The days of big spending are over for many Americans, but not for the high rollers. They just need a little encouragement to trigger that buying feeling.
On a recent weekday night in the Hollywood Hills, jeweler Damiani and lifestyle magazine Angeleno took over a $9-million house with views of Los Angeles to throw a lavish party for potential customers.
About 40 men in dark suits and women wearing pearls dined on frisee and filet mignon, then sipped champagne as they gazed at jewelry displays illuminated by eco-friendly fireplaces, watched videos of yachts with "Damiani" on their sails and ate coconut raspberry cake in the shape of a diamond.
Such parties are becoming more common, and more extravagant, as marketers try to connect with rich clients in tough economic times.
Over-the-top affairs are out of the question for most companies as they try to tone down their marketing campaigns to match their shrinking revenue and the gloomy mood of consumers. But in luxury marketing, splashy events are back in vogue.
"In turbulent times, when consumer confidence is decreasing and consumption habits are changing, the most important thing is to gain loyalty from the core customer," said Claudia D'Arpizio, a luxury analyst with consulting firm Bain & Co.
Upscale brands need to do something to keep the customers buying. Bain predicts that in 2009 the so-called luxury market -- brands sold in upscale department stores and advertised in high-end fashion magazines -- will face its first recession in six years, with a 7% decline in global sales. MasterCard SpendingPulse said luxury sales dropped 20% in October from a year earlier. And luxury jewelry retailer Tiffany & Co. recently cut its annual financial forecast and said sales in stores open at least a year had worsened from October to November.
Luxury brands have to adjust. As part of a strategy to expand their customer base, they have spent the last few years opening new stores across America and reaching out to mass-market consumers.
But the economic slowdown is forcing them to focus on their core customers: high-net-worth individuals capable of spending thousands of dollars in one visit. Price cuts risk backfiring by diminishing a brand's exclusive image, so brands are reaching out on a personal level.
"We're trying to be much more targeted and give customers a more intimate experience with our brand," said Laurie Patruno, boutique manager for the new Damiani store on Rodeo Drive, which has received clients as a result of the dinner. "These days, you need to be very efficient with your marketing dollars."
