Pam Danziger has spent years studying the spending habits of affluent consumers, but in November she observed a first. In a series of focus groups she was conducting in Westchester County, N.Y., where the median family income exceeded $105,000 in 2008, she heard a group of men claim bragging rights for spending less than their peers on their plasma TV, or Lexus sedan, or remodeled kitchen.
“I’m used to that kind of discussion among women,” even among Saks and Neiman’s buyers comparing the prices of Jimmy Choo shoes, says Danziger, CEO of Unity Marketing, a market-research company in Stevens, Pa. “What’s significant is that men are now saying the same thing,” in the same spirit of competition and bravado that helped many of them achieve financial success in the first place.
Mark Richardson has observed a similar phenomenon among his social set in and around Washington, D.C. But as co-chairman of Case Design/Remodeling, a large high-end remodeling company, the observations are personal. “Three to five years ago, it was very much a discussion of keeping up with the Joneses,” he says. At cocktail parties and business functions, “People would say, ‘We’re using Case’ with their chests puffed out. The sense was ‘nothing but the best,’” combined with a remodeling lust that encompassed not just the kitchen and master bathroom, “but also the waterfall and deck.” The conversation is more subdued now. Even humbled, Richardson says. “Now they’re saying they found an alternative to Case or Pella; they’re using this ‘nice guy’ builder they met. And they’re proud of that — proud not just to conserve energy, but to conserve their financial resources, too.”
“The luxury consumer’s power used to come from how much money they had to spend,” Danziger says. “Today it’s much more about how smart they are.” And how chastened, she might add, by the poor return they’ve received on many of the investments they made in more go-go times.
The same chastened thinking applies to consumers across the socioeconomic spectrum, from six- and seven-figure households to middle-class consumers who spent only modestly even when the funny money was flowing.
A Smaller Fix
Marketers are responding in turn. Mercedes-Benz, Audi, and BMW, for instance, are “tweaking their marketing messages to target consumers who may begin to spend more but remain in an austere frame of mind,” according to The Wall Street Journal. Don’t buy the Benz for the hood ornament, in other words, but for its safety features and hybrid engine.
And remodelers? “Nobody needs luxury,” Danziger says. On the other hand, given the recessionary chilling of high-end home sales, she has seen an uptick in consumers warming to the notion of improving the homes they have. In a recent online survey, GfK Custom Research found that 36% of U.S. consumers were planning a major remodeling project, and that 50% would like to, but say they “don’t know if [they] can afford it.”
The positive bottom line, according to Richardson, is that “Americans are addicted to remodeling. They still need a fix,” even if they’ve abandoned dreams of the whole-house renovation in favor of installing crown molding and some built-ins.
What’s different, of course, is that not only are homeowners spending within their means, but they’re doing so more cautiously, with an eye on value. Whether young couples seeking to improve the fixer-upper they bought in a short sale, or empty-nesters who have written their final tuition check, homeowners are looking for quality, both of the product’s workmanship and of their buying experience. They’re doing their research, taking their time, and looking for people they can trust to serve them wisely.
Here’s how to prepare for that role.
