Understanding the Affluent Market

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Understanding theAffluent Market
American Affluence Research Center

• Size Composition Values, Motivations,
  Current Mood Vacation Home Market
• Presented by Ron Kurtz, President
• The American Affluence Research Center
• October 6, 2008 Amenity Communities Marketing
  Summit

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3 Parts of Presentation

• Defining the affluent market, its size, and its
  composition
• Understanding the values, motivations, and
  current mood of the affluent
• Vacation home ownership and interests among the
  affluent

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Defining the Affluent Market

• Income?
• Net Worth?
• How much?

4
Wealthiest 5 by Income

• 100,000?
• 150,000?
• 200,000?

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Household Income in the U.S.
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Wealthiest 5 by Net Worth

• 800,000?
• 1,500,000?
• 6,000,000?

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AARCs Definition of the Affluent Market

• The wealthiest 10 of U.S. households, based on
  net worth
• 11.4 million households (22 million adults)
• 80 are millionaires
• Minimum net worth of 828,000 and average of 3.1
  million
• Average income of 256,000
• Earn 36 of total personal income
• Own 70 of total net worth of all U.S. households
• Control 89 of all publicly traded stock and
  mutual funds

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The Affluent Market

• Average age of 59
• 14 under 44
• 53 between 45 and 64

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The Affluent Market
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Risky Data

• Anecdotal evidence
• Inaccurate Statistics
• Media exaggeration

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The 9 Million Millionaires

• 80 are self made (Thomas Stanley/William Danko)
• Not conspicuous or pretentious consumers
• Retain middle class values and lifestyle (Dr.
  Gary Buffone)
• The Middle-Class Millionaire (Lewis Schiff)

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The Affluent

• Values
• Motivations
• Current Mood

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Wealthiest 10 of U.S. Households

• Popular Stores
• Target, Costco, and Home Depot
• Holiday Gift Budget
• 2,800
• Purchases Past 12 Months
• 17 fine watch/jewelry priced _at_ 5,000 or more
• 33 car valued _at_ 40,000 or more
• 15 item of ladys couture apparel _at_ 1,000 or
  more

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Wealthiest 5 of U.S. Households

• Sample Profile
• 472K average income
• 4.5MM average net worth
• Annual Spending
• 13,000 for vacations away from home
• 5,800 for dining out

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Primary Motivations of the Affluent

• Save money (find good value)
• Receive acknowledgement of their affluence
• Receive recognition as being something more than
  affluent (smart, worldly, collector, etc.)
• Obtain exclusivity (in good company with access
  to things beyond average persons access)
• Acquire things money cannot buy (unique
  experiences, access to people not normally
  accessible)
• Secure quality and convenience (leverage time)

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Attitudes Toward Spending

• 31 spend freely to enjoy life
• 69 spend conservatively to protect long-term
  financial goals.
• 96 spend a little more for a product that will
  last
• 4 spend a little more for something eye
  catching or in current fashion
• 82 look for discounts/compare prices before
  making a major expenditure
• 18 believe discounts are false savings you get
  what you pay for

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Outlook for the Economy
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Outlook for the Economy
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Actions Taken to Reduce or Defer Expenditures
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Affluent Spending Less
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Reasons for Reducing Expenditures
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Reasons for Reducing Expenditures
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How Will Your SpendingPlans Change?

• For dining in casual/family restaurants
• For entertainment (movies, concerts, sports.)
• For vacation travel

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Expected Changes in Spendingfor 17 Products and
Services
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Expected Changes in Spendingfor 17 Products and
Services
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Expected Changes in Spendingfor 17 Products and
Services
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Plans to Purchase 8 Major Items
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Plans to Purchase 8 Major Items
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Plans to Purchase 8 Major Items
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Profile of Those Reducing Expenditures
versusThose Not Reducing Expenditures
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3 Thoughts to Consider

• Those reducing expenditures are still spending
• Those not reducing expenditures represent a large
  market segment
• Market and competition will continue to be
  challenging

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Number of Homes Owned by the Affluent
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Value of Vacation Home
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Distance to Vacation Home
35
Plans to Acquire New Vacation Home
36
Subscriber Income of Upscale Media
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4 Thoughts to Consider

• Affluent market is large and can be segmented in
  various ways
• About 80 of the affluent are millionaires, of
  which 90 are self made with middle class values
  and life styles
• Mood of the affluent appears to be bottoming out,
  with a positive outlook for 12 months out
• Affluent indicate plans to build 96,000 vacation
  homes and to buy 264,000 vacation homes during
  the next 12 months for a total of 360,000
  potential sales