Tuesday, December 27, 2005

Upscale

"Upscale." "High-end."

Advisors seeking information from the Research Network often use these terms when they make their requests at their clients’ behest. But do your clients have any sense of what these terms mean when they say them?

High-end does not merely mean that the items or services provided sell for a higher price, an assumption I’m getting when an advisor merely "passes through" the clients’ question (not a good idea, by the way.) Upscale means that the product being sold is not only more expensive but also of a higher quality than the average product of its type. In the service sector, it means a greater amount of time and effort being exerted. The client cannot just slap a higher price tag on what they are doing and expect to receive it, at least over the long term.

There are some industries that are more mature, so that the sense of upscale is well-defined. The restaurant industry has codified upscale. Restaurants are divided into limited services and full service, with a few gradations of the average bill size indicated for the latter. The Research Network can easily find data for these breakdowns. Conversely, it will be considerably harder to find reliable numbers for the size of the upscale pen market or even high-end consignment shops.

A couple things to be aware of when determining the market size for upscale:
Not everyone who has money spends it. Note the advice in the Thomas Stanley books, "The Millionaire Next Door" and the newer "Millionaire Women Next Door" of living below one’s means. Despite the high rate of credit card debt in the country, there are pockets of frugality. Be aware of that when you ask for income information.

Another trend is that there are many folks who may eat macaroni but spend money on their car. Or they may drive their car into the ground but eat at fancy restaurants. Note this quote from "If Loving You is Wrong", a novel by Gregg Olsen:
"[It was better] to have one fine thing than a half-dozen average items. Quality over quantity. Clothes were a key example. She'd save up her money and splurge on a garment from Ann Taylor or I. Magnin…" The current economic books are saying exactly the same thing.
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An article on the luxury market.

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