New Resourcefulness and Rational Exuberance

We just released the latest insights from our Annual Survey of Affluence and Wealth in America, which we publish in conjunction with American Express Publishing. Highlights below…

Benchmark Study Shows America’s Wealthy
Are Altering Their Spending Habits;
More Than Half Worry They Could Run Out of Money

– “Economic Resourcefulness” is the New Watchword –

NEW YORK, NY (April 29, 2009) – According to The Survey of Affluence and Wealth in America, presented by American Express Publishing and Harrison Group, more than half (53%) of America’s wealthy worry that they could run out of money.  Almost three out of four (73%) believe that the recession will last longer than a year, a 10% jump from December 2008 and a 25% increase since September 2008.  Worse, the same group is deeply concerned that the U.S. could be headed for a depression.

The study, which queried more than 1,500 upper middle class, affluent, super affluent and wealthy individuals, probed the impact of the current economic turmoil on financial planning and spending.  The respondents have discretionary annual incomes up of at least $100,000, ranging up to $5 million.  Representative of 10% of the American population, this group accounts for half of all retail sales, 70% of all profit margins at retail and 80% of all non-retirement account assets.

At the same time, the recession continues to bite deeply into purchasing intent.  Across the 15 categories measured by the study, the trend line suggests continued, although moderating, declines in purchases of fashion, automobiles, luxuries and jewelry. Spending for travel is the only category that has ceased to erode on a quarter-on-quarter basis.

“Our data suggests that in 2009, we’ll see a decline in retail spending among affluent and wealthy consumers,” predicts Dr. Jim Taylor, Vice-Chairman of Harrison Group, a Waterbury, CT-based marketing and research consulting firm and co-authors of the quarterly study.  “The negative outlook is, however, modifying.  The rate of decline is now in the single digit range for everything we measure, except private jets and jewelry.  This contrasts with rates of decline in excess of 25% last year, in luxury categories.”

The spending of the top 10% has been offset by significant increases in their savings rate – up 12% since the first quarter of last year.  The wealthy segment, which represents one half of the top one percent of the population, has increased their savings rate by nearly 20%.  In total, this shift in priorities adds up to $600 billion in American savings accounts; concomitantly, willingness to invest in equity and related markets is off as much as 30%.

Optimism in the future continues to track lower.  Less than 46% of affluent and wealthy households say that they are optimistic about their own future.  78% report having experienced significant impact to their long-term financial security; and as many as 52% of America’s wealthiest households are of the belief that they could lose everything as a result of the current economic volatility.

New family resource management practices are proving to have a silver lining, however.  Respondents report an increase in conscientious savings, a newfound economic resourcefulness and a surprising enjoyment of life’s value-priced “micro-pleasures.”

 

Dramatic Increases in Savings

During the past 12 months, respondents have been saving 16% more of their household income and increasing contributions to their retirement plans by 6%.  At the same time, they’ve reduced their financial investments by 7%.  The dramatic shift toward saving, versus spending, underscores their belief that the recession will continue for an extended period of time.  More than three out of four say that the real estate and banking crisis has negatively affected their sense of financial security.

“These affluent individuals are being very cautious in how they spend and save.  They are becoming more responsible and practical in their financial decision-making,” said Cara David, co-Director of the Study and Senior Vice President, Corporate Marketing & Integrated Media of American Express Publishing Corporation.  “Yet, despite the real economic hardships brought on by the real estate and banking crises, people are feeling good about how they are managing their finances.”

 

Finding Happiness

Less than half of the individuals in the survey (46%) feel extremely/very optimistic about their future.  Even fewer (42%) feel extremely/very optimistic about their child’s future.  However, more than half (66%) say they are “very happy.”  Since the study’s inception in 2007, this is the first time results have revealed a clear upturn in American happiness.  The decline in optimism appears to have bottomed.  The possibility for an upturn in optimism certainly exists.

More than three-quarters of Americans (76%) report taking pride in their newfound shopping habits.  Additionally, 65% now describe themselves as “smarter” shoppers.

“Beginning last Christmas, shoppers – especially women – began to take pleasure in saying no to unexamined consumption.  They began to take pride in their ability to resist the urge to buy and started to examine why they needed a new dress, a new fixture, anything really.  And then, they derived pride – self-esteem – from their ability to make careful, reasoned purchase decisions,” said Dr. Taylor.

David adds:  “This new resourcefulness means, however, that as the recession ebbs, merchants cannot expect a return to the sort of ‘retail gluttony’ that has characterized the last 10 years.  Instead, consumers will continue to apply their newfound skills in comparative pricing, needs identification, budget-based and values-based shopping.”

“Brands will have to get in line with the spirit of this ‘rational exuberance':  the tendency to take pleasure in saying ‘no,'” Davis said.

 

Greater Role of Women and Children

An overwhelming 88% of respondents maintain that they have done a good job of making their household more fiscally responsible.  To accomplish this, 61% have set a monthly household budget they “try their best” to adhere to.

David comments that resourcefulness is becoming the new moral norm.  “Being ‘in the black’ is the ‘new black,” she observed. “The purchase criterion for the upper middle class, affluent and the truly wealthy, who account for half of all U.S. consumption, is now, ‘What do I really need?”

For example, 80% observe that they wait for an item to go on sale before they buy it; and 65% shop with coupons “fairly regularly.”  Additionally, the majority (77%) are buying fewer big ticket items, as compared to a year ago, an increase of 15 percentage points since last December.  The same group is carefully reviewing every spending category, to see where they can economize, an increase of 10% over the same time period last year.

“When we look at the purchase decisions of this group of individuals, we see that children’s opinions are playing a greater role in the family’s discretionary spending and that more and more women are driving the financial decision-making process,” Dr. Taylor points out.

 

Micro-Pleasures

Reflecting a shift in consumer values from “I want” to “we need,” the study found that the categories projected to do the best this year over last revolve around family, togetherness, goodness and small pleasures.  “This spending forecast suggests that individuals are indulging in micro-pleasures – smaller-scale purchases and experiences – versus the kinds of grand expenditures they made in times of economic good fortune,” says David.  “Despite a decrease in extravagant spending, the affluent remain loyal to brands they have used and like. The most prized labels are ones known for craftsmanship, quality and customer service.”

More than half of the respondents (57%) believe that “a few luxuries are important in tough times,” compared to those (54%) who feel guilty about purchasing premium priced goods in the current economic climate.  The study also found that categories that have seen significant spending reductions, such as weekend getaways, vacations, dining out and fashion accessories, have now begun to show signs of renewal.

For additional information on The Survey of Affluence and Wealth in America, or to arrange an interview with David and/or Dr. Taylor, please contact:

Harrison Group: Jodi Bannerman, 212.871.3020, ext. 107 / 202.577.5798 (cell)
American Express Publishing: Jill S. Davison, 212.382.5679 / 347.423.3951 (cell)

 

# # #

The Survey of Affluence and Wealth in America/Appendix

Survey Methodology

Now in its third year, The Survey of Affluence and Wealth in America, produced by American Express Publishing Corporation and Harrison Group, sampled more than 1,500 individuals with a household discretionary income of $100,000 and above, in the first quarter of 2009.

The four groups in the research – Upper middle class, $100K to $124K (n=358); Affluent, $125K to $249K (n=390); Super-Affluent, $250K to $499K (n=357) and Wealthy, $500K+ (n=314) – were defined by discretionary spending: gross income reduced by factors representing property assets (mortgage, taxes).  Discretionary household income was used to insure that the sample represented individuals with a high propensity to spend.  The study is nationally projectable within each discretionary income group; sampling error is estimated to be +/- 5%.   Multiple panels and starting points were employed to assure proper demographic and psychographic representations within each segment.

The survey itself addressed many aspects of respondent lifestyle, values, shopping habits, brand preferences, family characteristics, sources of success and wealth, attitudes toward money, lifestyles and media consumption.

Monthly fielding and quarterly reporting will continue in 2009.

 

About Harrison Group

Harrison Group (www.harrisongroupinc.com) is one of the country’s leading marketing and strategic research consulting firms.  Based in Waterbury, Connecticut, Harrison Group specializes in concept testing, forecasting, segmentation, branding and market modeling for some of America’s leading companies, including financial services firms, software and technology companies, retailers, consumer package goods manufacturers, pharmaceutical and interactive entertainment companies.

 

About American Express Publishing Corporation

American Express Publishing Corporation is an authoritative content company primed to deliver lifestyle expertise that informs choices, enriches perspective and empowers affluent and accomplished people — and the businesses that serve them — to make decisions and lead extraordinary lives.  A wholly owned subsidiary of American Express Company, American Express Publishing magazine brands are Travel + Leisure, Food & Wine, Departures and Executive Travel magazine.  The company also produces a variety of travel, cooking, wine, time management, and financial books and products, creates online content, operates luxury-marketing events and creates custom print and online programs for clients.

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The Economist “Special Report on the Rich”

The Economist has an interesting series of articles comprising their “Special Report on the Rich.”  It’s worth a look.

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The Mom-ocracy: The Rise of a New American Matriarchy

We recently published an interesting study on women in America, and the rise of a new matriarchy.  Details are below…

 

Retail Study Uncovers Cautious Optimism in Spending Habits of American Women

Results Suggest Potential for Rebound in 2009 for Female-Driven Economy

Nearly 80 Percent of Women Say Their Opinion Drives Family Financial Decisions; Two-thirds Believe 2009 Will Be a Better Year than 2008

New York, Feb. 12, 2009 – A new national study sheds light on the power of women in the retail sector.  With almost four-fifths of women driving family financial decisions, the study shows that women are shopping smarter and saying goodbye to impulse buys.  Understanding today’s successful, resourceful female and her purchasing motivations will be key for retailers looking to make the cash register ring in 2009. 

The two-phase study, “Women, Power & Money – The Shift to the Female-Driven Economy,” was conducted for Fleishman-Hillard International Communications by Harrison Group, a marketing and research consulting firm.  More than 1,600 women participated in the study during early September and November 2008.

According to the study, which outlines trends in purchasing, describes the modern matriarchy and details how women define success, the economic crisis is hitting home with American women; specifically: 

  • More than half (59%) say they are worse off financially than they were a year ago
  • Almost the same number (57%) worry that they will run out of money
  • Most women (83%) are budgeting expenditures more carefully than they used to

 

Despite this, however, they are feeling financially optimistic:  

  • Two-thirds (64%) believe that 2009 will be a better year financially than 2008
  • A full 95% of all American women feel they will “make it” through the recession

 

“It’s clear from this research that we are now living in a ‘mom-ocracy’ – women are setting the agenda,” said Nancy Seliger, president, U.S. East region, at Fleishman-Hillard, the global communications firm that commissioned the study.  “We believe the most successful marketers will address concerns of the spouse, the children, and even friends of women.  When these individuals are well informed, it is easier for women to build consensus within their families.”

“Women today have made a transition from home to the work place and back,” said Jim Taylor, Ph.D., Vice-Chairman of the Harrison Group. “They have created a self-reliant, thoughtful persona that cuts across the social ladder, career choices and geography.  These women run the economy, run the American family, run the checkbook and, most important, they run a new spirit of caring and competence. It’s an amazing story.”

Among the Key Findings:

American Women as Chief Purchasing Officers
Every single survey respondent maintains that they have significant input into household decisions; and more than half (59%) claim to be the sole decision maker on most issues.

  • 91% feel they manage their family’s quality of life
  • 75% are the primary purchasers of groceries and home staples
  • 55% are largely responsible for paying household bills
  • About half are the primary breadwinner or share responsibility for that role

 

When it comes to budgeting for the family, women are almost evenly split (47% v. 49%) on whether or not they own or share that responsibility.  Spouses, however, do play an important role in purchasing major household appliances (77%), choosing a brand of automobile (79%), deciding when to eat out (72%) or what to watch on television (69%). 

America’s women are unanimous about the one household duty that remains the exclusive responsibility of the spouse:  Mowing the lawn (46%). 

Recession-Proofing through Intelligent Shopping
Eighty percent of women say that their purchase decisions are more considered than ever.  Interestingly, this number increased 7% during the three-month period from September to November 2008.  As a result of the current economic environment, women are adjusting how and where they shop, namely: 

  • 86% are delaying purchases until items go on sale
  • 79% plan to cut back on “special occasion” gift-giving
  • 55% are spending less on eating out than they did last year
  • 47% are more likely to use coupons than previously
  • 44% are purchasing generic brands more often than they used to
  • 41% are more likely to pay with cash than on credit
  • Less than half (49%) are shopping at malls; just over one-quarter (26%) are buying from stand-alone retail stores; and 33% are ordering from catalogs

 
“Retailers may look at these numbers and cringe,” commented Seliger, “but family cost controls give women the confidence that they will be able to manage through these tough times.” 

The respondents admitted that charting their financial course over the coming months will be stressful.  To cope, most plan to spend more time with friends and family (53%), exercise (53%) and eat healthier (49%).

Saying “Goodbye” to Impulse Buys
When asked about their last purchase across a variety of price points ($100 to $499, $500 to $999 and more than $1,000), women said that prior to purchase, they conduct their own due diligence via Internet-based research and in-store comparison shopping. Specifically:

  • 65% of women researched online an item valued at $500 or more, while 61% researched online an item valued at $100 to $499
  • Approximately half, across all price points, comparison shopped online to prevent being taken advantage of
  • Approximately half, across all price points, shopped around at several brick and mortar stores to find the best pricing

 

Interestingly, 81% of women continue to purchase only trusted brands.  Women agree, however, that brand preferences are less about status and more about quality (95%), craftsmanship (93%) and reputation for service (91%).

Success and the Resourceful Woman
The vast majority of women surveyed (90%) feel successful; and 60% feel very successful.  In addition to feeling successful, most women are happy.  On a 10-point scale (with 10 being “extremely happy”), 92% rated themselves a six or higher; and 61% rated themselves an eight, nine or 10. 

Happiness, however, doesn’t mean having it all.  Of the 61% who describe themselves as extremely/very happy, only a little more than one-third (35%) of those surveyed claim to have achieved their life goals.  Despite the fact that these women feel they have more to accomplish, only 19% say they are stressed.  

Today’s woman is confident and engaged in a self-defined pursuit of self-satisfaction:

  • 87% consider themselves resourceful
  • 85% are the principal family decision maker; and 82% feel highly influential
  • 76% have always maintained their own bank account
  • Less than one-fifth (17%) look to their friends to decide what they should be doing
  • 83% rate family as their top priority; 67% say love is their primary concern; 66% place greatest importance on children; 60% say travel is their passion; and 59% ranked marriage and reading equally as their greatest source of joy in life

 

For more information, please contact:
Jodi Bannerman, jbannerman@jgordonassociates.com
212.871.3020 ext. 107 (office); 202.577.5798 (mobile);

 

Survey Methodology

The research involves two distinct studies with the same respondent group of 1,600 women.  Survey 1 was conducted in two parts during August-September 2008 via online interviews with a U.S. and Canadian representative group of women.  Roughly 1,900 of 4,000 women contacted agreed to participate in the pre-screening survey.  Nearly all respondents completed an additional 35-minute online survey.  Respondents are 21 to 70 years-old, with an annual household income of at least $25,000.  African-American, Hispanic and wealthy women were “bucket-sampled” to reflect the actual population.  Survey 2 was conducted November 5 – 7, 2008, and involved
602 respondents from Survey 1.  The dual survey approach allowed for more survey content while preventing surveyor fatigue. 

The margin for error in the master survey (Survey 1) is +/- 2%, and in the November survey (Survey 2) the margin of error is +/- 4%.

About Fleishman-Hillard

Fleishman-Hillard Inc., one of the world’s leading public relations firms, has built its reputation by using strategic communications to deliver what its clients value most: meaningful, positive, and measurable impact on the performance of their organizations. The firm is widely recognized for excellent client service and a strong company culture founded on teamwork, integrity, and personal commitment. Based in St. Louis, the firm operates throughout

North America, Europe, Asia, Latin America, Australia, and South Africa through its 80 owned offices. For more information, visit the Fleishman-Hillard Web site at www.fleishman.com.

Fleishman-Hillard is a part of Omnicom Group Inc. (NYSE: OMC). Omnicom is a leading global advertising, marketing and corporate communications company. Omnicom’s branded networks and numerous specialty firms provide advertising, strategic media planning and buying, direct and promotional marketing, public relations, and other specialty communications services to over 5,000 clients in more than 100 countries.

 

About Harrison Group

Harrison Group (http://www.harrisongroupinc.com) is one of the country’s leading marketing and strategic research consulting firms.  Based in Waterbury, Connecticut, Harrison Group specializes in concept testing, forecasting, segmentation, branding and market modeling for some of America’s leading companies.  The firm partners with Fortune 1000 clients to build substantial, profitable growth through superior marketing consulting and research.  Harrison Group’s core strengths have been successfully employed across consumer and business-to-business research engagements in more than 60 countries around the globe.

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The UGGconomy (and thriving amid turmoil)

MSNBC.com “Big Money” columnist Martha White has an interesting article: The UGGconomy: What ugly, utilitarian footwear says about the country’s financial future.

 

While high-end retailers had a rough holiday season, it’s always interesting to look at brands that buck the trends and not just tread water, but truly grow.  In footwear, UGGs and Merrell have done just that, riding the trends toward apparel that’s comfortable and non-ostentatious. 

 

White’s take is interesting, and we also agree with her perception that there’s been a conspicuous lack of trading down.  As she puts it, “In previous years, it was quality and quantity as opposed to the quality-over-quantity movement now in vogue. We used to want it all. Now we still want the best stuff, but we’re willing to make do with less of it.”

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Luxury market report from Sarasota

I (Steve) wrapped up my tour of Florida Luxury Marketing Council talks this morning in Sarasota. Again, city-by-city dynamics were evident. Historically a retirement community, the population of Sarasota has gotten significantly younger over the past decade, and with it so has the local community of affluent and wealthy individuals. As a result, generational dynamics in wealth were of particular interest to marketers there.

One magazine publisher asked me for data about spending patterns by generation, and normally when I hear that question, it is asked in terms of Baby Boomers vs. Gen Xers. But in Sarasota, the greater interest is in comparing Baby Boomers to the generation that came before (alternatively called Matures, the WWII generation, or any number of other names).

This publisher had been targeting Boomers, while his competitors ask: Why target Boomers, when it’s the 75-year olds here who have more money? The most important question for magazine publishers (and by extension, all marketers), of course, is less about who has more money – the question is who spends more money, particularly in the categories their advertisers care about.

Generation and age also play a role in psychological reactions to the current economic situation – many of those in the Mature generation believe they won’t see a return of their portfolios to previous levels in their lifetimes, further curtailing their enthusiasm to spend. Although younger affluent individuals aren’t entirely confident their investments will fully bounce back, they certainly feel that have a better chance of making up lost ground simply because they have more time to do so.

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Wealth & Luxury report from Tampa

I (Steve) spoke at the Luxury Marketing Council of Tampa this evening. The trend toward even more stealth wealth is evident here as well – the 50 or so luxury marketers in attendance were in near-universal agreement about that. Interestingly, msnbc.com just published an article about this phenomenon as well (here), including a quote from Neiman Marcus CEO Burton Tansky: “The fashionista is now a recessionista.”

But I’m struck by how the wealthy market is distinct on a city-by-city basis. Miami reflected much more international wealth (one attendee called Miami “the New York City for Latin and South America”), and a slightly more assertive style. Palm Beach was true to its reputation of older, hyper-wealth (a few attendees asked me: “Your data on the ‘wealthy’ with $10 million in assets is interesting, but I target people with $100 million or more – do you have data on them? Answer: Yes.). And Tampa had its own distinct feel. Our general portrayal of the wealthy as deriving from middle class backgrounds and maintaining their middle class aesthetics and sense of value seemed to resonate most strongly here.

Final note: In Miami on Monday, I shared the stage with Lois Geller who spoke about direct marketing to the affluent. You can read her description, and see our photo, here.

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Luxury report from Palm Beach

This morning I (Steve Kraus) spoke at the Luxury Marketing Council of Palm Beach, Florida.  Palm Beach is known as one of the last bastions of old wealth, and tremendous wealth as well.  Several attendees were less interested in the “wealthy” (as we typically define it, a group having at least $500K+ in annual discretionary income, and averaging $8-10 million in assets).  Instead, segments of $100 million or more in assets are often the target for luxury marketers in Palm Beach. 

 

I saw the full breadth of Florida in one day.  My speech in the morning was at the Polo Club in Palm Beach – from there I drove across the state to Tampa, passing through truly rural (and sometimes impoverished) areas. 

 

Attendees at my Palm Beach presentation were seeing many of the trends we have seen elsewhere, particularly a heightening of the “stealth wealth” we have witnessed for several years.  For lack of a better term, ostentatious displays of wealth seem particularly “gauche” these days.  Some have called it “luxury shame, although I don’t think ‘shame’ quite captures the essence of the emotional response.  Regardless of the subtleties, the phenomenon is certainly there.  For example, one director of a well-known non-profit told me that donations are down slightly, but there’s been a real growth in anonymous donations, and they have cancelled their fund-raising galas as it just doesn’t seem the right time.  Celebrations of wealth are difficult to maintain an enthusiasm for, even when they are well-intentioned and charity-related.

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