Discounts by prestige brands during the past two or three years of a weak economy have apparently been accepted by affluent and luxury consumers without diluting the stature of the brands according to a new Spring 2011 survey of the wealthiest 10% of US households by the American Affluence Research Center.

About 60% of the affluent in the new Spring 2011 survey, the 19th in a continuing series of twice-yearly tracking studies, say the discounts did not affect their opinion of the brands, while a quarter said the discounts motivated them to make purchases they may not have otherwise made. Only 5% said the discounts lowered the image/prestige of the brand.

This data suggests that the affluent recognize there are certain situations where discounting by prestige brands is reasonable and understandable, if not part of an ongoing practice. About half said discounts seemed to be a reasonable way to maintain sales during the past two or three years. Less than 20% said the discounts raised potentially negative questions about whether quality had been lowered to offset the discounts and whether prior prices and profit margins were fair.

Similar responses were elicited when asked about their opinion of discounts that prestige brands communicate via the internet or mobile devices only to past customers or to “members” of special “flash sale” sites.

There were some substantial differences within the age, income, and net worth categories. Those under age 50 and the higher income and net worth groups (all of which have a higher than average awareness of the “flash sale” sites) are more likely to make incremental purchases.

This data suggests that the affluent do not have a problem with situations where discounting by prestige brands is limited to special groups. About 39% said this type of discounting seemed to be a reasonable way to build sales.

The age 50+, women, and the higher net worth groups were a bit more skeptical or critical in their responses to both questions.

Participants in the American Affluence Research Center Spring 2011 survey have an average annual household income of $333,000, an average primary residence value of $1.2 million, an average net worth of $3.1 million, and average investable assets of $1.8 million.

A description of the survey methodology and other detailed highlights of the survey can be viewed at:
http://affluenceresearch.org/most-recent-tracking-study/highlights-of-most-recent-survey/

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In contrast to the March general Consumer Confidence Index of The Conference Board, which fell over 10% to the low levels last seen in Fall 2010, the affluent, who account for about half of all consumer spending, report a better outlook for the economy and their personal spending plans in a new Spring 2011 survey by the American Affluence Research Center.

Spending plans for all 17 products and services tracked by these twice-yearly surveys of the wealthiest 10% of US households are much stronger than in the Fall 2010 survey. There is also improvement in the plans to make major expenditures such as for a new auto, a cruise, and a vacation home. These results are consistent with reported sales during the first quarter of 2011.

Given the 11.4 million households represented by this survey, it can be estimated that the market segment represents potential purchases during the next 12 months of 2.4 million autos, 1.5 million home remodeling projects, 1.7 million cruise buyers (total of 3.4 million cruisers), 422,000 vacation homes, and 536,000 primary residences.

Men, those with a $6M+ net worth, and those under age 50 are the most likely to plan the acquisition of one or more of the 8 major expenditures listed. Most of the items have relatively large variations within age, income, and net worth segments. Reflecting a substantial amount of possible additional purchases, the “undecideds” or “don’t know” respondents are relatively numerous for autos (10%), cruises (8%), remodeling (5%), acquisition of a primary residence (4.1%), and acquisition of a vacation home (5.4%).

With the exception of the dining in casual/family restaurants index, which was unchanged, the index for all of the categories rose from the Fall 2010 survey, typically by 7 to 9 points.

The improvement has come primarily from increases in the “same” category and declines in the “less” category rather than increases in the “more” category.

In 16 of the 17 categories, two-thirds or more plan to spend the same or more during the next 12 months. There were 12 such categories in the Fall 2010 survey.

Domestic vacation travel continues to be the strongest category. Most of the categories are now higher than the Spring 2010 survey, when evidence of “frugal fatigue” first appeared in the surveys, and back to the levels of Spring and Fall 2008. The overall average is the highest it has been since 2008.

In 16 of the 17 categories, the segment with the strongest spending indexes is the under age 50 group. The differences within the gender, income, and net worth groups are generally minimal.

In general, the categories of services (vacation and leisure activities) appear to have somewhat better prospects than the other categories of tangible products. All three group spending indexes (home durables, leisure, and vacation travel) increased from the Fall 2010 levels, with the vacation travel category showing the most improvement and the other two groups up slightly less. All three groups are essentially back to 2008 levels.

Participants in the American Affluence Research Center survey have an average annual household income of $333,000, an average primary residence value of $1.2 million, an average net worth of $3.1 million, and average investable assets of $1.8 million.

A description of the Spring 2011 survey methodology and other detailed highlights of the survey can be viewed at:
http://affluenceresearch.org/most-recent-tracking-study/highlights-of-most-recent-survey/

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About 58% of the affluent indicated they are aware of at least one of the 12 sites listed in a new Spring 2011 survey of the wealthiest 10% of US households by the American Affluence Research Center. Those aware of any of the sites are aware of an average of 2.7 sites.

In the new Spring 2011 survey, the 19th in a continuing series of twice-yearly tracking studies by the American Affluence Research Center, awareness of at least one site increases as age declines and income increases. Women are more aware of at least one site, while the differences within the net worth group are minimal. Awareness of at least one site is much higher among those who own a smart phone and/or tablet than among those who only have access to a computer.

Zappos, which has a different business model and has been in business for about 12 years, is known by 54% of the respondents. It was included in the list to provide a point of comparison with the various “flash sale” sites. About 10% are aware of Gilt, and all other sites listed have less than 10% awareness. Among those aware of at least one site, over 90% are aware of Zappos. Gilt ranks second in awareness among the different groups. The relative awareness of certain sites varies by age, gender, and levels of wealth. For example, Gilt has a 24% share among those under age 50 and only a 12% share among those age 60+.

On average, about 40% of the affluent had visited at least one of the 12 listed sites at least once during the prior 90 days. There was a greater likelihood of having visited one of the sites as age declined, among women, and among those with $200K+ income. Women were more than twice as likely as men, and those under age 50 were more than twice as likely as those age 60+, to have visited one of the sites during the past 90 days.

Zappos was the site most likely to be visited, with a share ranging from 58% (among those with $6M+ net worth) to the high 80s among several segments. Gilt had the second strongest share overall, typically below 10% but as high as 25% of the $6M+ net worth group. As an average share, Zappos had 81% and Gilt had 13%.

The owners of mobile devices (smart phones and/or tablets) are more likely to have visited one of the “flash sale” sites during the past 90 days than those with access to only computers (36%). Those with both tablets and smart phones were most likely to have visited one of the sites (55%).

Zappos was highly favored over all the other sites among the owners of all the various devices. Its share was lowest among tablet owners (63%) and highest among those who have access only to a computer (87%). Gilt had the second highest share and was strongest among those with a tablet (about 22%).

About 39% of the affluent have ever made a purchase from one of the sites listed. On average, they have purchased from 1.2 sites. The incidence of at least one purchase increases as age declines and income increases. Women are more likely to have made a purchase by a margin of two to one over men.

About 87% of those who have made a purchase did so from Zappos. Gilt ranks second in purchase incidence among all groups, with the exception of those age 60+ and those in the lowest and highest net worth groupings. RueLaLa is a close third.
Participants in the American Affluence Research Center Spring 2011 survey have an average annual household income of $333,000, an average primary residence value of $1.2 million, an average net worth of $3.1 million, and average investable assets of $1.8 million.

A description of the survey methodology and other detailed highlights of the survey can be viewed at: http://affluenceresearch.org/most-recent-tracking-study/highlights-of-most-recent-survey/

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Only 1% of the affluent lack access to the internet according to a new survey of the wealthiest 10% of US households by the American Affluence Research Center. Roughly one-third of the affluent have access only through a computer, while the remainder own a smart phone or a tablet as well.

In the new Spring 2011 survey, the 19th in a continuing series of twice-yearly tracking studies by the American Affluence Research Center, only half (50%) of the affluent with a mobile device and/or computer participate in one of more of the social media. On average, they participate in about 1.5 types of the social media listed.

Participation in social media declines as age and net worth increase. Men participate a bit less than women because they are much less likely to participate in Facebook (33% versus 49%). LinkedIn is somewhat more popular among those age 50 to 59 and those with a $200K+ income.

As might be expected, owners of both smart phones and tablets are most likely (70%) to participate in some form of social media. On average they participate in 1.8 types of social media. Those with access to only a computer are least likely (69%) to participate in some form of social media.

Among the half of the affluent participating in some form of social media, about 80% of these people participate in Facebook and almost 60% participate in LinkedIn. Only 10% seem to participate in Twitter, which has its highest share (22%) among those who own a tablet and those who own both a smart phone and a tablet.

Only 26% of the respondents who use social media for any reason say they receive regular communications from a manufacturer or retailer to which they subscribe to receive product and related information. Since only 50% of the affluent say they use social media for any reason, this means only about 13% of the affluent use social media to receive regular communications from a manufacturer or retailer. Facebook is the most popular social media for “commercial” purposes, and on average, is connected to about 9% of the affluent for this purpose.

In contrast to the general use of social media where there are some substantial differences by age, gender, and net worth, the “commercial” use of social media varies more by gender and income. Among the affluent using social media for “commercial” purposes, Facebook has a share that ranges from 50% (among $6M+ net worth) to almost 75% among several segments of the affluent.

Among all those who participate in social media to receive regular product information from a business (manufacturer or retailer), Facebook has about a 69% share and is generally favored over the second most popular media by a margin of 3 or 4 to one. On average, these respondents participate in 1.2 types of social media to receive regular product information from a business. Only 11% seem to participate in Twitter, which has its highest share (37%) among those who own a tablet and those who own both a smart phone and a tablet.

Those who only have a computer give Facebook a 63% share and say they do not participate in Twitter. These respondents are most likely to say they participate in a type of social media not listed (17%).

Participants in the American Affluence Research Center Spring 2011 survey have an average annual household income of $333,000, an average primary residence value of $1.2 million, an average net worth of $3.1 million, and average investable assets of $1.8 million.

A description of the survey methodology and other detailed highlights of the survey can be viewed at: http://affluenceresearch.org/most-recent-tracking-study/highlights-of-most-recent-survey/

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April, 2011 – This Luxury Daily article discusses Audi’s strategy is to gain exposure and to develop a good feeling among the affluent audience (http://www.luxurydaily.com/audi-taps-stephen-colbert-to-win-fans-in-sailing-sponsorship/).

By Rachel Lamb

German automaker Audi has partnered with Stephen Colbert in the Charleston Bermuda sailing race where the comedian will be the honorary captain of the boat.

Sailing, similar to polo, golf and tennis, attracts an affluent audience. Audi is using a popular figure to build awareness throughout the event and attract fans more likely to buy its products.

“Audi has a long-standing relationship with Stephen Colbert and is happy to support him on his race to Bermuda,” said Andrew Lipman, communications manager at Audi of America, Hernon, VA.

“Mr. Colbert is an Audi driver and over the years we’ve worked with him in various capacities,” he said. ”Audi is a brand that stands for progressive luxury and redefining the affluent experience, and Mr. Colbert reaches an audience that is like-minded.

“The partnership is a natural fit. With Mr. Colbert, Audi is giving enthusiasts another reason to enjoy the brand and have fun with the experiences Audi offers.”

The partnership was made public at the New York Auto Show on April 20 in a presentation with Mr. Colbert and Audi of America president Johan de Nyschen.

Off to the races
“The Audi” yacht will feature the trademark Audi rings on its sail. It is a 65-foot-long ocean-racing yacht.

The Charleston Bermuda Race, beginning May 21, will travel around the infamous Bermuda Triangle.

Besides Audi, other sponsors include Gosling’s Black Rum, Garden & Gun and Chelsea Clock.

The biennial race is said to have been one of the most difficult races in the Western hemisphere.

This is Mr. Colbert’s second time competing in the 777-mile race, but his first year as “Morale Officer.”

The race kicks off in Charleston Harbor, SC, and ends in Bermuda. A three-day celebration will follow.

Audi will provide real-time updates on Mr. Colbert’s progress as he crosses the Atlantic.

The Charleston Bermuda Race Facebook page includes additional information about the event, including a promotion with Steven Colbert from his show, “The Colbert Report.”

“Sailing competitions attract a very affluent audience of fans and participants,” said Ron Kurtz, principal of the American Affluence Research Center, Atlanta.

“The brand’s strategy is to gain exposure and to develop a good feeling among the affluent audience and participants in this event,” he said.

Audi toity
Old-world sports such as racing, sailing, polo and golf have been frequently linked to affluent consumers.

For example, Hugo Boss dedicated a mobile application to let consumers follow the brand’s journey during the Barcelona World Race 2010/11 via videos, images, blogs and tracking the voyage on a map (see story).

Meanwhile, Rolex used its sponsorship of US Sailing Rolex Miami OCR Olympic and Paralympic championships to reach affluent, athletic males that represent the brand’s target audience (see story).

“This gives [Audi] a connection with and exposure to an affluent audience and the participants that appreciate the corporate support that is necessary to fund such events,” Mr. Kurtz said.

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April, 2011 – This Luxury Daily article features AARC research about affluent people’s use of social media (http://www.luxurydaily.com/50pc-affluent-consumers-do-not-use-social-media-affluence-research-center/).

By Rachel Lamb

Approximately half of upscale consumers do not use social media, which makes some experts wonder if a brand’s primary marketing is being misplaced online, according to a study by the American Affluence Research Center.

Of the half of affluent consumers who do use social media, only approximately 12.5 percent claim to get regular product information and news from brands’ social media accounts. Although social media is a great way to reach younger consumers, customers who are more likely to buy luxury brands, namely older and more educated individuals, are not getting their information from social networks.

“Social media is getting a lot of media attention in being very important and a wave of the future,” said Ron Kurtz, principal of Atlanta-based American Affluence Research Center. “However, there aren’t any statistics to show what the size of the audience is on those sites, particularly among the affluent.

“People that wouldn’t be considered affluent are making up the bulk of the numbers, along with a lot of younger people,” he said. “There isn’t really a good understanding of why brands should be [emphasizing social media] for any reason.

“I haven’t seen any good research on it.”

The American Affluence Research Center bi-annual survey studied the top 10 percent of affluent U.S. individuals.

The participants have a minimum net worth of $828,000 and an average net worth of $3.1 million.

These consumers earn 36 percent of the total income of all U.S. consumers, own 63 percent of the personal assets of all U.S. households and hold 89 percent of the total value of all publicly traded stock and mutual funds in the United States.

Face who?
Brands who use social networks such as Facebook, Twitter and Tumblr have boasted numbers of followers, customer interaction and feedback from events and contests.

Although social media can be used to build relationships with consumers who could eventually buy luxury goods in the future, Mr. Kurtz said that brands could be better advised to focus their primary marketing efforts on the customers who are able to purchase right now.

To go along with this, the Affluence Research has confirmed that upscale consumers are very much inclined to start spending again.

Although the depression was not too wounding to the truly affluent, the stock market plunge definitely affected spending habits.

For instance, males with a net worth of more than $6 million under 50 are the most likely to plan the buy of one or more major items including a new car, sailboat, house remodel; buy a new residence or vacation home; take a cruise or build a new residence or build a new vacation home.

“This is such as positive time, especially after the negative customer confidence survey in March,” Mr. Kurtz said. “Consumers are much more ready to spend on big purchases, almost up to where they were before the recession.”

Where’s (wealthy) Waldo?
If consumers cannot reach the majority of their target audience via social media, what steps need to be taken?

“I understand that brands want to connect with customers from the beginning to build a base foundation,” Mr. Kurtz said. “But it shouldn’t be the priority.”

Traditional media, such as direct mail, customer referrals and catalogs, are probably the most effective ways to reach affluent consumers.

Some brands, such as Harrolds department store in Australia, have completely opted out of the Internet and mobile and rely solely on word of mouth and mailers (see story).

“I’m not totally excusing all other types of media because I believe that businesses should have a well-rounded strategy which does include mobile and Internet marketing,” Mr. Kurtz said.

“But the best sources of business are referrals from existing customers, instead of solely trying to get prospective customers,” he said. “There are also a host of different activities including joint promotions and media publicity that are very important as well.”

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April, 2011 – This Luxury Daily article discusses how direct mail can incorporate various types of media to communicate a strong message (http://www.luxurydaily.com/jo-malone-tea%e2%80%99s-off-new-scents-with-bloomingdale%e2%80%99s-mailer/).

By Rachel Lamb

Fragrance and candlemaker Jo Malone takes over the Beauty Blooms Bloomingdale’s spring mailer with an independent fold-out sleeve promoting its new tea fragrance blends.

The Bloomingdale’s mailer advertises cosmetics and fragrances from brands such Marc Jacobs, Prada, Clarins, Nars and Yves Saint Laurent. Jo Malone’s fold-out mailer describes a few of the fragrances, with Internet and in-store calls-to-action and incorporating a sample of one of the colognes.

“Direct mail can incorporate various types of media to communicate a strong message,” said Ron Kurtz, principal at American Affluence Research Center, Atlanta. “Or it can be as simple as a strong letter encouraging people to visit a company’s Web site.

“For companies that need to reach truly affluent consumers, direct mail is probably the most cost-efficient and cost-effective method for making initial contact with potential prospects, much more so than even upscale magazines,” he said. “It can also be used to interact with existing clients to build rapport and loyalty.”

American Affluence Research Center is not associated with Bloomingdale’s or Jo Malone. Mr. Kurtz agreed to comment as a third-party expert.

Jo Malone did not respond and Bloomingdale’s could not offer comment by press deadline.

Normal mailer?
Five colognes are advertised in the Jo Malone mailer. Three are used as scents that can stand alone and two as accents to the others.

When consumers open the brochure, they must unfold one of the four sections at a time, each of which explains one cologne.

As consumers unfold the brochure, the cologne that was just described is portrayed as a vivid image on the opposite side of the fold.

When the entire brochure is unfolded, four images of the fragrances surround a middle section describing the tea fragrance collection.

The Jo Malone mailer also encloses a sample of one of the scents in a take-out sleeve. Customers are invited to go to a Bloomingdale’s location and take home a fragrance spray sample of their choice.

Customers can also visit http://www.bloomingdales.com/jomalone and will receive a complimentary Orange Blossom fragrance spray sample with any Jo Malone purchase.

The Bloomingdale’s mailer also introduces spring-inspired luxury products with digital and in-store calls-to-action.

Direct mail recipients are alerted to the fact that they can receive free gifts and beauty products at a current in-store event and that they can earn rewards points by using a Bloomingdale’s card.

Mail chauvinist
In an increasingly digital world, some luxury brands are looking toward social media, ecommerce sites and mobile to attract potential clients.

However, Affluent Insight’s Mr. Kurtz says that direct mail is one of the best ways that brands can start relationships with new customers.

“Many people think email is a good substitute for direct mail to make initial contact, but it is deceptively inexpensive and difficult to use for targeting truly affluent consumers,” Mr. Kurtz said.

Like in the case of Jo Malone and Bloomingdale’s, brands tend to use direct mail to entice consumers to other channels such as mobile, in-store and online.

The Jo Malone mailer attracts consumers’ with sight, smell and touch, which is more than recipients can get with online interaction. Moreover, the mailer has the chance to reach potential consumers by being sent out with the regular Bloomingdale’s spring brochure.

“It is necessary to make a distinction between making initial contact with a potential prospect and communicating to someone with which contact or a relationship has already been established,” Mr. Kurtz said.

“Direct mail is an active or assertive way to make contact with a potential prospect, whereas waiting to be discovered online is a passive approach, as is traditional media advertising in some respects,” he said.

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