Back in the Nineties, working for an Ultra High Net Worth individual, I was involved to a very limited degree in a possible office move. Architects and designers spent a good amount of time planning the layout, including an elaborate suite for the chairman with private boardroom, dining room and so forth. The move never took place but later, in a financial meeting, I had to hold my jaw in place when I saw that just getting to the concept stage had cost $70,000 in fees. After all, that was more than it cost my parents to buy the northern Westchester County house I grew up in back in the mid-Seventies. While far from a mansion, the house was four bedrooms on four acres.
Recently, I ran into a former senior executive of Robb Report, the luxury magazine just purchased by Quicken Loans billionaire Dan Gilbert. Having co-founded Elite Traveler, a magazine distributed on to private jets, we were like drivers on the Formula One circuit, racing around the same track but really not having the chance to spend time together except for the occasional hello.
The fun part of being an ex-luxury magazine executive is having the chance to catch up with a few former rivals and trade war stories. Publications such as Elite Traveler and Robb Report depend on print advertising for survival, nearly exclusively from luxury goods and services companies. The pages are filled with ads for products that often start at five digits and many times go into six and seven figures.
Much of the sales activity for publishers like this, particularly with larger clients, includes advertising agencies. Like myself a couple decades ago, most of the people who are putting together the media plans where to place ads for $20,000 watches and $5,000 bracelets are young, and didn’t grow up mega-rich.
My former competitor recalled how, after a presentation where he regaled an agency team with a story about a reader who spent $150,000 on a home theatre, he caught the tail end of some snickering. Enquiring to find out what was funny, he was told by one buyer that his story was untrue and “nobody spends that type of money on a home theatre.”
The challenge for high-end publications is that the syndicated research that most agencies use to guide their buying is really only effective until you get to a household income somewhere south of $1 million per year. After that, when you run reports, you get an asterisk, meaning the data is unstable. In other words the sample size is too small to accurately project responses from the survey to the universe of people in the category.
In 2007, when we surveyed over 600 private jet owners, we found the average private jet owner was spending nearly $250,000 per year on jewelry, six figures in watches and over half a million dollars on home renovations … annually. Like my former rival, the research was often dismissed by agencies despite the significant number of rich people we were able to include.
Now, I could fault young kids who are overworked and didn’t grow up taking a private jet to college. However, if I were sitting on the side of the luxury brands that spend hundreds of millions of dollars to sell their products, I would take an alternate approach. I would educate my media buyers by having them spend a couple weeks visiting my boutiques and shadowing VIP salespeople, and then maybe attend the Ft. Lauderdale Boat Show and arrange for them to go aboard the yachts that can cost $50 million to buy and over $5 million to run. Let’s call it a “class trip.”
Considering Wealth-X estimates there are 211,000 Ultra High Net Worth households worldwide spending $234 billion on luxury goods and services annually, I think it’s worth it. Knight Frank estimates the number of Super Rich households will grow by 30% in the next decade.
There is a need and opportunity for smart marketers to do a better job educating their buying teams on the UHNW market. When scoping out opportunities to sell to the super rich, the best media opportunities start where the spreadsheets end.