Being rich, really rich, isn't what it used to be.
Rich once was synonymous with millionaire and conjured up visions of the high life, from diamonds and furs to fabulous getaways on foreign beaches. No more. Today, it takes multimillions if not billions of dollars to be considered part of the leisure class--and, thanks to the influx of dot-com affluence, the picture of wealthy consumption has changed just as drastically.
"To be rich today, you need to have at least $5 million just to match the buying power of someone in 1960 with $1 million," says Edward Wolff, an economics professor at New York University. "But to be considered truly wealthy, one needs at least a net worth of $10 million, with income of at least $1 million annually."
At the same time, the number of millionaires in the U.S. is growing, Mr. Wolff says, putting the total at about 4.6 million. In fact, the number of households with a net worth of more than $10 million has grown fourfold over the last 10 years, from 67,700 to about 350,000.
`MASS UPPER CLASS'
All of this adds up to a fast-growing--and newly competitive--market for the makers and purveyors of high-end luxury products and services as they scramble to meet the needs of a new breed of affluent.
"What we're seeing is the emergence of a true mass upper class," says Dan Brewster, president-CEO, American Express Publishing Corp. "One of every 10 households in America has an income of $100,000 or more annually."
This new upper class views luxury and conspicuous consumption differently than did previous generations, Mr. Brewster says. "They're not spending so as to be associated with a particular economic class, they're spending in ways that distinguish them as individuals."
But marketers, particularly those offering what Ira Matathia labels "elite" luxury products, have been caught off guard by the phenomenon of the new wealth and are just now beginning to gear up to appeal to this new luxury consumer.
"The demographics of the new wealthy absolutely means there have to be changes in how companies come to market," says Mr. Matathia, CEO of Brand Futures Group, New York, a marketing consultancy and unit of Young & Rubicam that tracks social trends and attitudes. "Many luxury goods marketers are lagging behind the trend--and they're just beginning to sort out how they're going to appeal to this new, affluent consumer."
What the new rich want most of all, it seems, are unique, customized experiences, whether in their choice of automobile, their vacations, their entertainment or their wine selections.
The true affluent/luxury purchaser, says Mr. Brewster, is the person who gets pleasure from knowing the regions of France, the types of vines, maybe even the weather conditions during harvest.
"It's the development of the expertise that's rewarding," he says. "It's part of the identity of the luxury consumer--that is, at least the part that is expressed through his or her purchases."
That need to know is a key difference between old money and new these days. "What separates the old rich from the new is the newcomers have a tremendous appetite for information, they want to learn what it means to be truly wealthy and affluent," Mr. Matathia says.
"The new rich are trying to figure out how to crack the genetic code of what it means to be associated with money," he says. "More and more, they're looking to the media, not so much to advertisers and marketers, to help them figure out what they need to know."
To reach that market, a significant number of new magazine titles have launched specifically geared toward the affluent, whether it's a title that concentrates on wealth, such as Worth and SmartMoney, or a particular aspect of wealth, such as Cigar Aficionado, says David Peeler, senior VP-general manager of Competitive Media Reporting.
"At the same time, we've seen the rise of CNN, CNNFN and CNBC, outlets that primarily target affluent audiences," Mr. Peeler says. "For the most part, these are media that didn't exist in the '80s."
Targeting both marketers and consumers, American Express Publishing last fall held its first annual Luxury Marketers Conference, bringing together top executives from luxury companies such as Ferrarri, high-end cruise lines, retailers and top-tier real estate purveyors.
"We want luxury marketers to look upon us as a resource to reach the luxury consumer," Mr. Brewster says. "We can provide considerable help in bringing together various interests for special events and opportunities."
The vast increase in information may be critical for marketers that want to reach this audience. "The new rich want help so that they can feel smart about their decision-making," says Bill McCaffrey, senior VP-associate director, strategic planning, Lord Group, New York. "But figuring out what they want information about, that's the difficult part, because these aren't the people who get into focus groups."
The creation of personal relationships between customer and marketer is key to reaching the affluent consumer today, says Tom Cordner, co-chairman-creative director at Team One Advertising, Los Angeles, a division of Saatchi & Saatchi. "Luxury marketing is about conveying space and silence. It's extremely experiential."
No longer is it enough to have a packaged safari on Africa's Serengeti Plains. "Every trip needs to be enriching, rewarding, fulfilling, experiential and, most of all, it has to be unique," Mr. Cordner says. "It's about having a life-changing experience, of looking for things that can be felt, touched. There's a sensuality about what they're seeking, and it's for things that they don't get in their everyday lives or in their high-technology jobs."
For example, in an advertising campaign due in the fall for the LS 400, Toyota Motor Sales USA's Lexus Division plans to appeal to the new affluence, the first time the luxury automobile marketer has taken that approach, Mr. Cordner says. He declined to elaborate on the campaign's creative direction; how-ever, it will be "directly aimed" at 28-to-38-year-olds, an age group overwhelmingly populated by millionaire dot-com entrepreneurs, he says.
"In the last 10 years, we've seen a fundamental shift in the value structure of the affluent consumer, and that does mean a shift in marketing to that consumer," says Baba Shetty, manager of marketing communications at BMW of North America. "What makes for a successful life now are experiences, both exciting and enriching."
`A BETTER PERSON'
Another marketer pitching experience over consumption is the Government of India Tourist Office, which aims its advertising directly at affluent individuals, a slice of the population it defines as having an annual income of at least $1 million.
Although its advertising budget is modest, in the $1 million range for the combined TV and print campaign, the appeal of the advertising is "that you're going to come back a changed and better person," says Paul Bernasconi, partner-creative director, Oasis Advertising, New York, which handles the India Tourism account. "We understand that individuals with tremendous disposable income are searching for a life-changing experience. They want to be challenged, not simply tour a country and bring back trinkets and more stuff."
"The rich, they have everything," Mr. Bernasconi says. "They already have the three homes, the yacht, the jet, the car. They are consumed by the search for new experiences, new challenges."
What they don't want, he says, is to be treated as some kind of uber-consumer--that is, only interested in things to buy. "Their need is to be marketed to as people," he says. "The mistake is to treat them only as a consumer, someone who can be won over simply by draping velvet over pearls."
In fact, shopping ranks only fourth among other spending opportunities, according to "How America Shops 2000," a study by WSL Strategic Retail, a retailing consultancy.
Among individuals with incomes of more than $70,000, the greatest change is that 54% say they are spending more on savings and investment vehicles, says WSL Partner Candace Corlett. "Only 16% say they are spending more money on shopping activities.
"They're not interested in bringing home more stuff," Ms. Corlett says. "Their closets are full, their attics are full, their garages are full. Shopping is last on their list of opportunities to spend money."
Copyright May 2000, Crain Communications Inc.