The affluent aren't that different from you and me, except that they ... well, have more money. As I listened to a presentation from James Dean (he's heard all the jokes), SVP at Wealth Engine, at a Florida Luxury Marketing Council meeting recently, I wondered why more mainstream retailers don't do more to attract the wealthy as customers. With the U.S. middle class shrinking, it seems all retailers could use an influx of shoppers who actually have discretionary money to spend.
A recent article in The New York Times cited stats showing that the top five percent of earners accounted for 38 percent of personal consumption in 2012, up from 27 percent in 1992. Moreover, inflation-adjusted spending by this group is up 17 percent since 2009, while the spending of the bottom 95 percent has risen just one percent.
According to Mr. Dean, the average annual household income of the top one percent is $306,000, which may not seem astronomic, but is certainly significantly better than the average retail customer. And there are 13 million U.S. households with $1-5M in investable assets (the affluent); two million with $5-25M (super affluent); and 150,000 with $25M plus (ultra affluent). About 92 percent of the affluents are 50 and over, while two-thirds of the ultra affluents are. Three-fourths of affluents are married, as are 80 percent of the super and ultra affluents.
The affluent tend to be more educated than average consumers and less likely to have kids at home. Their interests include the usual suspects such as travel (60 percent), gourmet cooking (55 percent), golf (30 percent) and boating (30 percent). Meanwhile, 95 percent of marketers say data about their customers remains untapped, and 96 percent of wealthy customers report being mis-targeted with inappropriate offers.
Mr. Dean says the best approach to reaching these wealthy consumers is multi-touch and includes e-mail, direct mail, referrals and intros, online research tools, SMS targeting and display ads. Among those tactics, he is highest on text messaging at the moment because it still commands attention. He advocates starting small, using a test and learn approach while aligning tactics to each segment's value. The key, he says, is to use big data and analytics to find prospects who are exactly like your best customers.
Bottom line: Sure, it makes sense for yacht and real estate brokers to spend a lot of time researching and contacting wealthy prospects, as it does for Saks and Nordstrom. But perhaps there is an opportunity for mainstream retailers to identify and cater to the one-percenters, too. After all, we've all heard stories about the wealthy liking to shop at dollar stores. Perhaps with a few extra nudges, even discount retailers can attract more of the affluent and their affluent friends.
How effectively are mainstream retailers marketing to affluent consumers on the whole?