I was recently watching to my local television station in New York City, where I learnt that our billionaire Mayor, Michael Bloomberg, had spent over $100 million of his own money – in just five months – to gain re-election. It was an important point for luxury marketers: the super rich have no problem spending lots of money when properly motivated.
The depth of their pockets to purchase from you is virtually unlimited. To me, it is a marketing challenge if I ever heard one: very rich consumers who can buy more and more, and become the customers of dreams. But how to catch their attention?
The latest round of annual reports on the super rich from Wealth-X, RBC/Cap Gemini, Wealth Insight, Citi Private Bank/Knight Frank are out and we can say the world of Ultra High Net Worth Consumers (UHNW) from a marketing perspective is a relatively small audience at the top end, at approximately 185,000 families worldwide. In other words, it isn’t about reach, it is about targeting.
“ The super rich have no problem spending lots of money when properly motivated ”
The combined Net Worth of these families is estimated to be as high as $40 trillion. In other words, this elite group could pay off the United States deficit ($14 trillion) and still have Net Worth higher than the GDP of the U.S. ($15 trillion) and China ($7 trillion) combined.
Most interesting to marketers, the Ultra High Net Worth section probably controls as much as 50-60% of all worldwide High Net Worth Wealth. In other words, the consumers who can spend the most also have more “wallet potential” and are the least likely to be impacted by global slowdowns as a group, according to these reports.
While I certainly understand the Mass Affluent woman who saves to self-purchase a $3,000 bracelet or handbag and shoes or go to Australia (it’s all about choices) every 18 months if things are going well is important, these aspirational consumers are not “heavy users” and are the most prone to cutting back.
“ Aspirational consumers are not “heavy users” and are the most prone to cutting back ”
But back to the super rich. Over the summer a stream of reports came out these UHNWs – a group generally categorised as having a minimum net worth of $30 million – were actually richer than we thought. The reports claimed these families had an extra $10 trillion in overseas accounts previously unknown.
It got me thinking, what would $10 trillion buy from the luxury industry? So with some help from statistics from Boston Consulting Group here you go:
- Every Swiss watch exported for the next 526 years
- Every designer dress or suit made for the next 200 years
- Every designer hand bag, wallet, pair of shoes or traveling bag – in other words – leather goods and accessories – for the next 200 years
- Every room and suite in every luxury hotel, resort or spa for the next 180 years
- Every luxury automobile for the next 40 years
As one luxury marketing executive told me when discussing the above, “We need to do a better job getting them (the UHNWs) to spend.”
“ The combined worth of UHNW families is estimated to be as high as $40 trillion ”
Research by Prince & Associates, a specialist in Ultra High Net Worth consumers, based on interviews with over 600 private jet owners who read Elite Traveler, shows these consumers do in fact already buy quite a bit. Approximately a third buy high-end watches annually, spending $147,000 per household. Nearly 90% buy fine jewellery spending close to $250,000 annually, and over $100,000 per year on fashion.
They also spend over $400,000 on hotels, resorts and spas. What’s more, research by Prince with Family Offices (households with over $100 million net worth) affirmed spending in luxury category with actually higher than pre-Recession. And the fact is they can spend more – if motivated through smart marketing.
On my last trip to Switzerland, I was having a coffee with some business colleagues. They had recently been in New York with a friend who is part of a Middle Eastern Royal Family. With a free afternoon they accompanied him stopping in various stores on Madison Avenue.
“ 30% of UHNW families surveyed spend $147,000 on high end watches annually ”
In a few short hours, four individual stores had each made sales in the six-digit range. It was purely accidental In Louis Vuitton, my friend was looking at a bag, declining to buy it as she could get it back home for about $400 less. Their friend said simply, “buy it for the memories – you were with me in New York” and added it to his tab.
Of course the key to tapping these Ultra High Net Worth consumers is the understanding that they are a global entity. Research from the National Business Aviation Association shows private jet fliers make some 41 trips per year (over 100 flights) and Prince shows they make some 11 international long-haul trips.
Burberry CEO Angela Ahrendts tabbed them “traveling luxury consumers” while a Richemont executive called them “homeless with 20 homes.” Richistan author Robert Frank even identified them as their own global country, with more in common with each other than the citizens of their country of origin.
“ Nearly 90% buy fine jewellery spending close to $250,000 annually ”
They see each other in Davos, the South of France and Sardinia in the summer, Aspen and Gstaad in the winter, New York and London for Board Meetings or when they are speaking at forums and lots of spots in between.
If we start with the premise that advertising works – after all it seems to have worked for Coca-Cola – the super rich, despite these statistics, are still probably the most ignored media market in the world. Most of the big luxury houses split budgets to dozens of countries, yet virtually ignore that their best customers and prospects live a global lifestyle.
Part of the challenge is much of the research that ad agencies use, to guide their media planning to target mass affluent consumers ($100,000 to $400,000), is not useful when targeting the super rich (Household Income $1 million + and often much higher). Furthermore it is often country centric, not global.
“ UHNW’s are global. A Richemont executive described them as “homeless with 20 homes” ”
That said, it doesn’t take a rocket scientist to understand that consumers making $150,000 or even $300,000 before taxes, mortgages, tuitions, home repairs and the type of bills many of us enjoy, simply are not the consumers who are the “heavy user” of luxury goods and services.
By contrast there were over six million private jet flights last year, and the cost to fly privately fully calculated ranges from $5,000 to $10,000 per hour, so I always feel comfortable saying there aren’t many poor people on private jets! It is a targeted market where one reaches the super rich family together, talking about where they want to go next, what to get for the next birthday, anniversary or even just next trip.
When one considers the Mayor Bloomberg example, the concept is clear. Luxury brands could create a more stable future if they can do a better job of making sure their products are top of mind and desired with the super rich.
After all, if these UHNW consumers don’t even know you make it or can do it for them, chances are they don’t desire it. Global advertising both ensuring top-of-mind for your company and educating the super rich on your products and services is a key element to support your local markets where today as much as 50 percent of mono-brand store sales come from people who are “out of market.”
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