Wealthy Consumers Network Online

Wealthy consumer participation in online social networks dramatically increased to 60 percent in 2008, from 27 percent in 2007, according to The Luxury Institute.

Participation levels in leading social networks are: 16 percent for MySpace, 13 percent for LinkedIn, and 11 percent for Facebook. The wealthy average membership in 2.8 social networks, with an average of 110 connections, acording to the “The Wealthy and Web 2.0” survey from the New York-based consumer research firm.

“Being connected is second nature to these over-achievers,” said Milton Pedraza, Luxury Institute chief executive officer. “We are pleasantly surprised at the rapid acceleration in the over 55- year-old wealthy consumers whose participation increased five-fold, to 49 percent. The implications for luxury goods and services firms are profound. While some in the luxury industry are still debating e-commerce, search and banner ads, the majority of their customers have leaped into the online dialogue. Luxury needs to catch up quickly.”

Results indicate that online communities will continue to fragment into increasingly selective and specialized entities of like-minded members. This should make it easier to reach target markets, but luxury firms should avoid critical mistakes.

“The wealthy have a great deal to lose,” Pedraza said. “They will not tolerate behaviors exhibited recently by social networks that force opt-out techniques on member’s private purchase information, and make it difficult to exit.” Sixty-five percent of wealthy consumers say that giving out personal data without permission will cause them to disconnect; 63 percent have an interest in “do not track” lists.

The dramatic rise in wealthy participation in online communities points to another great opportunity for luxury marketers, who can create their own online customer and prospect communities and engage people in a rich honest dialogue.

“Luxury providers should already be in the testing and experimentation stages of online prospects, customers, employees and other constituents. The era of transparency and co-creation in luxury is well under way,” Pedraza said.

A national sample of 805 wealthy American consumers, with an average income of $287,000 and average net worth of $2.1 million, was surveyed online.