How Should Luxury Marketers Look at the Wealth Gap?

 

According to a Bloomberg BusinessWeek analysis of data compiled by Emmanuel Saez and Gabriel Zucman the break out of Net Worth and Household Income goes something like this:

 

The Top 1 Percent:

–       11,700 households with an Average Net Worth of $760 million with an Average Household Income of $30 million

–       105,300 households with an Average Net Worth of $79 million with an Average Household Income of $6 million

–       1,053,000 households with an Average Net Worth of $13.9 million with an Average Household Income of over $ 1 million

 

The Next 9 Percent:

–       10,530,000 households with an Average Net Worth of $2.6 million with a Household Income of $150,00 to $400,000

 

The Bottom 90 Percent:

–       105,300,000 households with an Average Net Worth of $194,200 with a Household Income of under $150,000

 

The Average Household Income the first group is around $30 million, the second group has an Average Household Income of just over $6 million and for the third group, rounding out the “Top 1 Percent” the Average Household Income is just over $1 million, but the entry point is $400,000.

 

If you are looking for a steady stream of big spenders, you need to target the first two levels, the Top 0.1 Percent making up some 117,000 households.

 

The next group of 1,053,000 households lives a nice lifestyle but with real life constraints. Being sort of rich can be expensive and actually leaves one a bit tight on cash. Think about the book pre-recession book Trading Up where one can buy a $15,000 watch, but at the expense of a nice vacation. It’s all about choices.

 

The 10,530,000 households that make up the Mass Affluent or The Next 9 Percent and have a $1 million + Net Worth but a Household Income of under $400,000 and get there by saving, saving and saving. What’s more they have little liquidity with a large part of their Net Worth tied up in non-liquid assets such as their principal residence and retirement funds. As you go down the 9 Percent spending power dries up considerably. Think about the book The Millionaire Next Door. These households are a are good target for marketers who offer “luxury for less” and non-luxury marketers. In a world of “mix and match” these consumers are pretty thoroughly matching. Perhaps a nice handbag or a pair of shoes now and then, but always on the lookout to get the “look for less.” Some however eschew luxury all together to better save.

 

What the research by UC Berkeley’s Emmanuel Saez and Gabriel Zucman shows is the Top 1/10th of The 1 Percent, 117,000 households, is the best target for luxury marketers who are seeking repeat customers. Going to the next 9/10th of the Top 1 Percent (slightly over 1 million households) probably means you will gain sales within a standard replacement cycle of car leases, furniture wearing out, stoves breaking and significant birthdays and anniversaries.

 

One needs to also look at the cost of reaching the 10 million + households in The Next 9 Percent versus the opportunity gain more sales, larger sales and more liquid customers by shooting a bit higher.

 

Putting it simply, if you ask your media buyer to scrutinize media against reach to an audience with at least a $1 million Household or $20 million Net Worth you will at least be spending your marketing dollars against an audience with enough discretionary spending power to make you happy.

About Doug Gollan

Media Executive focused on marketing and sales to Ultra High Net Worth (UHNW) consumers
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