Trading Up Update

Michael Silverstein and Neil Fiske, the authors of Trading Up: The New American Luxury, recently published an update reinforcing their findings that consumers will gladly “trade up” and purchase more expensive goods/services so long as they are of higher-quality and have greater emotional benefits than their less expensive counterparts

To reinforce their findings, the authors have created The New Luxury 15, an index of 15 companies that produce upscale goods in a diverse range of product categories. According to their findings, companies in the New Luxury 15 performed significantly better in delivering Total Shareholder Returns (TSR) versus the S&P 500 from the years 1999 through 2003. The New Luxury 15 delivered a 16% median annual TSR for the five year period versus a 5% median annual TSR for the S&P 500.

Their updated research indicates the Trading Up phenomenon is not limited to the United States. Japan, United Kingdom, Spain, Scandinavia, and most other Northern European countries are also experiencing similar shifts in consumers trading up to new luxury goods.

Throughout this update, Silverstein and Fiske continue to make their case that, “… it is clear consumers around the world are willing to pay a premium for goods they believe deliver better quality and higher performance, along with emotional benefits, than do conventional goods.”

Furthermore, the authors contend, “Consumers today have more discretionary income, more cash, more product knowledge and more sophisticated tastes, and have far more product choice than ever before. We believe that consumers will only grow more discriminating in their purchases. They will trade up and trade down, with great care, in every category of goods."

For the full report, click here.

If you need a Trading Up primer … read Jon Strande’s excellent book summary.

Comments

[Jon Strande]

John,

Thanks for the link and thank you for mentioning the book summary!

Oddly enough, I was on a con call yesterday and this came up.

Jon