Consumption habits have changed drastically after our emergence from the 2008 recession. Not only have consumers moved to the off-price sector, but luxury and premium retail have also seen a spike in profits, a deviation in behaviour observed even at the height of the recession. Traditionally, we have had a set of common demographic segmentation strategies to allocate shoppers to based on their buying behaviours. But fast forward to today, and middle income class consumers are found at both ends of the spectrum. They are seeking unbeatable deals with low-priced products while simultaneously investing in goods and services that would normally be outside their financial comfort zone. The same consumers who shop at Target now own items from Gucci. A couple traveling to a luxurious hotel retreat will fly with a budget airline. Someone who shops at Aldi for everyday necessities will happily spend much more at Whole Foods for goods that are more closely linked to their values or personality.

Hybrid consumers can be found in all income and demographic categories, meaning that traditional marketing segmentation needs to be rethought and most importantly, reworked. Consumers no longer fit the solid and definitive categories that marketing professionals hold dear. Emotional marketing and strong loyalty programs or offering the quickest and best deals will be of outmost importance to the survival of brands.

A few retailers have picked up on this and responded to the new consumption behavior. Luxury and premium brands have struck a delicate balance between exclusivity and accessibility. Hermés and Gucci have an extended entry-level product range to accommodate accessibility with lower-priced items. Online and physical marketplaces such as H&M’s Afound give over-stock a second life with off-priced premium items grouped together with high street fashion. At Selfridges, once again the winner of the prestigious 2018 GDSS award, the notoriously popular accessories hall has luxury items rubbing shoulders with low-cost brands, mixing high and low.

Although consumption of luxury goods is strongly linked to hedonic value, these consumers are now in search for authenticity and an emotional link. On the other side of the spectrum, consumers uninterested in a relationship with a brand are price driven, or transactional driven. Both ends of the spectrum have one thing in common: consumers refuse to be average or buy average products and services. To thrive, or even survive, retailers will need to go back to the drawing board and better understand their customers, scrapping their ancient segmentation rituals for more flexible and evolving solutions. The answer is with an updated and ongoing business and service design strategy that embraces the full user experience.

If your customers are not emotionally connected to your brand or they can find cheaper alternatives elsewhere, they will. If you are a luxury brand and inaccessible to a broader audience, you will lose (unless driving sales is not your top priority and remaining luxury is). In any case, both ends of the spectrum will have to rethink their marketing and business strategies as traditional demographic segmentation becomes obsolete.

Get in touch with us to explore how we can help you build a relevant and meaningful experience for your brand:

Martin Stenberg
—Business Director,
Kurppa Hosk

martin|at|kurppahosk.com
+46 73 610 75 81

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