By Contributing Editor Dianna Huff
Marketing to the super rich is difficult because many hide behind their advisers, live on gated estates and make purchasing decisions based on totally different “drivers” than the rest of us.
The top strategy for attracting high net worth (HNW) clients? Building relationships with those *trusted* advisers. And the biggest no-no? Treating them like everyone else. Here’s how to do it right.#1. Quick Definitions and Data
First of all, wealth isn’t defined by salary but by net worth. Someone may have an annual household income of $250,000 and not have two nickels to rub together because he or she is leveraged to the hilt.
Although each expert we interviewed had a different idea of what he or she considers real wealth (one said: “$5 million? That’s just paying the bills”), the HNW group is generally broken down along the following lines (these numbers are estimates because only the IRS knows for sure how much money people really have):
Category A: $1 million to $10 million in assets -- about 2.5% of the US population falls into the well-off category
Category B: $11 million to $25 million -- this category of wealthy individuals comprises about 500,000 US households
Category C: $26 million to $50 million -- this is the category many refer to as the “very wealthy” -- about 35,000 US households carry this designation
Category D: Over $50 million in assets –- otherwise known as the “ultra wealthy,” this is the top 1% of 1%
According to Forbes, 400 Americans have $900 million or more in assets –- the minimum needed to get on its annual “Richest Americans” list. All but 26 of the 400 for 2005 are billionaires, with Bill Gates topping the list at $46.5 billion and Warren Buffett a close second at $44 billion.#2. Six Affluent Lifestyles and Purchasing “Drivers”
If you follow how the affluent live, you’ll notice that someone like Oracle CEO Larry Ellison thrives on showing off his wealth (he owns a MIG fighter jet) whereas Berkshire Hathaway CEO/Chairman Warren Buffett is more low key –- to the point that he drives a 2001 Lincoln Town Car with a license plate reading “Thrifty.”
“We noticed this difference, too,” says Dick Baker, CEO of Premium Knowledge Group. “We wanted to know why and how the wealthy live as they do and what motivates them to spend money.”
To answer these questions, Baker’s company spent three years conducting a series of focus groups, one-on-one interviews and surveys of more than 1,000 HNW individuals with an average net worth of $3.2 million. They identified six statistically different Life Styles™ as well as “personal drivers,” or needs of the affluent.
LifeStyle #1. Unmistakable Affluent
Think Paris Hilton and Donald Trump. This group spares no expense in terms of clothes, accessories, vacations, real estate and home furnishings. Driver: They want to been seen as distinct from the crowd and will go to great lengths to portray that image.
LifeStyle #2. Understated Affluent
People often think of “old money” when it comes to them. Their driver is not to call attention to their wealth. However, don’t think they don’t enjoy their money. The Understated Affluents own private planes, vacation homes and yachts; you just won’t see them flying a jet with their name emblazoned across the tail or driving a Bentley. Indeed, according to Forbes, IKEA Founder Ingvar Kamprad, a double-digit billionaire, drives a 13-year old Volvo 240 GL.
LifeStyle #3. Tasteful Affluent
Martha Stewart is a good example of this group whose personal drivers include owning unique items that make them feel good. They’re concerned with showing good taste versus fitting in.
LifeStyle #4. Dependable Affluent
The driver behind this group is concerned with purchasing items with excellent craftsmanship. Buying something simply to make an impact is not on their agenda –- hence, a Dependable Affluent will drive a Toyota for every day but maintain a collection of prized antique automobiles.
LifeStyle #5 –- Economical Affluent
Their driver is based on blending in. A typical Economical Affluent will shop at the Gap or Land’s End because the clothes are well constructed and of good value with occasional splurges on a designer outfit or two. Sitting on boards of local non-profits and belonging to a country club (in order to fit in versus stand out) are also important.
LifeStyle #6. Practical Affluent
Otherwise known as the “millionaire next door,” this group can be difficult to recognize. A typical individual can have $5 million in assets but live in a ranch house in a solidly middle-class neighborhood and drive a second-hand car. Their prime driver is to enjoy their wealth in a practical way –- so while their principal residence may be the ranch home, they’ll also have a well-appointed vacation lake house where they entertain family and friends.#3. How the Affluent Use the Internet
Basically, there are three different groups of Internet users: the Have, the Have-Nots and the Have-Haves. The Internet works really well if you’re targeting the middle class. However, the very wealthy use it but not as much or for the same things, so you can’t run a 100% Internet campaign to reach them.
“We’ve found that use of the Internet varies by income and by lifestyle of the consumer,” Baker says. “Use also varies by the subject matter (auto vs financial services) and stage (comparison vs purchase) of the shopping process.”
Overall, the highly affluent are as likely to use the Internet as the rest of population, but it plays a different role in their overall purchase process because they can afford and use a wider variety of information resources. Chief among these information sources is recommendations from advisers, friends and family.
Here are specifics based on Baker’s research:
o 20%–25% of those with household incomes of $75K-$250K use the Internet and newspapers for financial information. Surprisingly, for those with incomes of $500K or more, Internet use dropped to 10%. For those with $1 million or more in income, it dipped to less than 5%. For million-dollar income respondents, newspaper use soared to 40%.
o 30%+ of respondents across all Life Style categories use the Internet to book their own hotel reservations.
o Across all Life Style categories, “Unmistakable Affluent” being the exception, more than 40% of respondents use the Internet for travel information. For the Unmistakable Affluent, 27% use the Internet and 26% use word of mouth.
Just like the rest of us, the uber wealthy also use email. Also just like the rest of us, newsletters targeting them get a higher open rate than broadcast offers. This tells us broadcast offers might work, but it had better be about something they want to buy. Also, be prepared to see your tracking to be off a bit since Warren Buffett probably won’t be buying your product himself but will be sending to an adviser who does.
Michelle Horowitz, Sales Director Luxury Reach, which conducts dedicated email campaigns, behavioral targeting, postal direct mail, advertorials targeting the affluent, says wealthy people are looking for the newest and best places to go where they can be pampered or for venues where other HNWs congregate, including tennis, golf, yachting and equestrian events. Her company regularly sends opt-in email and newsletter campaigns with the following results:
-> Broadcast offer email open rates 14%-16%
-> Newsletter open rates 35%-45%#4. Top Four Challenges Marketing to HNWs
Challenge #1. Targeting difficulties
Marketing to the affluent is more like business-to-business marketing than business to consumer. It’s a smaller audience, and mass media doesn’t work as well. Yes, you can rent a postal direct mail list from magazines like Town & Country or Departures (magazine for AMEX platinum card holders), but these demographics are based on income or wealthy wannabes not actual net worth.
Challenge #2. Influencing the influencers
“HNW individuals are very protective of themselves and their assets,” says Renee Miller, President The Miller Group. Hence, they hide behind handlers, investment bankers and other advisers.
According to Jane Bernardini, a CPA with Anchin, Block & Anchin, those who don’t want to flaunt their wealth will use firms like hers for financial advice and to purchase automobiles or hire nannies. “They’re afraid of being ‘taken’ when a salesperson either recognizes their name or sees the bank balance.”
Challenge #3. Run a holistic campaign
Because of their low reliance the Internet, using search marketing alone isn’t going to reach your target audience. But a multiple media buy will be expensive. Building a relationship and keeping it going, you’ll need to use several approaches. This can include sponsoring events, buying print ads in magazines and local newspapers in the right markets, product placement and PR.
Challenge #4. Creating unique experiences and services
HNW individuals “expect special access to extraordinary experiences and services –- preferably, those that can’t be bought,” says marketing consultant Michael Calman. Providing these services goes a long way toward building and retaining customer loyalty and trust.#5. Eight Strategies for Reaching the Hard-to-Reach HNWs
-> Strategy #1. Build relationships with those trusted advisers
As you’ve probably guessed, the No. 1 strategy for reaching the affluent is through their advisers. HNW individuals will turn to their investment bankers, interior designers, architects –- and other HNW individuals -- for recommendations.
However, while standard lead generation marketing tactics can work for finding these advisers (networking, postal direct mail, email, etc.), building a long-term relationship is key. Remember, they won’t recommend you based on a chance meeting and business card swap or letter –- they have to trust you before they can recommend you.
-> Strategy #2. Develop your own exclusive networking event
Gerald Dolezar, Marketing Consultant for France-based Les Metalliers Champenois (LMC), which hand-makes museum-quality wrought iron railings and bronze doors, shares his five-star strategy for reaching owners of estates valued at $20 million or more.
“These people don’t know me from Adam, so I’ve learned that the best way is to reach them through their architects,” says Dolezar, who uses postal direct mail for lead generation and then carefully qualifying respondents. “I have to make sure I’m dealing only with those architects who work with my client’s target market -- people who need $400,000 worth of custom-made railing or $140,000-$350,000 bronze doors.”
To become a trusted vendor, Dolezar holds a sailing regatta in New York Harbor every July. An invitation-only event, the regatta is sponsored by LMC, Steelcase, Bauerschmidt & Sons, JT Magen Company and supported by Interior Design Magazine -– all of whom pitch in funds to help buy food, jackets, etc. Proceeds from the event benefit charity.
“When I first started the event in 2001, I didn’t know any of the architects. Now I know them all personally,” he says. “After the first couple of years, I started inviting magazine editors to be honorary judges, which resulted in a really nice write-up in eOculus, one of the top respected magazines for architects.”
Although Dolezar is mum about his numbers, the event has been so successful in generating new business that he’s now taking it to Monaco. In addition, he’s putting together an entirely new event –- a croquet event for interior designers.
-> Strategy #3. Find a way to get into private jet terminals
Fractional jet ownership, ownership of private jets and chartering of jets is soaring, says Doug Gollan, President and Editor-In-Chief of Elite Traveler magazine. Due to overcrowded conditions at commercial airports, lack of exclusivity for first-class cabins and terrorism issues, HNW individuals are turning to private or fractional jet ownership (fractional meaning a number of people own one plane).
The FAA is projecting the number of private jet hours to triple in the next five to 10 years, with the average number of trips a person makes totaling 41 a year, according to the National Business Aviation Association. NetJets Europe, a fractional jet ownership company, reports business has grown 1000% in the last four years, according to Gollan, while Marquis Jet, a company that offers hours of flight time, has risen to $500 million in sales since its launch in 2001.
“Reaching these wealthy travelers is difficult due in part to changing travel patterns,” he says. It used to be that the wealthy lived in Manhattan and kept a summer house in Newport, RI, or Palm Beach, FL. Thanks to private and fractional jet ownership, they now move horizontally around the globe and include Tokyo, Paris and Dubai in their travel itineraries.
Private jet terminals don’t carry newsstands, so people can’t buy magazines or newspapers, but newspapers and magazines such as Elite Traveler are distributed there and on private jets for hire. The terminals also carry static and TV advertising –- and should be considered a prime venue if you’re trying to reach this audience.
-> Strategy #4. Deliver a consultative approach
Joseph Meerbaum, President Meerbaum & Co., recommends speaking at industry programs and conferences. “If you’re an adviser and want to add HNW clients to your client list, the best thing is to pick an industry and offer yourself as a speaker. You can do a whole program around buying commercial real estate or equipment leasing –- issues they’re facing every day. It’s this type of consultative approach that brings HNW clients in the door.”
-> Strategy #5. Create a personalized service for top-tier customers
For specialty or boutique retailers, Calman recommends segmenting your data by purchasing behavior and then developing high-end, specialized loyalty programs for the top 1% or 5% -- your crème de la crème customer. (According to Greg Furman, Founder and Chairman of the Luxury Marketing Council, less than half the respondents to a 2002 Best Practices Survey indicated they invest in a loyalty program –- a vehicle proven to build long-term relationships with “best customers.”)
Many HNW women shop atypically –- that is, they don’t browse boutiques or major retail stores the way most of us do. Instead, salespeople in high-end stores keep databases of their top customers that include sizes, colors, styles and other information. When items come in, they contact the client to see whether she’s interested in seeing them.
“High-end specialty stores routinely phone, email and/or fax their best clients whenever new collections come in and before they hit the floor,” Calman says, “Often these customers buy new items sight unseen.”
Implementing a “surprise and delight strategy,” is another way to build customer loyalty. Calman suggests having sales associates on occasion deliver the purchase and surprise clients with a gift, such as a full-sized beauty product.
-> Strategy #6. Offer “experiences” money can’t buy
“Offer best clients special access,” Calman says. Example, partner with a designer and present a special client or clients an opportunity of viewing a runway fashion show open only to the trade and the press. Include airfare and luxury hotel accommodations.
-> Strategy #7. Postal direct mail must be targeted and well-crafted
Renee Miller, whose client list includes First Federal Bank in California, recently ran a campaign to select households in Palos Verdes, a well-heeled locale in Southern California. The campaign was developed to notify the community that First Fed was opening a new branch. The campaign included postcards and a dimensional mailing.
“Our goal was to generate awareness of First Fed to HNW individuals.” Miller’s agency sent out miniature brown bags with an outside teaser that read, “What’s inside this bag is as good as money in the bank.” Inside was a grocery list note pad and a letter from the bank branch president that included a strong bonus rate money market offer. “We had an amazing success ratio and generated a fair number of leads of HNW individuals."
-> Strategy #8. PR and product placement
Because HNWs use email, newsletters are one way to target them. Just make sure your offer is something they’ll want. PR and product placement, advertorials are all effective ways of reaching the wealthy. Think about it: Getting mentioned in the local paper in the Hamptons will probably do you far more good than a blurb in The New York Times.
However, a problem arose last month with one type of product placement: goodie bags. The IRS determined that the free items being given to celebrities are a marketing tool and de-facto payment for their services, so don’t count as gifts and are liable for tax. The American Academy of Motion Picture Arts and Sciences, which runs the Oscars, says it will discontinue allowing bags to be handed out.Useful links related to this article (in alpha order):
Anchin, Block & Anchin
Luxury Marketing Council
Meerbaum & Co.
The Miller Group
Premium Knowledge Group