their neighbors’, or with relatives generally at the same income category. Nowadays, many want to be Trumps or Mittals, or at least live some part of their luxurious lives, which was hardly even known or visible to outsiders a mere generation ago. The craze is to ‘differentiate’ oneself from the masses, to find things that bring with them a sense of pride, yet all within the constraints of their growing albeit limited means.
The initial successful companies of this High End trend were mostly from the USA – the country famous for democratizing virtually anything, in this case, the luxury. Great examples of such companies are Tommy Hilfiger, Abercrombie & Fitch, Banana Republic, Coach, Dooney & Bourke, Ralph Lauren, Tiffany, etc. Now this trend has swept Europe and is blossoming in Asia.
Some people believe that Japan represents “the” blueprint of contemporary luxury consumption in Asia. Japan consumers account for well over 10% of the world’s luxury goods and services. A stunning statistics shows that 95% of young Japanese females own a real Louis Vuitton. Is it a luxury (based on the price – it has to be), a mass-product (95% sounds quite massive to me) or something in between?

Moving from Japan to India. I remember a couple of years ago observing a teenager squatting on a corner of a busy street-market in Mumbai, who proudly showed his friends what seemed to be a newly acquired mobile phone. It wasn’t a cheap no-frills model. Clearly, it was something better than his peers had (or could get). One could deduce that just by looking at the expressions of awe on their faces reflected in the gleaming happiness of the proud owner. It did not matter whether he needed all the functionality of the product or utilized it’s quality production – the others saw him owning the gadget and that made him proud. I doubt that at that specific moment, even a much more expensive possession – whether it is a gold ring or another more traditional sign of affluence - would make him more resplendent and admired than the phone, which seemed to have a very high emotional connection with this group of youngsters.
Price is a highly important aspect of the majority of purchase decisions. Yet a cheap price is not a determinant for commercial success anymore. People are looking for something they can afford but which is not available to everybody. Many are willing to pay higher prices for these newly discovered prestige attributes. Where there is an opportunity of higher prices with higher margins, there is no lack of companies wanting to jump the wagon. Some older and well-respected luxury brands believe that their name would suffice to win the war. Yet is it that simple? Compare Apple iPhone – a definitive premium product - with Prada/LG phone and Armani/Samsung phones. Despite the intimidating names of the heavy weight competition, iPhone won in most places of the Western world. iPhone is upscale albeit real and exciting while the competitors failed to establish the emotional connection with the consumers. Many new middle class consumers are not aspired by the old luxury – they are looking for new, fun experiences that the old luxury industry has yet to catch up with.
The iPhone story above is true around the world with a possible exception of …India where the consumer's obsession with value is paramount. I’ve heard a joke somewhere about an Indian consumer who was thrown out of the showroom when he asked about how economical a super luxury car was. Many prominent brands failed to find the right balance between functionality and value for the Indian market. iPod still has a phenomenal aspirational effect on the Indian consumers but does not sell well there due to the suboptimal balance.
An astute marketer Allyson Stewart-Allen chided that MASTIGE stands for “Marketers Always Seduce Shoppers To Instigate Great Expenditure”. It might be true but it sounded so adorable and appealing when a Japanese company Yosimiya started offering bags of rice printed with a newborn’s photo, name and date of birth, which many proud parents just could not resist. The bags were shaped to resemble a baby and weighed exactly as much as an infant thus giving a feeling of holding a newborn. It felt fresh and different, customized and expensive enough to feel exclusive yet reasonably affordable for middle class families. And most importantly, it appealed to the emotional side of people.
Another example. LG sells usually at the lower end of the market while producing quality products. Their persistent advertisement of low pricing was affecting the company’s ability to move up the scale. So, in the last years, LG concentrated on building a premium image in advertising without much regard to the price. And in some places it is already showing results (recon Prada selecting LG for their premium phone offering).

The economic downturn has had an impact on the trend. Many people raised the bar of their consumption to the level they could not really afford. What would happen to these consumers and the companies that target them during economic slowdown and possible recession? Michael J. Silverstein, the “grandfather” of “trading-up” who was the first prominent author to describe the trend, believes that the trading up phenomenon is recession-proof.

This belief is under heavy testing now. Would the consumers continue paying ten times more for pair of jeans made by a premium brand like 7 for All Mankind from virtually the same denim as a $30 pair of Wranglers? What if instead of trading-up in the current economic situation the consumers will trade down?

In either case, whether you are an established luxury corporation or operate in a mass products area, you can’t afford to ignore this exploding market of high-end / high-margin products. Otherwise, you could be drowned in the surrounding waters of competition.
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Alex Gofman is VP of Moskowitz Jacobs Inc., a NY based company. He is a co-author of the international bestseller Selling Blue Elephants: How to Make Great Products That People Want Before They Even Know They Want Them (www.SellingBlueElephants.com) written with Dr. Howard Moskowitz and recently republished in India along with translations in 14 countries. He is also a co-author of an upcoming book Premium by Design: How to Design and Market High End Products (www.FutureHighEnd.com) written with Marco Bevolo, Director at Philips Design, Stefano Marzano, CEO of Philips Design, and Dr. Moskowitz. Alex may be contacted at alexgofman@sellingblueelephants.com.