Can consumers of luxury be classified?

A deep dive into categories of luxury consumers.

To understand the different kinds of luxury consumers, we have to first understand the theory of conspicuous consumption. First introduced in 1899 by Thorstein Veblen, a sociologist and economist of that era in his book Theory of Leisure Class. The theory of conspicuous consumption suggests that the reason consumers buy luxury which is priced far higher than its 'functional' value is because it is their way of displaying prestige, social power or economic status.

Veblen goes on to say that in fact, a strange effect takes place in the demand-supply equation of luxury goods, i.e. demand increases as prices increase.

This is commonly known as the Veblen effect. This is an important aspect in understanding the different categories of luxury consumers, essentially what are they willing to pay for.

Now, let's understand the categories of luxury consumers:

Based on the model by Han, Nunes & Dreze proposed in 2010

As per this model, consumers can be divided into 4 main categories with the y axis measures amount of wealth they have on the scale and the x axis measures their need for status.

Patricians: Often the legacy rich

These consumers are generally super wealthy and have been for generations.They do not need to belong, they are born into this world.

Motivation: A secret society.

Seek out rare and truly exclusive experiences that are pure forms of art & craftsmanship. Patronise brands that are subtle and only signal to fellow Patricians.

Their tastes are more evolved when it comes to conspicuous consumption - in fact, while they are serious consumers of luxury, they mostly choose more rare, boutique and iconic brands in their pursuit of art & design.

They are willing to pay much more for discreet consumption. In fact, many popular luxury brands price their products without obvious logo/print markers on their products to cater to the Patricians.

Luxury preferred by the Patricians: RW Smith, Bentley, Hermes, Bottega Veneta, Mansions at remote locations, etc.

Parvenus: Often the nouveau rich

These people are also very wealthy, however, relatively recent entrants into the wealthy circles, therefore they need to signal that they are the top of the pyramid.

Motivation: Spend money to show money

Seek out Luxury brands that are popular and recognisable from a distance. Loud logos, signature prints and bling are the preferred choice to be seen as belonging to the top of the pyramid.

The primary use case of conspicuous consumption - from flashy cars to everything branded and bling, it is their way of showing, that they have arrived an how.

They are willing to pay more for the most known high price tag in luxury.

Luxury preferred by the Parvenus: Rolex, Louis Vuitton, Gucci, Ferrari, Most sought after real estate in landmark addresses, etc.

Poseurs: Often the aspiring middle class. While they are low on the wealth scale, however, they want to belong to or seen as wealthy and thus their need for status is very high.

Motivation: Look wealthy, at all costs.

Seek out entry level products in luxury brands and purchase counterfeit luxury products - recognisable logos and signature prints to showcase they belong to the upper class.

Poseurs imitate the behaviour of Parvenus however do not possess the wealth to actually purchase true blue luxury. Discount hunters, consumers of pre-owned luxury and counterfeit luxury, these consumers are a huge driving force behind the popularity and the cult of luxury brands, paying for deals/discounts for the most known luxury.

Luxury preferred by the Poseurs: Counterfeit or Pre-owned LV, Gucci, Chanel, entry level BMW, Mercedes, etc.

Proletarians: The regular middle class. Proletarians neither possess wealth nor do they have need for status or to belong. Quite happy with who they are and where they are.

Motivation: Live within your means.

Do not seek out luxury.

Proletarians are value conscious consumers and think luxury consumption is a frivolous expenditure. This is not to say that they do not seek out experiences or spend money, rather it needs to make sense to them in the price-value equation. Which is not what luxury brands aspire for. Therefore, Proletarians are not consumers of luxury.

Luxury preferred by the Proletarians: Do not consume luxury brands.

Implications for Brand Marketeers and Product Managers working in the luxury space.

1. Patricians are the true blue luxury consumers are the ones that become patrons of your brand. So when it comes your brand story, the origin story, your purpose and why your brand resembles an art form are key drivers for Patricians to seek your brand. What makes you unique, understated and truly rare are key drivers here. Similarly when it comes to product design, it is important to design like an artist first and foremost, to make products that evoke an emotion.

2. Parvenus are the biggest consumers of luxury, and their motivation to choose your brand or product depends on how popular and recognisable you are plus how unaffordable you are at the same time. This dictates your marketing planning, media mix modelling and product design in terms of ensuring that there are enough recognisable elements (logo placement, badge value, signature prints, signature colours, charms, stitching, etc.) are prominently visible.

3. It is important to understand that while the first two are the real consumers of luxury, Poseurs are a very important segment of consumers to cater to as well. This is because the aspiring class is the one that fuels the cult of your brand. Without their aspirations and love for your brand, value of ownership is not fully realised. So when it comes to your marketing efforts, advertise to the ones who can afford it and the ones who cannot, because the ones who cannot afford it are the fans. One, they make the ones who can afford it enjoy it more and two, one day if they can afford it, they will choose you first.

These are the broad strokes that categorise different kinds of luxury consumers and most brands cater to all three consumer sets.

The most popular luxury brands especially create more discreet, less obvious luxury products for the Parvenus and price them the highest as well. Plus, in this digital age, a huge focus goes on bringing a new aspiring class to follow the cult of their brands.