Marketing to the Relatively Well Off
At a presentation given last week to the Florida Luxury Marketing Council in Coral Gables, Florida, I found out that a million just ain't what it used to be.
For example, one now has to have $1.3 billion in net worth to make the bottom of the Forbes 400 richest Americans list. But, Lewis Schiff, co-author of The Middle-Class Millionaire, says that while the Forbes group in total has a net worth of $1.54 trillion - there is another group of about nine million households that each have between $1 million and $10 million and have a total net worth of $20.7 trillion.
This group (the middle-class millionaires) is responsible for 39 percent of consumer spending in the U.S. and is a new super-demographic that has lots of money to spend.
According to a survey of 3,700 U.S. households done in 2006 in preparation for the book, the most important personal values of this group include:
- 92 percent - Good parenting
- 85 percent - Providing children with a good education
- 97 percent - Being ethical
- 92 percent - Health more important than money
On average, they work 70 hours per week, versus 40 hours per week for the traditional middle class, and take only 12 days of vacation per year, versus 20 for the middle-class. What makes them successful? Well, one idea is that they don't give up. Survey respondents recalled an average of 3.1 major business decisions that didn't turn out well, versus only 1.6 for middle-class respondents. But, it was the reaction to a bad business decision that was really interesting. Seventy-six percent of the middle-class millionaires tried again after a bad business decision, versus only 14 percent of the middle-class respondents. And, 52 percent of middle-class respondents eventually gave up to focus on other things, while only two percent of the 'millionaires' did that.
What does this all mean for retailers and manufacturers targeting the 'millionaire' group? Consider these numbers and you'll have a better idea:
The 2006 survey was supplemented by another one in January 2008 focused on luxury categories such as jewelry, watches, clothing, perfume and accessories. In this survey, respondents were asked what would make them spend more in a weaker economy. About 89 percent indicated interest in value-added options such as upgrades, additional time or services as part of a program, and limited editions.
Meanwhile, 32 percent of respondents planned to increase their charitable giving, while only six percent planned to reduce their giving. So, one idea is to tie products and services to charities important to your best customers.
Of the respondents, 34 percent are paying more attention to price and 24 percent are planning to postpone purchases. Mr. Schiff says these respondents are "pushing the pause button" but still plan to make the purchases as 65 percent plan to increase their spending when the economy improves, indicating pent-up demand.
Bottom line: Mr. Schiff says this group of affluent consumers needs to be given incentives to make purchases now, rather than delay. And, they want middle-class things in new packages, which is driving the trend towards fractional ownership of homes, jets, yachts, cars, etc. Finally, they are trying to buy back time. They work long hours and work hard to become successful so if retailers can give them back time in the form of added convenience, it can be a winner.
Discussion Questions: In what ways do you think middle-class millionaires are different from the traditional middle-class? Should mainstream retailers make a special effort with this demographic and, if so, how?