Luxury Defined: What the Affluent Will Spend for Luxury

In this 2008 survey of the wealthiest 10% of US households, the respondents were asked to specify the most they could imagine spending for 37 different products and services. They were also asked to name the brand they would most likely purchase for each of the items.

The goal was to understand how affluent consumers define the word “luxury”, which is a very ambiguous word for which there is no objective and quantifiable definition. The results of this new ground breaking research demonstrate that surveys that attempt to measure spending on “luxury” items are useless, at best, and dangerously misleading, at worst, if “luxury” is not precisely defined by specific price points. The same appears to be true for surveys that attempt to identify “luxury” brands without specifying price points to define “luxury”.

Unlike other affluent and luxury market research that is based on online surveys of panels of people who are compensated for participating in regular and frequent surveys, our unique mail surveys are based on samples drawn at random to be representative of the precisely defined population of affluent households, consistent with the research of the Federal Reserve Board. Confident of their anonymity, the respondents to our surveys are typically more affluent and more open in providing confidential information.

In this study, both men and women were asked about the same 15 products and services. Women were asked about an additional 11 gender oriented products and men about an additional 11 products.

Both men and women were asked about a new auto for personal use, a room in the winter in a Caribbean resort, a European cruise, a hotel room in New York City for a vacation, a refrigerator, an original painting, a washer/dryer set, a king size mattress, a set of linens for a king size bed, wall to wall carpet, a watch for dressy occasions, a watch for every day, a bottle of wine for a special dinner at home, frames for sun glasses, and a large 24” wheeled garment bag.

Women were asked about a dressy suit, shoes to go with the dressy suit, a cocktail dress, shoes to go with the cocktail dress, a pair of jeans, a pair of diamond stud ear rings, a purse for every day, skin rejuvenation cream, liquid make-up/foundation, a bottle of perfume, and lipstick or gloss.

Men were asked about a business suit, shoes to go with the business suit, dress shirt to go with the business suit, a tuxedo, shoes to go with the tuxedo, shirt to go with the tuxedo, a sport coat, slacks to go with the sport coat, a dressy long sleeve shirt, and dressy short sleeve shirt.

The questions were included in the 14th study of a continuing series of twice-yearly surveys of the most affluent 10% of U.S. households (a total of 11.2 million households with an average $3.1 million net worth and average $256,000 income) as determined by The Federal Reserve Board. These surveys regularly measure and track their current views as well as their 12-month outlook for the economy, the stock market and their personal earnings, savings, and investment objectives.

Research Methodology

This research is based on self-administered questionnaires mailed to a randomly selected, national sample of 5,000 men and women in households that, based on their income and ownership of certain assets, were expected to meet the minimum net worth requirement of $800,000.

The profile of the sample is as follows: $304,000 average household income, $3.1 million average household net worth, and $1.6 million average household investable assets. The average value of their primary home is $1.2 million. The average age is 55 while 86% are married and 60% are males. The sample represents 33 states plus the District of Columbia.

The overall survey response rate was 14.0 percent. These survey results are based upon the 552 men and women who promptly responded to the survey and met the minimum net worth requirement. The maximum margin of error of this survey, at 95% confidence, is five percentage points.