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The term kakusashakai, meaning a society with an income gap, has become a buzz word with political relevance. In the “lost decade” of the 90s, after the bursting of the asset price bubble, increasing social inequalities began to surface, betraying the international image of Japan as a country of equality and a population where 90% are seeing themselves belonging to the middle-class. A change in the demographic structure of an aging society with a declining birthrate can lead to a consciousness of perceived inequality. The transition from the bubble economy to the long economic slump, and now back to an economy of regained strength, left an enormous impact on the mind set of Japanese people. The terms kachigumi (winners) and makegumi (losers) have appeared in the media and illustrate how Japanese see the effects of the “lost decade” on their society.

This is an online version of my working paper dealing with luxury marketing in Japan. It is updated on a regular basis. The online version includes interactive elements and comments not included in the print version.

Creating shopping environments, fully developed experiences and personalized services for consumers is a global trend that has come to Japan. The expectations that affluent consumers have for their retail environments are increasing. The loyalty of customers is depend on the efforts made by brands to create variety and creative ways to set themselves apart from competitors. Consumers will easily switch to other retailers and brands, if they fail to invest in the creation of meaningful relation-ships with them.

Many foreign luxury companies still have problems in adapting to the high service requirements demanded by the Japanese and to express luxury at all levels of the product purchase process, including the aftersales experience. A brand is not only shaped by its products but also by the staff, location and promotional campaigns, and these are becoming more diversified in Japan. There are a lot of examples for creative ways in which both foreign and domestic brands are trying to lure consumers into their stores by refining their premium offerings and the surrounding in which to present them.

A major trend is to see luxury as an enrichment of life, a means to deliver new experiences, and satisfy the consumer's curiosity for adventure and exoticism. Experiences are seen as the real luxury—exotic holidays, authenticity, environmental consciousness, in general a trend toward informed consumption. Corporate social responsibility (CSR) is gaining importance in purchasing decisions. This change in preferences demands know-how, intelligence, and education and underwrites the above mentioned change in social status markers. Japanese consumers are aiming for a return to a natural and simple lifestyle, with time for taking care of oneself and the family. Eating well, natural and organic food, spas and wellness holidays are no longer only for the elite and superrich. The trend is to seek eco-friendly and slower lives.

The high-growth phase in Japan influenced all aspects of private life. The baby boomers, as Higashi (2004) points out, were the icons of their time. Security and a sense of belonging to a large corporation, the “typical” middle-class lifestyle, was idealized as the norm for ordinary lives in the second half of the 20th century. The job was the primary identity for the man and marriage, family and raising the children the primary role attributed to the woman. Not the ie-system (an extended patriarchal household) but the nuclear family became the new model, which is now challenged by a growing number of singles as late marriages increase and birth rates are declining.

In recent years, many companies have sprung up that offer luxury companies ways to tap the new affluent class, the ‘new rich’ in Japan. Their methods range from high class, exclusive magazines, over collaboration marketing with exclusive credit card companies such as Diners Club, to more sophisticated approaches that include the creation of marketing environments and exclusive clubs and services for a limited audience. Many companies offer a list of HNWIs and grant their clients access to those individuals, others offer concierge services or high-class personel for the execution of events. The quality level of the different solutions varies tremendously, and most infomaterial was available only in Japanese. This section offers detailed information on the different concepts.

Consumers shop in different ways and they form their opinions prior to purchase in different ways. The social networks that consumers interact with are a major part in creating role-models and social codes that form the context of consumption. The conceot of consumer levels tries a new approach for categorizing luxury consumers, by not differntiating them by wealth level or income, but by their different social networks. We come up with three levels that show different social patterns and incentive structures. The analysis will differentiate between consumer level 1 people who buy products of a luxury company but do not have the assets or income to qualify them for a rich lifestyle, who use luxury consumption as a way to distinguish themselves within their limited social mobility, consumer level 2 people exhibiting a high salary that enables them luxury consumption in certain categories, but not in all, who use luxury consumption to define their way up the social ladder, often within a corporate environment, and consumer level 3 people encompassing both HNWIs and individuals with an extraordinary income, qualifying them for an active premium consumption lifestyle and with access to extensive social networks and connections.

HNWI marketing is about reaching customers who are nearly immune to normal marketing approaches, frequent highly exclusive networks and are often byuing certain products for very personal reasons connected to social contacts, their networks, the opinions of friends, relatives, and colleagues. It still takes many luxury companies long to realize that their most prestigious customers are not impressed by direct push approaches or plain advertising. A word of mouth strategy takes a more indirect approach, and, don ’t be mistaken, maybe the only approach that has a profound effect within closed networks. In principle it is about creating highly satisfied customers or participants of events linked with the brand experience, and then intermingling these influential individuals (often network hubs) with other high-profile and connected people. All this is done in an exclusive environment with personal incentives for the rich customers to attend and without making brand affiliations too obvious. Instead of marketing to HNWIs, you enter their networks and become part of their lifestyles and create added value for them before you expect them to look upon you and your brand in a favorable light.

Acquiring customers for luxury brands must be differentiated by wealth level and the customer's marketing exclusivity, meaning the inclination of a consumer to be not receptive for mass marketing environments and mass media. The theory is that the higher the wealth level, the less receptive the customer is to normal marketing channels. The introduced concept of marketing exclusivity offers a way for luxury companies to assess their own customers and to find channels that will be able to establish a connection. It offesr a way of categorizing environments and situations by the differences in marketing activities that are possible there. Marketing is not only created by companies`marketing department. It is created in interaction with the cutsomer. The most exclusive of all environments is personal communication between high-class indivuduals. This exclusive word of mouth is what luxury companies should aim for.

- Luxury consumers can be rich, mass affluent, or normal middle-class people who are trading-up (economizing in certain areas to spend disproportionally in areas with an emotional relevance to them)

- The main problem of luxury marketing is how to market to different wealth levels and customer profiles and at the same time not to devaluate the brand

- Not all luxury consumers have high assets. For many, their income forms the base of their luxury consumption. Many are not rich enough and do not command a high enough income to show luxury consumption patterns in all aspects of their lives and are consuming luxury selectively.

- A certain part of luxury consumers (the percentage depending on the brand in question) are individuals of high net worth (HNWIs), people with assets of more then 100 million Yen (approx. 1 million dollars).

- Their lifestyle and social connections tend to be different from other luxury consumers. They belong to highly inter-connected networks of influential people and lead upper-class lifestyles in all aspects of their lives.

- Depending on the way they have made their wealth (inheritance, professionals, IT-millionaires) their attitude towards spending differs tremendously. What they share is belonging to a social class that allows them to meet people from other networks more easily.

- Targeting them means accessing those networks and reaching higher marketing exclusivity by not using normal channels of mass marketing. Instead, techniques such as club marketing or collaboration marketing are employed, and specialized high class media is used to reach this exclusive audience.

The question why it is so difficult to get reliable data on marketing issues in the Japanese context is not answered to a satisfying extent in the literature. This is actually part of the problemthat I try to explain with this approach. I try to propose a model that will give marketing departments in Europe a different perspective on the way they form their own marketing decisions in the context of the Japanese luxury market. The model does try to give an explanation that will make it easier to understand where exactly the problem lies and further tries to offer possible ways to correct the problematic approach taken by many European and American companies.