Who are ethical luxury consumers?
In the luxury industry, two trends have emerged. On the one hand, some luxury brands have worked to increase the ethicality of their sourcing, manufacturing, and marketing strategies…
In the luxury industry, two trends have emerged. On the one hand, some luxury brands have worked to increase the ethicality of their sourcing, manufacturing, and marketing strategies. For example, the producer of exceptional quality cashmere products, Loro Piano, has developed a new, selective breeding method for goats to limit threats to the fragile ecosystem of Inner Mongolia and facilitate a sustainable balance among the welfare of the animals, benefits for the local population, and protection of the environment. On the other hand, demand for ethical luxury is increasing. At least 30%–40% of luxury consumers seek ethical luxury and view ethicality as an important purchase determinant.
But who are these luxury consumers interested in ethical luxury? To successfully serve these consumers, luxury firms need to better understand which sub-segments of luxury consumers they should target with ethical luxury offerings and how to craft their value proposition to serve these different targets.
The study we recently published in the Journal of Business Ethics sought to identify the profiles of these luxury consumers who engage in ethical luxury consumption. Based on a sample of 706 US luxury consumers, we identified five distinct segments of luxury consumers, personified by five fictive profiles, or personas (Tom, Gail, Ashley, Sarah, and Caroline), who differ in the extent to which they engage in ethical and ethical luxury consumption.
Two of the five personas, Gail et Tom, are luxury consumers who are truly interested in ethical luxury and are thus of particular interest for luxury firms who want to push ethicality in luxury. They represent slightly more than 40% of our sample. Gail (15 %) and Tom (29 %) have the highest purchasing power of all five segments; while these consumers are willing to pay high prices for ethical luxury, they differ in terms of their consumption of such products. Gail is a heavy consumer of luxury and ethical luxury, while Tom is a very heavy consumer of these categories.
For luxury firms, attracting clients like Gail and Tom requires different approaches and marketing communications. Tom is full of contradictions, perhaps because he is young (with age comes wisdom…). He tends to be driven by his ego and is self-centred, but he is also socially engaged, and tries to help others and make the world a better place through his purchase behaviour. This ambivalence might explain, or be the result of, his feeling that he is unworthy (he has a negative self-image). He is very anxious about the world he lives in but also expresses faith in the goodness of people and the world.
In contrast, Gail represents consumers who are less ego-oriented and do not suffer from the same anxiety about the world around them. Luxury firms might emphasize ego and ethical aspects of their product lines to target Tom, but they should downplay ego aspects when targeting Gail. Emphasizing prestige and status would be more effective for Tom, in need of ego reassurance, than for Gail. To appeal to them, luxury firms can highlight the quality of their offerings but also their efforts to contribute to social, economic, and ecological issues.
… and less well-off clients
Sarah and Ashley are highly price-sensitive luxury consumers; they might not be able to afford or might not want to pay very high prices for luxury items. Sarah represents 18% of luxury consumers in our study; she is a light consumer of both ethical and ethical luxury products. For luxury firms, the relative value of the segment of consumers like Sarah is the lowest. Ashley represents 21 % of luxury consumers in our sample and this segment has a higher potential value, similar to that of Gail.
Pursuing sustainable growth through consumers like Sarah and Ashley requires that firms adopt alternative, more sustainable business models. For example, a rental business model might make it possible to help Sarah and Ashley access luxury and ethical luxury products in a more sustainable way, and not force companies into the vicious circle of cost-cutting to offer affordable luxury, which might give free way to less ethical or unethical practices (extremely low wages, etc). In such business models, consumers can access expensive items without having to pay the full price of a new item.
For Sarah and Ashley, who do not believe that buying ethical luxury products has a positive social impact, emphasizing the ethicality of luxury offerings would not be as effective as emphasizing the “good deal” aspect. Rental solutions would enable them to consume luxury and ethical luxury at lower prices, but it would also nudge them toward doing the right thing; even if they do not care about ethics, they still would be consuming luxury in a more sustainable (ethical) way.
Those who remain to be convinced
The Caroline persona consists of heavy consumers of ethical products but light consumers of ethical luxury products. They represent 17% of the luxury consumers in our study.
Given their relatively high purchasing power, luxury firms might want to target these consumers, but they would need to convince Caroline that ethical luxury products are worth purchasing. Caroline likely sees luxury and ethics/sustainability as oxymoron. In addition, status and prestige do not appeal to Caroline, which might explain why these consumers account for such low shares of ethical luxury purchases. Caroline is humble and does not like to be in the spotlight, but she cares about doing the right thing. Ethical luxury is not aspirational for her.
Therefore, alternative business models based on reuse, such as second-hand luxury goods, might better fit their values and desire to help make the world a better place. This alternative business model also would enable luxury firms to price their ethical luxury offerings at acceptable levels for Caroline, without compromising long-term sustainability.
There is still room to increase the share of ethical products among luxury purchases. The most ambivalent segment (Tom) accounts for almost 75% of luxury purchases that are ethical, yet it barely makes up 15% of luxury consumers. The other segments, who do not even reach a 50% share of ethical purchases among their luxury purchases, instead are the heaviest purchasers, signaling that they likely engage in unsustainable overconsumption. A long-term sustainable strategy for the luxury sector would replace non-ethical items with ethical versions, without increasing the total number of purchases; this could be achieved with a long-term strategy of continuous training, campaigns and activism on ethical questions, and the adoption of alternative, more sustainable business models (rental, reuse, and the like).
If luxury firms can help consumers make more conscious purchase choices, and swap their business models for more sustainable ones, they even might cultivate greater brand loyalty by aligning their values with those of their customers.
Photo by Caroline Hernandez on Unsplash