Boom, Boom, Boom

Image courtesy of secure.nexgenfinancial.ca By Christoher Zoukis

Baby boomers are people who were born between 1946 and 1964, according to most experts. The sheer size of this group of people is mind-boggling. There are approximately 75.8 million baby boomers. Put another way, they make up one-third of the population in the United States.

Generally speaking, baby boomers range in age from 45 to 65. Many of them are what demographers call “empty nesters,” which means the children have left home. This means that a tremendous amount of income that was formerly spent on “the kids” has now become discretionary income. According to Ken Dychtwald, CEO of Age Wave LLC, baby boomers take home $2 trillion per year and, as a group, embody 50% of all discretionary spending. They control 70% of all the wealth in the United States. They own 77% of all financial assets. They own and use 50% of credit cards in the United States. Fully 80% of the money deposited in savings accounts belongs to the baby boomers. And 50% of all luxury cars sold are purchased by baby boomers.

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Sensation Transference and Marketing

Christopher Zoukis

What does all of the aforementioned information reveal about the affluent self-made customer? For one, they are pretty much the same, regardless of age or gender. All are strong personality types, who have struggled and worked hard for everything they have achieved. Extreme independence sums up their psychological profile. They do not believe in luck, and the words “cannot” and “no” are not in their vocabulary. Whereas when a seller of luxury goods or services says “yes” to them, regarding a request, they keep coming back, because they like and approve of the sellers “can do” attitude.  It reminds them of themselves.  Image courtesy parfumo.net

The affluent self-made like doing business with people who have common sense, specialized knowledge, self-confidence, creativity, leadership ability, and who are self-reliant and get things done. And because they are self-made, they look for value. This means they will negotiate over price, and like to think they’re getting a good deal.

The psychological factor to remember when marketing to the self-made affluent customer is this: they need to “feel right” about a luxury purchase. If they “feel right” about it, they will part with their hard-earned money.  “Feeling right” about a luxury purchase involves a concept called “sensation transference.” Defined by a man named Louis Cheskin, sensation transference is when a customer unconsciously transfers his perception of the way a product is packaged over to the actual product. To put it another way, most customers do not distinguish the package from the product. To most customers, the two concepts – the packaging and the product – are one and the same. Which explains the old adage, “Packaging is everything.”

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Attraction Marketing

Image courtesy miniwatts-email-marketer.com By Christopher Zoukis

According to the Luxury Marketing Council, the regular retail mass market experiences a 4% to 6% growth annually. Contrast those numbers to the annual growth of the luxury retail market, which has averaged growth of 20% to 32% each year for the last fourteen years (from 1998 to 2012).  Forecasters predicted the luxury market would approach $2 trillion per year in 2014. 

Who is purchasing all these luxury products? There are 2.7 million customers in the United States with liquid portfolios of $1 million or more. Of those 2.7 million affluent customers, 1.2 million have a net worth of over $5 million. And their numbers are increasing at the rate of 100,000 per year. Add to that the fact that there were 215 million people in the United States over the age of 50 in 2010. This means over the next 20 years $12 trillion in inheritance will change hands. 

The rich are definitely getting richer

Of those getting richer, 10 million of them are self-employed women, entrepreneurs who are running and growing their own businesses. In fact, at least 20% of the people in the workforce are self-employed, and they control a whopping 70% of the wealth. Of those classified as ultra-rich, 50% are self-employed.

The U.S. Census reports provide much interesting information about the affluent self-employed. Seventy

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Marketing: Online Packaging Is Everything

By Christopher Zoukis

Affluent customers are eager to spend their money on luxury goods and services. Yet as eager as they are, they do not simply spend their money willy-nilly. They do research, read reviews and recommendations, and seek advice. The advice they accept and trust the most comes from two sources: word-of-mouth referrals, and suggestions presented by the media. In other words, affluent customers are influenced in making luxury purchases.

According to Helen Leggatt, 43% of affluent Americans are influenced by the internet in their buying decisions. Another 30% are influenced by magazines, 29% by experts, and 19% by radio, television, and direct mail.  Image courtesy of dotcomsecrets.com

Ipsos Mendelsohn performed a survey of affluent customers in 2011. The results were summarized by e-Marketer:

Affluent customers who made more than $250,000 per year spent the most time online. In fact, the survey found that the higher the income level, the more time spent online. Those in the $250,000 category spent 27.4 hours per week on the internet, 17.8 hours per week watching television, and 10.9 hours per week listening to the radio.

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Marketing: Positioning, Recognition, Exclusivity

By Christopher Zoukis

For example, a company sells ultra-exclusive cell phones. The company has targeted the ultra-rich as its desired customer. To utilize Tony Hawk, the world-famous skater, as the company’s marketing face would be a gross error. Why? Simply because very few ultra-rich customers would recognize Tony Hawk. There is no recognition factor. Thus there is no positioning of the product, no emotional connection. The ultra-rich do not “want to have it.”

A number of different marketing techniques are available when celebrities are used. The most obvious method is advertisements on television or in upscale fashion magazines such as Vogue, W, or Very. This type of marketing depends on the connection between the celebrity and the luxury product. Examples of this method were mentioned previously, and included Madonna, and Demi Moore.  Photo courtesy www.lexusclub.com.sg

Another wildly beneficial method is the placement of luxury products or brands in movies, television shows, and even books. A few recent examples include BMW cars in the James Bond movies, Audi high-performance luxury cars in Transporter 2, and the movie Sex and the City, which featured Jimmy Choo and Manolo Blahnik. Two examples of books that did the same thing were Malcolm Gladwell’s The Tipping Point, which made public Hush Puppy shoes, and William Gibson’s Pattern Recognition, in which Tommy Hilfiger played a prominent role.

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Marketing: The Recognition Factor

By Christopher Zoukis

The number one most desired brand in the world is Gucci, which also owns Yves Saint Laurent and Sergio Rossi. Michael Macko, who is the director of fashion at Saks Fifth Avenue, explained to Forbes why Gucci is so alluring. “Gucci manages to offer high fashion and very commercial items. That iconic red and green stripe is some of the most iconic luxury branding ever created, and people want a piece of it.”

When Gucci opened its store in New York City, they planned their marketing carefully. First, a grand opening that was well-advertised; second, the launch of a “Gucci Loves New York” handbag collection; and third, all profits from the handbags went to a charitable cause, which was also well-advertised.  Photo courtesy examiner.com

The second most desirable brand in the world is actually two brands, Chanel and Calvin Klein. The two brands tied. Chanel’s success is attributed to its relevance, according to Forbes. Which means constant refreshment of products in the area of styling. Chanel’s luxury products are timeless. Marketing of this ageless quality is accomplished by identifying the products with the most beautiful women in the world. Chanel’s current celebrity symbol is Vanessa Paradis. Her presence implies exclusive beauty.

Calvin Klein’s world-wide sales were $4.5 billion in 2006. In 2009, that number increased to $5.8 billion. The appeal of Calvin Klein’s luxury products is due to the company’s contemporary designs, which present an image of cool arrival. Calvin Klein’s marketing revolves around the deliberate presentation of this carefully fostered image of cool confidence, which speaks to the desires.

Christian Louboutin and Jimmy Choo hold down the final spots in the world’s most desirable brands.

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Marketing: The Emotional Factor

By Christopher Zoukis

So-called “rich” people sit at the pinnacle of the financial pyramid.  Even the so-called “moneyed” category, those making $200,000 or more per year have access to more money than 97% of the population in the U.S. This means wealthy people compose an elite group, a group that is separate from all other groups, in a financial sense. Like any other homogenous group of people, wealthy people tend to think and act the same as other wealthy people. This is an example of acquired behavior, which takes place because wealthy people socialize with other wealthy people, just as any group with definite characteristics tends to socialize with those of similar characteristics. They feel comfortable with people who are “like” them.  Image courtesy aytm.com

This tendency explains why there is a Croatian enclave in Sacramento, California; a Dutch enclave in Ann Arbor, Michigan; and German Baptist enclaves in Pennsylvania.  People feel comfortable around other people who are similar to them. It also explains why people from an upper-middle-class suburban area feel uncomfortable around outlaw biker gangs. Each of these groups is distinct from the others for any number of reasons, which means they acknowledge those in their group, because they are similar. This similarity draws them together.

Wealthy people prefer to associate with others of the same economic level. They feel comfortable with each other. This comfort-zone is as much psychological as economic, which means it is emotional. Any business or individual who desires to market and sell luxury goods and services to the affluent needs to recognize this elite psychology, and incorporate it into marketing. To put it bluntly, the wealthy feel and believe they are different and distinct from the other 97% of the population. In that sense, they are special. Feeling special is an emotion, and emotions need to be affirmed. Which means wealthy people crave acceptance, approbation, and confirmation of their uniqueness.

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Marketing: Recognition, Appeal, and Emotion

By Christopher Zoukis

So-called “rich” people sit at the pinnacle of the financial pyramid.  Even the so-called “moneyed” category, those making $200,000 or more per year have access to more money than 97% of the population in the U.S. This means wealthy people compose an elite group, a group that is separate from all other groups, in a financial sense. Like any other homogenous group of people, wealthy people tend to think and act the same as other wealthy people. This is an example of acquired behavior, which takes place because wealthy people socialize with other wealthy people, just as any group with definite characteristics tends to socialize with those of similar characteristics. They feel comfortable with people who are “like” them.  Image courtesy imit.com

This tendency explains why there is an Irish enclave in Boston; a Dutch enclave in Ann Arbor, Michigan; and German Baptist enclaves in Pennsylvania.  People feel comfortable around other people who are similar to them. It also explains why people from an upper-middle-class suburban area feel uncomfortable around outlaw biker gangs. Each of these groups is distinct from the others for any number of reasons, which means they acknowledge those in their group, because they are similar. This similarity draws them together.

Wealthy people prefer to associate with others of the same economic level. They feel comfortable with each other. This comfort-zone is as much psychological as economic, which means it is emotional. Any business or individual who desires to market and sell luxury goods and services to the affluent needs to recognize this elite psychology, and incorporate it into marketing. To put it bluntly, the wealthy feel and believe they are different and distinct from the other 97% of the population. In that sense, they are special. Feeling special is an emotion, and emotions need to be affirmed. Which means wealthy people crave acceptance, approbation, and confirmation of their uniqueness.

This desire for affirmation is normal and universal. Each human being wants to feel special, desires acceptance, and searches for approbation. Everyone wants recognition, including wealthy people. Even rich people feel unappreciated. They drudge through their projects, jobs, and daily lives like anyone else.

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E-Commerce: The Importance of Website Design

By Christopher Zoukis

Many affluent customers are influenced to make impulsive purchases of luxury goods or services by a number of factors. Why? Because even though they are rich, they are still human and they sometimes feel insecure, need acceptance, and desire recognition. According to research done by User Interface Engineering (UIE), impulse purchases made by affluent customers account for 40% of all online purchases. In determining what motivated such purchases, UIE made a fascinating discovery. Price was not the explanation. The explanation was found to be the way the website was designed.

UIE defined impulse buying as any spontaneous purchase. In other words, the online shopper bought something they had not intended to buy. Prior to the UIE research, most marketers believed the primary motivation for impulse buying was attributable to price. This belief was based on previous surveys done by The Yankee Group and Ernst & Young. Both surveys asked buyers why they made spontaneous purchases. Of those surveyed, 75% stated that a “sale price” had motivated them to buy something they had not planned on buying. Free shipping motivated 49% of online shoppers to make an impulse purchase. The conclusion was obvious: online shoppers made unexpected purchases because of perceived savings. Impulse buying was price-motivated.  Image courtesy masternewmedia.org

UIE disagreed with these results and decided to do their own research. Rather than asking people why they had made impulsive purchases, UIE observed people as they actually shopped online. UIE’s reasoning was that if online shoppers were actually making spontaneous purchases, the behavior should be discernible.

The results? Of affluent online shoppers, 34% made impulsive purchases, and spent 39% of their money on the impulsive purchases. Only 8% of the impulsive purchases could be traced to the price of the items bought. In other words, very few of the affluent shoppers were motivated by price when making impulsive purchases.

What did motivate the purchases? The UIE study indicated the primary motivating factor was awareness. When the affluent shoppers saw an item, they became aware of it. Awareness led to impulsive buying.

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Marketing: Impulse

By Christopher Zoukis

According to Paul Nunes and Brian Johnson, the authors of Mass Influence, most people generally buy with their emotions. Later, they justify their purchases with logic. In other words, people buy impulsively. They did not go into the store or go online planning to buy what they ended up buying. They were shopping for a particular item, but spotted something else. Curious, they examined it, and wanted it. So they bought it.

It is called impulsive buying.  Image courtesy googolplex.cuna.org

Statistics state that 20% of what shoppers buy at the grocery store is bought on impulse. However, the numbers vary widely based on other factors, such as if the buyer drove to the store or rode a bike, whether they are young or old, married or unmarried, and whether or not they consider themselves browsers or “fast and efficient” shoppers. Shopping online versus shopping in a traditional store makes a difference too. This will be discussed in more detail below.

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