Prior to the global financial crisis, affluent consumers spent above their means, in large part due to phantom-like perceived wealth. “Their housing values were going up and their 401k’s were going up, so they felt wealthy and tended to spend above their income level,” said Unity Marketing’s Pam Danziger recently in Luxury Daily. Of course, that behavior changed during the recession, as Affluents (HHI $100k+) went back to living on their real income.
It’s critical that marketers understand the lessons learned by Affluents, since this category of consumers is one of the biggest drivers of economic activity. For example, in the U.S., where consumer spending accounts for 70% of GDP, Affluents account for more than 40% of this volume.
And while post-recession growth remains stable, the overall rate of growth is slowing, according to Bain. “We are entering a new phase for the sector, call it a new normal,” said Bain’s Claudia d’Arpizio. “There are unlikely to be more booms like the recent one in China.”
Many high-end home brands that survived the recession have adapted well. Others less so. With slowing growth and a changed consumer, what’s a brand to do?
For starters, understand the lessons learned by Affluents:
– We will live within our means, not on our perceived wealth.
– Our shopping decisions will be more calculated.
– We will think of big-ticket purchases as investments, not as whims.
– It’s less about the logo and more about what the logo stands for.
– Value rules.
You can see how this phenomenon play out in a recent survey by Ipsos Menhelsohn:
78% of Affluents agreed, “When it comes to quality, I believe you get what you pay for.”
60% of Affluents agreed, “Even though the recession is ‘officially’ over, I am still spending money much more cautiously than I used to.”
89% of Affluents agreed, “When I decide to purchase a luxury item, I go out of my way to find the best price possible.”
Remember: just because they have more money than most Americans, that doesn’t mean that Affluents spend it less carefully – even on high-end or luxury products and services. Make sure that your brand strategy and marketing communications are aligned with this new affluent consumer.