New Luxury creators and retailers understand, however, that the Web is about Connecting and Questing as well as sales. Americangirl. com is rich with content, offering games, polls, e-cards, activity ideas, trivia quizzes, and an advice column for girls. BMW created tremendous buzz with its BMWFilms, action shorts directed by and starring world-class talents and featuring BMW cars. The first round of films was viewed more than 14 million times. Two million people registered on the Web site, 60 percent of whom opted to receive more information via e-mail. Ninety-four percent of registrants recommended the films to others, feeding into a viral campaign that seemed to encompass the world.

Influence of solo females. Our survey shows that solo working females are particularly active buyers of New Luxury goods. Young singles rocket in a relatively small number of categories, but divorced women told us they rocket in as many as thirty different categories. With the incidence of divorce continuing to rise, and with singles delaying marriage, the pool of solo females is likely to increase— along with their willingness to spend on goods that help mitigate the rigors of Connecting (or not Connecting) and the pain of divorce.

Seniors as heavy spenders. Seniors represent an enormous potential market that New Luxury goods creators have yet to fully tap. Not only is their number growing as Americans live longer (currently there are about 46 million people over the age of sixty), but they are generally healthier, more active, and more willing to spend on themselves than any previous generation. Our survey results show that seniors are spending on their children and grandchildren, but they are not neglecting themselves to do so; they are particularly big rocketers in packaged travel. There is an opportunity to better serve the senior travel market with clothing, luggage, health care products and services, food supplements, photo and electronic-imaging systems, travel planning and support services, and more.

Next-generation consumers: smarter and more sophisticated than ever. It is the “juniors,” aged six to eighteen, however, who represent the greatest potential for continuing and expanding the trading-up phenomenon. They are interested in learning, travel extensively, and are highly attuned to brands and products. They have become accustomed to the acceleration of the innovation cycle and are not as exhausted by it as their parents or as bewildered by it as their grandparents. Juniors take it for granted that styles are quickly replaced with new ones and that products should be constantly updated and improved. Unlike their elders, they have no memory of a time when products did not always deliver quality. They will have little, if any, patience for goods that are poorly made or don’t perform as promised. They surf the Web, communicate on many channels, and drive the definition and recognition of what is new.

Most important, juniors have come to expect and appreciate the emotional satisfaction they get from New Luxury goods. As many consumers told us, “It’s very hard, if not impossible, to go back” to lower-quality, undifferentiated, emotionally empty goods once you’ve experienced a New Luxury entry in the category. Americans never like to settle back, give up, and trade down unless they are absolutely forced to by world events or personal vicissitudes. Even when times are rough, they tell us, they continue to hold on to one or two New Luxury items they “just can’t live without.” Americans, including kids, always want to escalate to still higher levels of quality, taste, and aspiration.

The Demand Society: The Middle Market Takes Control

There is another important aspect of trading up in today’s society, beyond its speed and volume: the newfound power of the middle-market consumer. Traditional trading up might be described as a downward-flowing cascade of innovation. A luxury first appeared on the market in very limited quantities and at very high prices, available only to the rich. It might take years, even decades, for the luxury to become more widely available and for the price to come down to the point where the middle class could afford it. For example, that most ubiquitous commodity, coffee, began its career as a luxury item. The delights of the coffee bean were probably discovered in Ethiopia before the year 1000, but coffee did not reach Europe until around 1600. It gradually was transformed from a rare and expensive treat into a daily want and, at last, into a necessity of everyday life. In the late 1780s, during the run-up to the French Revolution, the ordinary people of Paris took to the streets to protest the high cost of what they believed were the necessities of life, including sugar and coffee. In our own time, cashmere was for years an expensive luxury, affordable only for the wealthy, with limited supply. With the opening of China, however, supply has increased, and the price of cashmere has dropped considerably. It is now possible to buy a woman’s cashmere sweater at Lands’ End for just over $100.

The point is that the consumer has traditionally had little control over the pace and timing of the downward cascade of luxury goods. The producer had the control because demand was high and often the supply of raw materials was limited. Besides, the producer often had no great desire to speed up the cascade, because he believed that exclusivity and high margins were the keys to success in luxury goods. But now, because the middle market has become so much more affluent and so much more sophisticated, the luxury producer need not give up those attractive margins in order to gain greater volume.

At the same time, producers of conventional goods are faced with the problem of overcapacity and oversupply. Makers of cars, appliances, clothing, computers, and a dozen other types of goods have become so highly skilled and productive, and so used to selling in huge volumes, that they are making more of their products than consumers want or can buy.

Of course, businesses have been making more goods than American consumers strictly “need” for at least a century. That’s what marketing is for—to help create new wants for the consumer. But the “want-creation” industry has hit the wall. Because of all the factors we’ve discussed, businesses find that advertising, in particular, has lost much of its ability to persuade consumers to buy goods they don’t really want. Consumers know too much about product differences and availability, thanks to the proliferation of information available everywhere, especially on the Internet; they have too much choice; and they are too sophisticated about their own emotional needs to settle for mediocre goods.

Suddenly, the middle-market consumer has real control.

It is a control that is very different from the nominal control expressed in the traditional sales bromides—“The customer is always right” and “We don’t exist without the customer” and “Our major concern is customer satisfaction.” Today’s middle-market consumers are active participants in the creation of the goods they want. They don’t have to wait for the cascade to reach them; they can demand it because they have the power to buy, the knowledge to select, and the option to choose. They don’t really need anything, so they are hardly at the mercy of the producer.

We have said that trading up is a historic alignment of consumer needs and business capabilities. It may be more than that—it may represent a power shift from the producer to the consumer, a new dominance of the demand side over the supply side. That will make New Luxury goods all the more important in the years to come, since they are harder to create than conventional goods and therefore harder to copy. And they have the great advantage of providing emotional satisfaction, which is the key benefit that today’s consumer is seeking.

For Americans in the foreseeable future, the call is “excelsior”— ever higher—and that is what trading up is all about.