A consumer switches to private label at the grocery store, keeps the same phone for another year, cancels two subscriptions, and books the cheaper flight. Then she spends $180 on skincare, upgrades the hotel, and buys concert tickets without much hesitation.
For years, marketers and researchers have tried to classify people like this with broad labels: premium, value-conscious, affluent, and deal-seeking. Increasingly, those labels seem too blunt for how people actually spend.
McKinsey found that 79% of consumers were trading down, but more than a third were also trading down in one category while planning to splurge in another. Nearly one in five were cutting back in a nondiscretionary category while spending more freely elsewhere.
Inflation and economic uncertainty are clearly part of the backdrop, but the behaviour appears more selective than a straightforward spending pullback. Consumers are making sharper distinctions between categories, where they see little reason to pay more, and those where quality, identity, enjoyment, convenience, or reassurance justify the premium.
That changes the way we should think about value.
A consumer can be highly price-sensitive in one category and relatively unconcerned about price in another. Income still matters, but it tells us less about where someone will spend freely and where they will refuse to spend.
For researchers, the more useful question may no longer be whether someone is a premium consumer. It may be where, when, and why they give themselves permission to spend.
Value Seeking Has Moved Up the Income Ladder
One reason the old segmentation language is starting to look dated is that value-seeking behaviour is no longer concentrated among lower-income households.
Deloitte’s 2026 global consumer research found that 47% of consumers now behave as value seekers, including 35% of high-income households. In the US, nearly a quarter of households earning $200,000 or more still fell into that group.
Consumers with money are still comparing, waiting, switching, downgrading and deciding that some premiums are simply not justified. They are not necessarily spending less overall. They are becoming more disciplined about where they see enough difference to warrant paying more.
That shift is showing up in the way people assess brands. Deloitte’s research suggests that perceived value is not reducible to price alone. Quality, reliability, service and trust can account for a meaningful share of what makes a product feel worth the premium.
So the behavioural change is not a retreat from premium spending … it is a tougher test for it.
A higher price now has to earn its place more explicitly. In categories where products feel interchangeable, consumers are increasingly willing to trade down. In categories where the stakes feel higher, or where the purchase carries emotional, social, or practical weight, they may still pay considerably more.
For researchers, that creates a useful distinction between affordability and willingness to pay. The first asks whether someone can spend more, while the second asks whether they believe they should.
The Splurge Has Become More Selective … and More Personal
Where consumers choose to spend is becoming just as revealing as where they cut back. In the US, McKinsey found that 39% of consumers still planned to splurge even as trading down remained widespread. Younger consumers were especially willing to spend on beauty, fashion, and dining, while high-income millennials showed stronger intent around travel and jewellery. Older consumers were less likely to splurge overall, but when they did, travel and restaurants featured more prominently.
The categories are different, but the pattern is consistent: people are protecting the parts of their lives that carry the most meaning.
That helps explain why premium demand has held up in areas that might look discretionary on paper. Fragrance is one example. Gen Z households accounted for 38% of US fragrance spending in 2025, while prestige fragrance sales continued to grow. In a period when consumers were scrutinising grocery bills, subscriptions, and everyday household spending, they were still finding room for products that offered identity, mood, and a sense of indulgence.
The same logic applies to travel. A consumer may choose the cheaper airline seat and still spend more on the hotel because one is simply transport, and the other is part of the experience they are buying.
This is where traditional premium segmentation begins to lose explanatory power. Two consumers with similar incomes can make completely different trade-offs because the categories themselves carry different emotional weight.
One may see skincare as maintenance and travel as the thing worth saving for. Another may happily stay in a budget hotel but refuse to compromise on food, fitness, or tech.
What looks inconsistent from the outside often makes perfect sense when viewed through the consumer’s own hierarchy of priorities.
The premium is not disappearing - it is becoming concentrated in the places people care about most.
If Income No Longer Tells You Where People Will Spend, What Should?
For years, income has played a major role in segmentation. It is easy to measure, easy to understand, and, at a broad level, still useful. But income tells us who has the capacity to spend … it does not necessarily tell us where the willingness exists.
Two households with similar incomes can have completely different spending profiles because they place different values on different things. One may happily pay more for travel, food, and fitness while buying the cheapest acceptable option in household goods. Another may prioritise tech, beauty, and convenience while being highly disciplined everywhere else. Their disposable income may look similar on paper. Their premium behaviour does not.
This is where brands need to move beyond demographic affluence and start mapping what might be called category permission: the parts of a consumer's life where paying more feels justified.
That permission is rarely driven solely by price. It can come from performance, trust, identity, status, convenience, enjoyment or perceived risk. It can also be highly situational. A consumer who will not pay more for an everyday product may happily trade up when buying a gift, preparing for a holiday, managing a health concern or purchasing something that will be visible to others.
The research challenge is therefore not simply to identify who is affluent, but to understand the conditions under which premium becomes acceptable.
That means looking at several things together: where consumers are willing to spend more, what they are willing to cut back on to fund it, which occasions change their price sensitivity, how replaceable they believe cheaper alternatives are, and what emotional return they expect from the premium.
This is also where segmentation can become more useful to the business. A traditional “premium” segment may tell a brand who is broadly comfortable with higher prices. A category-based segmentation can tell the business which propositions are likely to justify that premium, for whom, and under what circumstances.
That is much closer to the decisions companies actually need to make.
Should we launch a more expensive tier? Which benefits would make it credible? Which consumers are most likely to trade up? What are they currently sacrificing elsewhere? Is the premium driven by quality, convenience, status, trust or something else entirely?
Those questions cannot be answered by household income alone.
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The Behaviour Is Global. What Earns a Premium Is Local.
In Europe, consumers have continued to trade down at scale, yet splurge behaviour has remained firmly in the picture. Younger consumers are more likely to prioritise spending on apparel and fashion, while older cohorts are more inclined to prioritise travel and restaurants. The same economic environment is producing very different definitions of what feels worth preserving.
Across Asia, the contrast is even sharper. India has shown stronger discretionary intent around dining, travel, electronics, and jewellery, while China has remained more cautious. In Japan, spending has been more restrained overall, but domestic travel has held comparatively greater appeal. Higher-income consumers in South Korea have shown stronger splurge intent than the broader market.
For global brands, this is where a single premium segment becomes especially fragile.
The willingness to pay more is shaped not only by income or age, but by local ideas of quality, status, trust, convenience, and social meaning. A premium proposition built around exclusivity may resonate in one market and feel remote in another. In some categories, craftsmanship carries the weight. In others, it is efficacy, service, provenance, or simply the reassurance that the product will perform as promised.
That changes how international segmentation should be built.
Rather than starting with a fixed definition of the premium consumer and applying it across markets, research needs to identify what premium means locally, which categories consumers are most protective of, and what they are prepared to give up elsewhere to maintain that spending.
Premium Behaviour Is Here to Stay. Segmentation Needs to Catch Up.
It would be easy to assume that this pattern will fade if inflation eases and consumer confidence improves. I do not think it will.
Once people learn to scrutinise some categories closely while protecting others, that behaviour does not simply disappear when conditions improve. Consumers have become more practised at comparison shopping, more comfortable switching brands, and more willing to question whether a premium is justified. At the same time, they have become clearer about what they are prepared to spend on, because those purchases deliver something they genuinely value.
For brands, the implication is fairly direct: income should remain part of segmentation, but it should no longer be allowed to do more work than it can reasonably support.
A high-income household may have the means to buy premium across multiple categories and still reject most of them. A middle-income household may be highly selective overall but consistently trade up in one or two areas that matter disproportionately. The opportunity is not simply to identify who has money. It is to understand where consumers are willing to release it.
That requires a different research lens.
Brands should look at category-specific willingness to pay, the trade-offs consumers make to protect certain purchases, the occasions that change price sensitivity, and the emotional or functional returns people expect when they spend more. They should also be looking at what a consumer refuses to compromise on, because that can be far more revealing than asking whether they consider themselves premium buyers.
For researchers, this means building segmentations that are less static and more behavioural. Income, age, and life stage still provide important context, but they should sit alongside need states, category priorities, perceived substitutability, cultural meaning, and the situations in which a premium becomes credible.
The best buying segment may no longer be a demographic group waiting to be found. Or it may be a pattern of priorities.
That is a more demanding way to think about segmentation, but it is also a more useful one. It gets closer to the decisions brands actually need to make: where to premiumize, which benefits will justify the price, which consumers will respond, and where a lower-priced offer may be more compelling.
The companies that continue to define premium primarily through affluence risk targeting people who can pay more but see no reason to.
The better opportunity is to find the consumers who believe that, in this category, on this occasion, for this benefit, paying more is worth it.
That is where premium growth is likely to come from next.
At Kadence International, we help brands move beyond broad demographic labels to understand the behaviours, priorities, and trade-offs that actually shape purchase decisions. From segmentation and pricing research to category strategy and global consumer insight, our work helps businesses identify where willingness to pay really exists.
Talk to us about building a segmentation approach that reflects how consumers spend today, not how they were assumed to spend in the past.
FAQs
What is premium consumer segmentation?
Premium consumer segmentation is the process of identifying consumer groups more likely to pay higher prices for certain products, services, or experiences. Increasingly, this requires looking beyond income to factors such as category involvement, perceived value, life stage, purchase occasion, and willingness to trade off spending elsewhere.
Is income still a useful way to segment consumers?
Income remains useful as an indicator of purchasing capacity, but it is less effective on its own for predicting willingness to pay. Two consumers with similar incomes may place very different levels of importance on the same category, underscoring the importance of attitudinal and behavioural variables.
What is willingness-to-pay research?
Willingness-to-pay research measures how much consumers are prepared to spend for a product, service or specific set of benefits. It can help brands understand pricing thresholds, identify premium opportunities and determine which features or experiences create enough value to justify a higher price.
How can brands identify consumers who are likely to trade up?
Brands can combine behavioural segmentation, needs-based research, pricing studies, and qualitative research to understand when consumers are most willing to pay more. Purchase occasion, perceived risk, emotional importance, and category involvement can all be stronger indicators of trade-up potential than demographics alone.
What is the difference between demographic and behavioural segmentation?
Demographic segmentation groups consumers by characteristics such as age, income, or household structure. Behavioural segmentation looks at what people actually do, including purchase patterns, brand switching, usage, price sensitivity, and category priorities. Using both together can provide a more accurate view of likely buying behaviour.