Consumers, with schizophrenic buying habits–spendthrifts on some products, tightwads on others–are part of a growing trend, says Michael Silverstein, a senior vice president and director for the Boston Consulting Group. “They’re willing to pay a premium price for products and services that possess higher levels of quality, taste, and aspiration–but are not so expensive as to be out of reach,” he says. Silverstein uses the term “new luxury” to describe these products. Think Starbucks coffee, Aveda shampoo, Victoria’s Secret lingerie, BMW cars, and Viking ranges–all of which command a pretty penny and engender fanatical customer loyalty.
Silverstein and his former BCG partner, Neil Fiske, have been studying this phenomenon, which they term “trading up,” for the past 10 years, during which they have analyzed more than 30 categories of consumer goods and services and surveyed 2,300 consumers about their buying habits. Their new book, Trading Up: The New American Luxury (Portfolio, 2003), documents their investigation into the forces driving this trend and profiles companies that have cracked the code to success in this market.
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