The Strange Ways We Spend Money

People are strange about money.

We will walk twenty minutes because £12 for a taxi feels outrageous, then spend £200 on dinner. Someone who wouldn't dream of paying full price for a jumper might book a £2,000 hotel room without much deliberation. There are people who fly economy wearing very expensive watches, and people with enormous houses who still know exactly which supermarket has their favourite wine on offer.

Most of us have some version of this. There are things we think are worth spending money on and things we don’t, regardless of whether we can actually afford them. Which makes the idea of a neatly defined “luxury customer” complicated.

Who exactly is the luxury customer?

Luxury brands have spent decades trying to work this out. Traditionally, the answer has relied heavily on wealth: income, postcode, age, property ownership and all the other signals that someone has money available to spend.

Of course, that makes sense. If you are selling expensive things, you need to know where the people who can afford them are likely to be. How they choose to spend that money is much harder to predict.

Someone may fall perfectly into the target audience for a £4,000 handbag and have absolutely no desire to own one. Someone else might save for a year to buy it.

The same applies across luxury. A healthy bank balance won't necessarily persuade you to fly business class. Being passionate about food doesn't mean you care about wine. Someone with a wardrobe full of designer clothes might happily stay in a fairly modest hotel, while someone who spends very little on clothes might save all year for a week at Claridge's.

The danger of deciding for people

Businesses make judgements about customers all the time. Anyone who sells something develops instincts. A sales assistant starts to recognise who is likely to buy. A travel advisor gets a feel for which clients will pay for the better room. A restaurant may have a good idea which table is likely to order another bottle.

Experience inevitably shapes those judgements. After twenty years of watching people make purchasing decisions, you are going to have a fairly strong sense of what happens next. Sometimes, though, we become so confident in those instincts that we start making the decision for the customer.

Decide someone is unlikely to spend, and the more expensive option may never make it into the conversation. The suite goes unmentioned. The private experience stays off the itinerary. The £800 coat remains on the rail while the salesperson brings over the £300 one.

The customer chooses from what is in front of them, and their choice reinforces the original assumption. Someone can only say yes to an option they have actually been given.

What we buy is only part of the story

Brands now have access to an extraordinary amount of information about how people behave. They can see what somebody bought, which products they browsed beforehand, which emails they opened, what they searched for and what brought them back three weeks later.

A purchase can mean several different things. Someone may return to the same hotel because they adore the restaurant, because their children love the pool, because the beds are fantastic or because their best friend lives around the corner.

A customer buying the same fashion label every year may be devoted to the design. Or, she may have finally found a pair of trousers that fit properly and sees no reason to start the search again.

If the hotel assumes it is the restaurant, it will keep talking about the restaurant. If the fashion brand assumes its customer is following every new collection, it may miss the fact that she has been buying the same black trousers for six years.

Personalisation can go much further

Most of us encounter personalisation every day. We buy something and are shown another version of it. We visit Rome and receive an email about Florence. We browse a pair of shoes, and they follow us around the internet for the next fortnight.

Sometimes the recommendation is exactly right, but there are other patterns in how people spend. Someone who cares about craftsmanship might be drawn to a handmade watch, furniture from an independent maker and a hotel that works with local artisans. Someone who values convenience might pay extra for a direct flight, same-day delivery or a restaurant five minutes from home.

These preferences can cross categories, and they can change with circumstance. Someone planning an extravagant holiday this year may want something low-key the next. The person who usually buys the sensible option may decide that this is the occasion when they want the best one.

One product, several reasons to buy it

Take a hotel. The same property might appeal to one person because of its restaurant, another because of its location and another because it has connecting rooms and a swimming pool.

A fashion house might attract one customer through craftsmanship and another through the way a jacket makes her feel when she puts it on. A car might be chosen for its performance, design, comfort or because somebody has wanted one since they were twelve.

Most brands have many more stories to tell than the handful that generally sit at the top of the messaging hierarchy. Understanding what someone cares about helps determine which of those stories they see. The hotel is still the hotel. The jacket is still the jacket. You are giving different people different ways into the same story.

Maybe luxury is a decision

Demographics will continue to matter. A luxury brand needs to understand the size of its potential market, where its customers are and who has the means to buy what it sells.

Most people don't move through life buying the premium version of everything. We splurge on some things and economise on others. We save for something we've wanted for years, then complain bitterly about the price of a coffee. We decide the suite is worth it this time and take the standard room on the next trip.

So perhaps “luxury customer” is less helpful as a description of a person than we have come to assume. Sometimes luxury is just the thing someone has decided is worth spending on.