Targeting In 2014: High Income Or High Net Worth?

by , Jan 7, 2014, 10:16 AM
  • Comment (2)
  • Recommend (3)
Subscribe to Engage:Affluent

Tags

As 2014 kicks off, many financial and economic pundits are optimistic about the U.S. economy as unemployment continues to decline slowly and the economy appears to be rebounding at a faster pace. And some forecasters are even bullish about 2014. What does this optimism mean for those who market to the affluent? Based on our most recent survey of high-income and wealthy consumers, we believe it depends upon how the target market is defined. Is the marketer's target defined by household income (current cash flow) or net worth (current wealth)?

Depending on the definition of affluent, the target market is materially different concerning its size and what those prospects are planning to do during 2014. High income and high wealth are not interchangeable, even though reporters and marketers often use the words interchangeably. For example, if a marketer is targeting the "uber-affluent," as many luxury brands do today, these consumers may be defined as having household incomes of $250,000 or more.

According to U.S. Census, there are about 7 million $250,000+ adult consumers as of 2013. If a marketer, though, defines uber-affluent as having a net worth of $1 million or more (and this is the definition used by many financial service/investment marketers, among others), the target would include more than 13 million consumers in the U.S as of 2013, according to the estimates in the 2013 Credit Suisse Global Worth Report that are based on governmental balance sheets. Our estimates, though, are consumer survey-based, and with the rising value of homes and the recent increases in the value of the stock markets, we estimate the number of millionaires in the U.S. could be approaching 18 to 20 million.

Let's take a quick look at why the definition of affluent matters by comparing what the high-income consumer (household income $250,000+ per year) versus the millionaire is planning to do as 2014 begins. In the world of luxury products and services, 68% of the $250,000+ income segment is planning to buy at least one luxury in the near future compared with 55% of the millionaires. In the world of financial services marketing, 73% of the $250,000+ consumer segment reported they are planning to save or invest.

Among the millionaires again, 63% is planning to save or invest. However, when those percentages are extrapolated into numbers of consumers, the millionaire is most likely the preferred target market, as about 11 million of them are planning to buy at least one luxury, compared with close to 5 million of the smaller, high-income group. And in the world of saving or investing, more than 12 million millionaires are planning to be active in the near future compared with about 5 million high-income consumers.

As the prior example clearly demonstrates, how a marketer defines affluent in 2014 does matter. Should it be high income, net worth or some combination of the two? That's the marketer's decision to make, and we will be addressing that in next month's column.

2 comments on "Targeting In 2014: High Income Or High Net Worth?".

  1. Nate Carter from eEffective
    commented on: January 7, 2014 at 10:23 a.m.
    The other issue with looking at affluence based solely upon income is it doesn't index based upon cost of living. The person who makes $150,000/year in Birmingham may have a significant amount of discretionary income as opposed to the person making the same income but living in downtown San Francisco. In order to get the most complete view of the consumer marketers should look at net worth and income indexed against cost of living in their market.
  2. Paula Lynn from Who Else Unlimited
    commented on: January 7, 2014 at 2:50 p.m.
    To add to Nate's comment which is so correct is that $150,000 for a single person is not the same for families. Kids eat up the availability to buy $5000 handbags.

Leave a Comment

Sign in to leave a comment. Don't have an account? Join Now

Recent Engage:Affluent Articles

» Engage:Affluent Archives