Milton Pedraza, chief executive officer of the Luxury Institute, a research institution that focuses solely on the top 10 percent of America’s wealthy, says that a great body of mythology and popular lore surrounds the wealthy consumer. And that old world luxury CEOs and marketers continue to perpetuate these myths and forego a great deal of profitability as a result. In response the Luxury Institute published 10 myths regarding America’s wealthy and what to do to get beyond them:
1. The wealthy made their money easily and spend their money easily.
Most wealthy individuals spend far more hours working, embrace far more risk, and create far more value for society than their mainstream counterparts. Even today, for most, it still takes years of immense sacrifice to achieve wealth. Wealthy consumers are therefore very value conscious and discerning when they buy luxury goods and services. As a luxury provider, you need to recognize and acknowledge their achievements, deliver compelling emotional benefits, and position your offer as a complete experience that delivers a fitting reward.
2. The wealthy are conspicuous consumption machines living in another reality.
The minority of wealthy individuals who live ostentatious, opulent lifestyles are often portrayed as stereotypical wealthy consumers. In reality, most wealthy consumers are value creators, who seek quality and value, including authentic prestige, in luxury goods and services. Like many of us, some of their biggest concerns include taking care of aging parents and raising well-educated, generous children. When marketing to them, acknowledge their basic human values and show you understand them as the well-rounded and balanced individuals they really are.
3. The wealthy can’t really define luxury.
Put a list of brands in front of the typical wealthy consumer and she, or he, will not only be able to articulate the attributes that constitute a luxury brand, but will also discern differences between brands better than any luxury marketer. The ability of wealthy consumers to define true luxury, individually, and as a group, is laser-accurate. Ensure that your brand is truly unique and exclusive and worthy of being rated a luxury brand.
4. Luxury goods are a far larger industry than luxury services.
Luxury goods such as couture fashion, watches and jewelry, get all the attention, yet, are dwarfed by the size of luxury services such as wealth management, travel and leisure, security, etc. Innovative services, including those as basic as nanny services, concierge services, and medical services, aimed at the wealthy, will grow faster and more profitably in the future. Many luxury goods firms are busy transforming themselves into services, or adding services to add value. Time to rethink your luxury business model, or invent a new service-oriented offering.
5. The wealthy don’t participate in consumer satisfaction surveys.
Wealthy consumers provide feedback and respond to surveys, sometimes more that the general population. Most wealthy consumers are highly educated businesspeople. They recognize the value of feedback and will provide theirs candidly to brands they trust. No metric is more highly correlated with financial success than customer satisfaction. Brands that fail to solicit and measure their customers’ feedback and continuously seek to improve customer satisfaction will become extinct.
6. The wealthy don’t go online.
A recent survey by the Luxury Institute found that the vast majority of wealthy consumers are regularly online. The wealthy work long hours, are more time-starved than the general population, and use the Internet more heavily for researching luxury goods and services, and conducting transactions. If you are not selling your full luxury offerings online, you are giving your competitors an edge.
7. The wealthy don’t use ratings and reviews to make purchasing decisions.
A recent survey by the Luxury Institute found that over 80 percent of wealthy consumers use ratings and reviews sites to facilitate purchasing decisions. While the wealthiest may rely on a few trusted experts, many have middle class values and lead regular lives that include seeking information from ratings and reviews sites and publications. The difference is that these savvy consumers steer clear of biased Web sites and publications and “best of” lists that pretend to provide non-conflicted advice. Keep your brand clear of conflicted and biased recommendations that will turn off savvy wealthy consumers.
8. Luxury marketers should be targeting only the wealthiest clients.
Luxury brands that seek to serve only the $100 million plus net-worth consumer are usually small and often have fairly low profit margins. The truly under-served wealthy, in luxury goods, and, especially in luxury services, are households with a net worth from $ 1 million to $50 million. Their lives are busy, and often complex, and require many types of trusted advice. There are far more of these individuals globally, and growing in numbers. They are the core customers of most luxury goods and services firms. Ignore them, or treat them badly, at your peril.
9. Wealthy clients do not give referrals.
Research with wealthy and ultra-wealthy consumers indicates that the vast majority are willing to refer trusted brands to friends and family. Yet, ask luxury goods and services CEOs what their client referral rates are, and the answer is usually well below 50 percent. This disconnect is due to the fact that most luxury goods and services firms rely on individual salespeople for referrals rather than creating a company-wide referral program. It is one of the greatest revenue opportunities in luxury today.
10-Wealthy consumers are not very loyal since they can go anywhere.
The majority of wealthy consumers are among the most loyal customers. Their loyalty must be earned with great service. Ratings show that most luxury goods and services firms have yet to internalize what brands such as Ritz-Carlton, Nordstrom, Neiman Marcus, and Bessemer Trust inherently know: That the entire customer experience, from A to Z, must be at a level that makes customers happy to do business with the brand. This is the greatest, and easiest to implement, opportunity for luxury goods and services brands globally today.