When the affluent are spending, they drive the economy and create demand for a wide range of goods and services -- not only luxury items. When they pull back, the impact is felt at all levels. Understanding them is crucial for brands, agencies and anyone paying attention to the financial well-being of the market in general. For 35 years Ipsos Mendelsohn has been conducting annual surveys about the affluent, building a wealth (if you will) of information about their demographics, spending habits, attitudes and media consumption. In 2009, Ipsos Mendelsohn launched its monthly Affluent Barometer survey, which keeps its finger on the pulse of the affluent in today's turbulent economy and rapidly changing world.
Welcome to Affluency, a new monthly column on AdAgeStat by Bob Shullman, president of Ipsos Mendelsohn. Each month he will highlight the newest information from their ongoing tracking program with insights needed for advertisers, marketers and agencies to reach this valuable market segment.
The reality of today's economy is that a relatively small percentage of households account for most of the economic activity in America. To some, this fact is a celebration of achievement and meritocracy, benefitting all through "trickle-down" economic activity; to others, this fact is a sign of America's bedrock middle and working classes being squeezed out of the American Dream.
There is no debating the facts. When the Mendelsohn Affluent Survey was first launched in 1977, it surveyed those making $40,000 in annual household income. Believe it or not, that seemingly modest income reflected a very small percentage of the U.S. households at that time -- about 5%. Today, we survey those with at least $100,000 in annual household income, reflecting roughly 21% of the U.S. population. These 58 million affluent adults and 24 million affluent households receive about 60% of U.S. household income, and hold about 70% of U.S. net worth, according to the most recent government surveys.
But the influence of the affluent on the American economy, and American society, is even more pervasive and profound. Across the 140 product and service spending categories we measure, on average affluents are twice as likely to make purchases of these products and services, and on average spend three times as much when they do make a purchase. Many of the affluent are business leaders --those whose decisions to expand or contract, to hire or fire, shape the future of the American economy. For those of us in advertising and media, the affluent are "harbingers of media paradigms to come" -- virtually all (98%) are online, they are digitally fluent, and their discretionary income has helped them become early adopters of tablets, e-readers, and new platforms in general. Their importance to marketers cannot be overstated.
As we review the past two years, our monthly Mendelsohn Affluent Barometer shows that the key indicator of optimism about the U.S. economy bottomed out in August 2010 at 40% (what economists would call the local minimum), rising to 53% in March 2011. But the ride has hardly been smooth. After steady increases throughout the fall of 2010, optimism spiked at 57% in December 2010, spurred in part by 68% approval ratings by the affluent for the bipartisan compromise extending the Bush-era tax cuts, extending unemployment benefits, and cutting selected taxes. Holiday sales were strong, luxury retailers did well and hope was in the air.
But expectations returned to earth in the post-holiday season, as optimism about the economy fell to 52% in January. Fewer affluents began to expect a recovery in 2011, with more expecting a recovery not in 2012, but 2013. Optimism about the economy fell again in February, to 49%, and those listing "peace in the Middle East" as one of their top three concerns understandably jumped from 10% to 30% with the unrest in that region and its potential impact on our oil supplies.
So the fact that 53% are optimistic in March is a figure best taken in context. It is a modest rise from February, and far above the 40% of August 2010. But it is also the latest in a series of event-driven gyrations that seem to reflect a skittishness, an optimism that can be easily shaken, a set of expectations about the future that are not stable and malleable.
Add to today's skittishness an increasing sense of "when it rains, it pours." The March 11 earthquake and tsunami in Japan, and its nuclear aftermath, haven't (yet) strongly shaped expectations of the U.S. economy, but they have certainly commanded attention and emotional resources. Indeed, affluents reported consuming an average of more than 10 hours of media coverage related to the tragedy during March, using all various media platforms available. Ninety percent have followed it on TV, 65% on the internet, 57% in newspapers, 32% on the radio and 16% in magazines.
Clearly it is a time of rapid change -- on the world stage, in the domestic economy, in the advertising and marketing milieus, and in the lives of today's affluents. As I look ahead to future columns each month, my team and I will do our best to keep you abreast of the latest developments.