May, 2014 – This article from Media Post discusses that the vast majority of those with a net worth of $1 – 5 million are likely to be big savers and not conspicuous or pretentious consumers. (http://www.mediapost.com/publications/article/224957/appealing-to-the-millionaire-next-door.html)
By Gary Leopold
There’s no question that the ultra rich and the glitterati get all the attention when you start to discuss luxury marketing, but the reality continues to be that most of the truly affluent people in America look much more like you and me than they do the celebrities and business elite that dominate our perceptions.
According to researcher Ron Kurtz and his American Affluence Research Center, net worth, and not income, is the truest barometer for measuring affluence (a belief supported in research done by the Federal Reserve Board and the IRS), and his latest wave of research shows that travel brands still have work to do to penetrate and appeal to this audience.
No stranger to travel, Kurtz was formerly VP of Pacific marketing at Pan Am, CMO at Quality Inns, chief marketing officer at Norwegian Cruise Line and president of Sea Goddess Cruises. He’s been tracking the affluent market twice a year for the past 12 years, and his surveys look at their behavior and attitudes across a wide range of consumer categories, including travel.
The surveys focus on the wealthiest 10% of U.S. households, each with a minimum net worth of approximately $800K. The top 5% have a minimum net worth of approximately $1.5 million and the top 1% have a minimum net worth of approximately $6 million.
Unlike other studies that merely look at income, Kurtz believes that income tends to be fleeting and often volatile, a point driven home in a recent New York Times op-ed piece from Mark Rank headlined “From Rags to Riches to Rags.” The article cites a study done by Cornell that showed 12% of the U.S. population will find themselves in the top 1% of the income distribution for at least one year. That 39% of Americans will spend a year in the top 5% of the income distribution and 56% will find themselves in the top 10%. Yet, only 0.6% of that top 1% will do so over 10 consecutive years.
Just as striking is the reality that 54% of Americans will experience poverty or near poverty at least once between the ages of 25 and 60.
This data would seem to challenge the notion of a rigid class structure within our country. It also speaks to the need for travel brands to recognize that there may be a good number of new members in their “target audience” each year that need to be educated and motivated, and who previously may have had little opportunity to be exposed to luxury brands or place them within their traditional consideration set.
Kurtz is a strong proponent of the work of Dr. Thomas J. Stanley who penned the best seller The Millionaire Next Door and spotlighted the reality that the vast majority of those with a net worth of $1 – 5 million are likely to be big savers and not conspicuous or pretentious consumers.
In fact, Kurtz believes that the opportunity for travel brands lies in educating these “millionaires next door” to better understand and appreciate what they are missing in life. Raised in the middle class, this audience isn’t used to spending on travel, especially at the luxury end of the market. He believes they may not be fully aware of things that might be passing them by, and Kurtz has consistently found that only about 10% of these affluent consumers are familiar with the true luxury brands and their price points. Kurtz declares, “Too much emphasis from brands has been spent talking to and about the glitterati which isn’t at all the world that these folks live in or care about.”
Perhaps it shouldn’t be a surprise that the study reveals that the affluent most frequent retail stores like Costco, Home Depot and Target.
Included in the latest wave of research were a series of questions related to the cruise industry. What the research discovered is that less than half of these affluent consumers have taken a cruise in the past 10 years and those that do cruise are only taking an average of one cruise every three years. Equally surprising is that while they experience high levels of satisfaction with these trips, they have not been stimulated to take them more frequently.
When asked to rate their awareness and experience levels with 19 cruise brands listed in the latest survey, both measures scored very low. And when they were asked their familiarity with specific luxury cruise providers, the scores were even lower.
From his perspective, Kurtz believes travel brands need to better create stories rich in visual imagery, that explain the quality and craft of service, accommodations and other features of the product. Similarly, he sees opportunities for travel brands to showcase experiences that can provide emotional enrichment, bring together family and friends, and reinforce the fact that members of this audience have earned the opportunity to discover and experience more of life and the world.
Clearly, the affluent don’t all take luxury trips and not all luxury trips are being bought by the affluent. Travel remains both an aspirational and inspirational product and this latest research would seem to reveal that there’s still considerable room for luxury travel brands to appeal to more of these millionaires next door.