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The biggest spending customers are not changing their buying behavior. Even the luxury sector has been hit with the economic downturn, suffering a more than 20 percent drop in October 2008 compared with the year before, yet many luxury customers continue to spend at the same levels.

Retailers therefore have to offer this select group of customers extra benefits to maintain their relationships. Many brands, such as Damiani Jewelers, host extravagant parties. The Damaini party, held at a $9 million house in Hollywood Hills, served filet mignon and champagne. Mikimoto, the pearl retailer, and Equinox, a chain of posh fitness clubs, use their lavish parties to exploit the word-of-mouth marketing they gain when partygoers brag about their good time to nonattendees. Such parties lift customers’ spirits and help them forget the economic downturn.

American Express held a dinner party for its best customers in a room suspended by a crane, 160 feet in the air. Another high-end marketer invited clients to fly MiG jets. These luxury companies demonstrate their recognition that they need to develop relationships with their customers outside of the sales setting or the store.

The fabulous parties represent a marketing expense, namely, the cost of doing business with the very wealthy. If companies want to function in that environment, they must cater to extravagant desires. Entertainment MarketPlace plies its services by putting on parties for the likes of Bugatti and Jaguar.

At a time when most ofAmericafeels clinched and consumer confidence is at an all-time low, the wealthy may be the means to help luxury retailers weather the storm.

Discussion Questions:

  1. How are lavish parties justified to marketers in an economic downturn?
  1. Are there any ethical considerations to consider regarding this issue?

Alana Semuels, “Luxury Brands Go Over the Top to Connect with Wealthy Clients,” Los Angeles Times, December 4, 2008.