Stephen Kraus is the chief research and insights officer at Ipsos Mendelsohn, where he leads the design, analysis, and interpretation of The Ipsos Mendelsohn Affluent Survey. A recognized expert on consumer behavior and social trends, he was the co-author of The New Elite: Inside the Minds of the Truly Wealthy and co-author of Selling to the New Elite: Discover the Secret to Winning over Your Wealthiest Prospects.
Kraus received his Ph.D. in social psychology from Harvard University, and has twice won Harvard’s award for teaching excellence. We recently discussed some of the key findings from the 2011 Ipsos Mendelsohn Affluent Survey.
How does Ipsos define the affluent population, and what influence do affluents have on the market, especially on this market?
We define affluents as those living in households with at least $100,000 in household income; U.S. government surveys reveal that affluents account for about 60% of U.S. household income and hold approximately 70% of U.S. net worth. Our research has been ongoing for the past 35 years, and this year 2011 we received over 14,000 surveys completed from adults over 18 and with a household income of over $100.000. The affluent are comprised of roughly 58.5 million adults living in 24.5 million households. Demographically, affluents tend to be married, white, highly educated, and employed in professional and managerial fields. They average nearly $200,000 in annual household income, and fall just short of $1 million in average net worth.
It is important to remember there is an enormous diversity within this affluent frame. For example, although nearly half have children, practically every life stage is represented, from those demonstrating strong earning power early in their careers to retired empty nesters.
“ 78% of affluents agree that when it comes to quality, you get what you pay for ”
Give me a general picture of the affluent attitudes, the lingering effects of the recession, and how it relates to spending patterns, according to your data.
Affluents still feel the impact of the recession that began in 2008, in their lives and in their outlooks for America. Despite the “official” conclusion that the recession ended in June 2009, affluents tend to disagree. As of August 2011, only about one-fifth of affluents felt the recession was over for their family or their employer, and fewer than one in 10 felt that it was over for the U.S. as a whole. In fact, when asked affluents to project when the recession would likely end, the most common answer was 2013 or later.
One of the lingering effects of the prolonged economic downturn has been to heighten the affluents’ already strong value orientation, which is rooted in their modest upbringings, and has created a sense of marketplace pragmatism that runs deep in the affluent consumer psyche. Today’s ongoing economic turmoil has only served to intensify that value orientation. For example…
• 78% agree that “when it comes to quality, you get what you pay for.”
• 71% agree that “good value for the money is more important than price."
• Only 18% agree with the statement, “I tend to buy based on price, not quality.”
Their value orientation and mainstream shopping sensibilities are apparent in their choice of retail stores. The most widely shopped retail outlets are Home Depot, Target, and Walmart, and few of the top 20 stores could be considered high-end or luxury. Of course, shopping in luxury retail outlets is more common if we examine those with even higher income (such as those with $250,000 or more in household income, for example), but even those elite individuals are still more likely to visit mainstream outlets.
“ Only 18% of affluents agree with the statement, I tend to buy based on price, not quality ”
I know you have broken down the affluent segment into Millennials, the GenXers, Boomers, and Seniors, but you have segmented them even further from a psychographic dimensions – their attitudes, likes, dislikes. Could you highlight some of the attitudes of each affluent segment, as regards what your research recently discovered? *
Millennials – those aged 18-29, who have come of age in the 21st century – are the heaviest users of the internet, using it 39.7 hours each week, in contrast to the Gen-Xers (34.9) Boomers (28.3) and Seniors (18.4). They also use Facebook most heavily – 84% of those we surveyed used FB in the past 30 days and 50% check their email and FB pages within 30 minutes of when they wake up in the morning.
Music is more important to them than other segments (71% of Millennials, in contrast to other segments, ranging from 54% to 58%). They also like (in contrast to the other segments) to offer advice, stand out from others, keep up with the latest fashions and trends, and have interest in luxury brands. If they appear fancy free, it is probably because 80% of them are unmarried, in contrast to the GenXers, where only 15% of them are unmarried.
So, GenXers (now in their 30s and early 40s) are understandably more family oriented, and that shows itself in different preferences from Millennials. The GenXers scored highest, in contrast to Millennials, Boomers and Seniors, in sharing in family activities, doing due diligence before buying any products, don’t take care of themselves the way they should, and a very interesting one, often buy products and brands that their children prefer.
Boomers – those born between 1946 and 1964 – they are the ones who score highest on the spending more cautiously, doing more DIY projects at home, are more spiritual, work at simplifying their lives and not surprisingly, feel that the kitchen is the center of their family lives.
Finally, Seniors, those 64 and beyond, are truly the last, but absolutely not the least. They have the highest net worth of any of the generations, with averaging $1,686,000 net worth. They have lived long enough to know the game, and more than the other generational segments, own a luxury car, have joined a country or golf club, own a Rolex and have a passport. They prefer to buy American-made, consult financial experts before deciding on money issues, and have a little left over for indulgences. They usually get top-of-the-line models when luxury options are offered.
“ 50% of millennials check their email & Facebook pages within 30 minutes of waking up ”
Interesting! But your research goes further, as there are newer emerging definitions within these generational frames – could you quickly define these?
Yes. We have a segmentation based on lifestyles and attitudes, and that identified four distinct lifestyle groups: Affluent Style Setters, Affluent Traditionalists, Affluent Individualists and Affluent Globalists. We have also profiled the “Emerging Alpha Affluents” – young up-and-comers who are on the track to become the “Alphas” (or power players) of tomorrow. They tend to be socially engaged, style setters, early adopters, gamers, technophiles and opinion leaders.
Taking a meta-view, how do you see emerging and evolutionary affluent trends and interests, based on this research?
Some of the most dramatic changes in the lives of the affluent over the past year involve their adoption of “new” media platforms. Nearly all of the affluent own cellular or wireless phones, and 45% own a smartphone – in other words, smartphones barely qualify as “new media” any more.
Their digital literacy and their discretionary income have combined to fuel their rapid adoption of the “newest of the new” digital platforms: tablets and e-readers. From 2010 to 2011, ownership of e-readers nearly tripled, to 13%, while ownership of tablets quadrupled, to 9%. We expect such strong growth to continue. Projections suggest that tablet ownership could double in the coming year, while ownership of e-readers may grow by 50%.
Technology, seemingly like everything else from the last decade, is viewed by the affluents as something of a mixed blessing. When we asked how their lives had changed over the past decade, “infused with technology” was the most widely cited answer. But equally telling are the phrases coming next on the list: “more complicated,” “more stressful,” and “focused on finding ways to do more with less.” In contrast, less than half said their lives had become “more fun” or “easier.”