It might seem strange to talk about disposable income in the midst of a global pandemic, with unemployment rising and recession looming in many countries around the world, but even under these pressures, discretionary spending on everything from premium food and drink to cars and fashion (see ‘revenge buying’ in China) has continued, even if it’s at a slower pace.
Whether it’s a little pick-me-up (let’s face it, the past year has been a shocker) or simply that some people have more disposable income as a result of not commuting, paying for childcare or eating out, people are still buying premium products across sectors – because of the emotional reaction they evoke.
Throughout 2020, Keko London, in partnership with BVA Nudge Unit (part of the BVA Group), has been trawling through the academic literature, behavioral economics and science behind what we call emotionally charged purchases. The articles in this series for The Drum will seek to unpack some of the implications for brands trying to either defend or increase people’s willingness to pay for premium products.
And premiumization seems to be the name of the game, whether you’re a high-end or mainstream brand. We see it in everything from milk, baby food, and supermarket ‘finest’ ranges all the way through to fashion and automotive: brands are looking to create premium variants of their products and services. Partnerships such as Gucci and The North Face (and Pokémon Go) or BMW and Kith are great examples of how high-end brands are seeking to expand their appeal to a wider premium audience, while more mainstream brands are seeking to move ‘up’. These collabs are an acknowledgment that they want to appeal to a mutual, overlapping audience – a group of people that Keko London has defined as ‘modern affluent’ consumers.
Modern affluent consumers have disposable income to make discretionary purchases on premium products and services across categories that boost their cultural capital. And we at Keko, via the clients we work with and data we have access to, have been witnessing the global shift in the balance towards this audience for some time.
As part of researching our paper on emotionally charged purchases, we were able to gain access to a global study conducted by BVA BDRC that aims to deliver a fresh perspective on the wealth mindset.
The study investigated people on high incomes and within this group were a subset who were comparable to modern affluent consumers. The findings told us that these types of consumers:
make more emotionally driven purchases that are dependent on certain personality characteristics that determine their desire (or not) for status (see diagram above for our definition of ‘status’ for a modern affluent consumer) – with those who are more value-conscious, financially knowledgeable and/or less extroverted having less need for status and consequently making less impulsive or hedonic purchase decisions;
are more likely to seek out premium brands that successfully signal and justify a premium price that aligns with this desire for ‘status’ – with the less status-conscious also more likely to make a premium purchase if it satisfies other emotional justifications (such as sustainability or quality).
Modern affluent consumers will become an important audience for brands with, or looking to build, a premium proposition – and as their wealth climbs, so will their spending power. We see brands struggling to balance the need to sell to their existing customers today with the need to pivot to ensure they remain relevant in the next five, 10, 15 years.
A big challenge we often face is getting people to re-evaluate their often outdated perception of what terms such as ‘premium’, ’luxury’, ‘status’ and ‘exclusivity’ actually mean to a modern affluent consumer because people immediately think of the mega-rich, super expensive and extravagant. What we’re saying here is that modern affluence is as much about the everyday item as it is about the once-in-a-lifetime purchase. The same rules apply: those products with a premium proposition are purchased through emotion.
It’s worth ending on one more trait: the modern affluent consumer’s ability to ‘flex’ is like no other. Just because they buy some things at a high price doesn’t mean they always do. Their ’high and low’ swings can result, for example, in a weekly shop at Lidl being worn as a badge of honor (low cost, high quality – still emotional) as that same shopper spends just as much money on regular home delivery of single-source coffee. Two behaviors, one consumer. And that means superficial positioning supported only by a price point is not sustainable.
In a pandemic where the modern affluent consumer has lost the ability to make medium-term decisions, their willingness to spend time deriving the maximum amount of benefit from a purchase where they are in control has never been greater.
Like most worthwhile things in life, it’s emotional.
The paper referenced in this article – ‘Emotionally charging your brand to a global Modern Affluent consumer’ – can be downloaded here.
By Prashant Yadave, Richard Chataway and Gonzalo Lopez.