In my three Engage:Affluent columns this year, I have focused on those consumer segments that many marketers to the affluent indicate are the primary targets for their luxury and premium products and services. Those are, not surprisingly, either very high-income adults (the 7 million adults who live in households with incomes of $250,000 or more) or adults who report a net worth of $1 million or more (about 20 million adults).
As there are about 237 million adults (18+ in age) living in the United States (according to the U.S. Census Bureau in 2013), a good number of readers who market to the affluent have asked me to address the luxury and premium buying habits of all American adults when segmented by household income (the targeting approach most marketers to affluent consumers currently use). What do luxury marketers, agencies, and media sellers see when they review luxury and premium buying behaviors in the past 12 months across all adults? We believe it’s surprising, to say the least.
According to our survey, slightly more than one in four (28%, which projects to 66 million) adults reported they bought a luxury product or service in the past 12 months. When these 66 million luxury buyers are segmented by household income according to the $100,000+ targeting approach used by some other Engage:Affluent columnists, our survey indicated that the majority of luxury buyers actually fall under that $100,000 household income “affluent” threshold.
Notably, projections from our survey show there are about 27 million adults with household incomes of $100,000 or more who bought one or more luxuries in the past 12 months, compared with about 40 million adults, or about 60% of the total number of luxury buyers, who live in households with incomes of less than $100,000. Those findings indicate that, as expected, the likelihood of an adult buying a luxury or premium product or service increases as household income increases, but the largest number of luxury buyers tend to be where a majority of adults are — living in households with incomes below $100,000.
Our survey tracks 14 luxury/premium categories on an ongoing basis, and the #1 luxury/premium category among all luxury buyers is premium cosmetics. Projected results indicate there are about 19 million buyers of premium cosmetics in total, and more than 13 million of them have household incomes below $100,000. And, although the differences are not as striking, the same pattern occurs for other categories.
When it comes to luxury cars/SUVs/trucks, luxury cruises, fine jewelry, fine art or antiques, fine wines, fine liquors, fine champagnes or sparkling wines, premium beers or ales, and premium fragrances, the majority of purchasers have household incomes of less than $100,000. The $100,000+ household-income adults, though, were the majority buyers for luxury vacations, designer clothing or accessories, and premium liqueurs.
A deeper look into the luxury buying behaviors of consumers with household incomes of $100,000 or more compared with those below that level reveals differences beyond the categories that the two household-income segments buy. Consumers in the higher-income segments are less likely to be saving up to buy their luxuries and, not surprisingly, they spend more on average for them.
In short, adults with household incomes of $100,000 or more are more likely to buy luxury or premium products and services and to spend more on them, but the greatest number of luxury buyers in a good number of categories (those that require “scale” in many instances, such as autos, cosmetics, spirits, wines, etc.) live in households with incomes of less than $100,000.