Affluent Market Tracking Study #19, Spring 2011 Survey of the Wealthiest 10% of US Households

In contrast to the March general Consumer Confidence Index of The Conference Board, which fell over 10% to the low levels last seen in Fall 2010, the affluent, who account for about half of all consumer spending, report a better outlook for the economy and their personal spending plans.

Spending plans for all 17 products and services tracked by these surveys are much stronger than in the Fall 2010 survey. There is also improvement in the plans to make major expenditures such as for a new auto, a cruise, and a vacation home

The 19th in a continuing series of research reports based on twice-yearly surveys of the most affluent 10% of U.S. households, this survey was designed to provide information critical for effective marketing to the affluent and luxury consumers.

With this new report, you will learn:

• Spending plans over the next 12 months of both the luxury and affluent consumers (and they are often different)
• Which of 8 major expenditures show the most sales potential and among which segments
• Which of 17 product categories show the most sales potential and among which market segments
• How the large discounts offered by some prestige brands in recent years affected the image of such brands among affluent and luxury consumers
• The effect of "flash sales" of prestige brand products on affluent and luxury consumers
• Who owns smart phones and tablets, and which types, among affluent and luxury consumers.
• Which forms of social media are favored by the affluent and luxury consumers
• Who among the affluent and luxury consumers use social media, and which types of media, to receive communications from manufacturers and retailers about products
• Which of 11 "flash sale" sites are familiar to the affluent and luxury consumers, which have been visited during the past 90 days, and which have ever been used to make a purchase
• The market potential for vacation homes, including time share, fractional ownership, and destination clubs, among affluent and luxury consumers during the next 12 months
• Which segments of the affluent are generally reducing expenditures and which are not
• What the affluent expect of the stock market, business conditions, and their personal income during the next 12 months

Top 5 Ways to Use and Benefit from This Research

If your perceptions of today's luxury and affluent consumers (who are often very different) are largely derived from what you read in the media and online, you are probably creating your marketing strategies and plans based on false premises. To stay ahead of your competitors, you need AARC's new research report to understand today's luxury and affluent consumers and how to market to them.

1) Develop an understanding of the general mood of the affluent and their expectations for business conditions and personal income over the next 12 months. Gives you a basic perspective on general market conditions that will determine marketing opportunities and challenges

2) Identify changes in the spending plans of the affluent for your specific product category during the next 12 months. Shows you how potential sales of your product category compare to prior years and indicates what competitive pressures may result in your industry

3) Learn which segments of the affluent market represent the best sales potential for you during the next 12 months. Identifies the market segments that are cutting back on spending and those that are continuing to spend for your product category.

4) Understand the prevalence of smart phone and tablet ownership, by type, and the usage of social media, by type, among different segments of the affluent and luxury consumer markets. Provides a perspective on the opportunities and requirements for effective marketing via mobile devices and social media.

5) Create your marketing and sales plans with data based on the future intentions of the affluent. Unlike many other surveys of the affluent, this is not an extrapolation of past actions that they have been asked to remember and reconstruct. And it is based on a mail survey and not an online panel.

Focused on the wealthiest 11.4 million households with an average $3.1 million net worth (as determined by The Federal Reserve Board) these surveys regularly measure and track their 12-month outlook for the economy, the stock market and their personal earnings, savings, investment objectives, and spending plans for 17 product categories and 8 major expenditures.

Special questions in this survey reveal which segments of the affluent will be making a general effort to reduce or defer expenditures during the next 12 months, how the discounts offered in recent years by prestige brands affected their image and sales potential, and how discounts communicated via the internet or mobile devices only to past customers or “members” of “flash sale” sites affect their image and potential sales.

This survey also contained a series of questions to identify which segments of the affluent market own mobile devices and which types, the social media in which the affluent participate, the use of social media to receive regular communications from a manufacturer or retailer for product information, and which “flash sale” sites they are aware of, have visited in the past 90 days, and from which they have ever made a purchase.

The survey also produced data on familiarity with the private residence and destination club concepts and current and potential ownership of various types of vacation home access, including whole ownership, time-shares, and private residence and destination clubs.

The surveys track plans for major purchases (vacation homes, primary residences, home remodeling, automobiles, boats, and cruises) during the next 12 months. The surveys also track anticipated changes in spending during the next 12 months for 17 categories of products and services. These include fine jewelry and watches, domestic and international travel, dining in casual and upscale restaurants, furniture, major appliances, entertainment equipment, home computer equipment, entertainment, recreational activities, collectibles, designer and non-designer apparel, and charitable and political contributions.

For much of the preceding, the report shows historical trend data and data by demographic segment within the overall affluent population.

Research Methodology

Unlike other affluent and luxury market research that is based on online surveys of panels of people who are compensated for participating in regular and frequent surveys, our unique direct mail surveys are based on samples drawn at random to be representative of the precisely defined population of affluent households, consistent with the research of the Federal Reserve Board. Confident of their anonymity, the respondents to our surveys are typically more affluent and more open in providing confidential information.

Surveys were mailed to a randomly selected, national sample of 4,500 men and women in households that, based on their income and ownership of certain assets, were expected to meet the minimum net worth requirement of $800,000. The overall survey response rate was over 12 percent

This report is based on the responses from 405 men and women who promptly responded and met the minimum net worth requirement of $800,000. Their households have an average annual income of $333,000, an average net worth of $3.1 million, average investable assets of $1.8 million, and an average primary residence value of $1.1 million. The survey respondents represent 28 states and the District of Columbia. Eighty-eight (88) percent are married. The average age is 57. Fifty-six (56) percent are males and forty-four (44) percent are females.

The maximum margin of error of this survey, at 95% confidence, is five percentage points.

Additional Information

These surveys focus on the 11.4 million households that represent the wealthiest 10% of all U.S. households, based on net worth. The research available from The Federal Reserve Board indicates these households:

• Have a minimum net worth of $828,000.
• Have an average net worth of $3.1 million.
• Have an average income of $256,000.
• Earn 36% of the total income of all Americans.
• Own 63% of the personal assets of all U.S. households.
• Hold 89% of the total value of all publicly traded stock and stock mutual funds in the U.S.
• Own a primary residence valued at an average of $651,000.