Today, more than ever, marketers of luxury products and services have more choices than ever.
What are you doing to target Millennials? How about the exclusivity seeker? I also hear indulgers spend 15 percent more than exclusivity seekers! What about them? The bridal market is good. After all, don’t people get married whether the economy is good or bad?
If you are a marketer in the luxury segment with any sort of budget, I am sure glad I am not on your side of the table. Everyday you have a line of people at your desk talking up some segment and why you need a higher profile with that group.
However, having been there and done that for over 15 years, I can safely say there is one segment many luxury marketers believe their brand has covered, and I can tell you first hand they don’t.
“The Super Rich already know us.”
During my tenure running a magazine that specifically targeted this group via distribution to private jets it was an answer I would hear quite a bit when I spoke with purveyors of luxury goods and services.
There is an urgency to get the word out to a broader audience of aspirational consumers with the belief that Ultra High Net Worth prospects already have some type of intimate knowledge of what they are selling. It’s as if billionaires and centimillionaires wake up in the morning wondering what new luxury products have been launched lately.
Now that I don’t have a dog in the fight, I thought it might be useful to list off why luxury marketers and sellers need to re-think about whether or not they have enough focus on the UHNW segment. And by the way, hosting a couple “collector” dinners, sponsoring a polo tournament and assuming/hoping that today’s Super Rich are also reading regularly the media on your current plan is not a strategy.
First of all, around 90 percent of Ultra High Net Worths (UHNWs) are self-made, first-generation wealth. In The Sky’s The Limit only 2.9 percent of private jet owners we surveyed became rich via inheriting their money. Many came from middle class households. (See five Super Rich Americans who started out super poor). Dad might have been a bus driver or factory worker, mom a teacher or nurse. Wealth was created via business success or innovation. There were no father and son trips to Hermes to buy new saddles before heading to the club. More likely mom was taking the future UHNW to soccer games in a minivan while dad was painting the house.
Today’s UHNW was never the aspirational consumer flipping through fashion magazines in their cubicle. As they built their business, every extra dollar was plowed into the business. During school breaks, vacations meant the kids came to work in the warehouse. The spouse helped in the business, and her shopping was probably buying new computer equipment online, not shoes. There are many stories about today’s very rich having to borrow money from friends and family to make it through the early years.
Somewhere between age 30 and 50 these folks crossed the chasm that separates being UHNW from aspirational wealth. Today’s UHNW didn’t grow up shopping to impress other people. There was no need to wear Gucci loafers at the factory. Now they are the ones with the money. In fact, since 2009 the Top 1 Percent, the rich have gotten richer, having gained 95 percent of income increases, according to UC Berkeley researcher Emanuel Saez. Their new found lifestyle means they are active in luxury, having time and taking time to vacation, often working it in with business and investment opportunities, flying on their private jet, pursuing hobbies and passions, going to places where a nicer wardrobe and some upgrades are needed. Research by Harrison Group suggests this socialization into luxury trappings and preferences is a five to 15 year process, providing a nice window of opportunity for marketers. In some cases it never stops. Carl Icahn was in his 60s when he bought his first super yacht although he could have afforded to buy one for many years before.
The Super Rich know less about your product or service than you think. While they weren’t thinking about you as they were making their money, you have been busy the last decade or so churning out innovative products and experiences, line extensions and so forth. After all, it wasn’t that long ago Montblanc, as an example, just made pens. Now a large part of their business is mechanical watches, they have a jewelry line and accessories such as briefcases and luggage. It’s only in recent years Louis Vuitton launched high jewelry, high-end mechanical timepieces and menswear. The Super Rich don’t wake up in the morning and think about what new product launches you just had. So while UHNWs may know the brand, they might not know everything you do.
At the same time they are the segment with the most money. They already spend lots of money with you or your competitors, but they have the depth of wallet to spend more. To me, that’s an opportunity. This goes for every segment. How many people who have the money have chartered a yacht? How many Super Rich people know the full range of spa experiences? It seems like there is a new concept every month. For that matter, destinations are constantly evolving their offerings. Fine dining in Australia? How many rich people have never had an Italian hand stitched suit made custom? Why doesn’t Bill Gates appreciate the complex mathematical concepts behind mechanical watches? After all, Microsoft and minute repeaters are both the works of genius.
I think it’s important to state luxury industry and brands have done a phenomenal job developing lots of infrequent buyers, the aspirational consumer, who spends money they really don’t have to create an image of status not matched by their bank accounts. According to Boston Consulting Group there are 350 million aspirational luxury consumers worldwide that account for $620 billion in global sales, or about $1,700 in total luxury purchases annually per household.
In terms of growth opportunities, my point is there are untapped opportunities with UHNWs. According to Wealth-X, the global UHNW audience spends $234 billion on luxury goods and services despite a population barely breaking 200,000 households. With wealth possibly exceeding $50 trillion, more than the GDP of the 15 larges economies in the world, they have more to spend.
While every brand has its fans and advocates, there are lots of Super Rich folks out there that could spend a lot more. The opportunity is only matched by the depth of their pocketbooks.