Affluent Market Tracking Study #21, Spring 2012 Survey of the Wealthiest 10% of US Households

Countries covered: United States Following a substantial decline in the economic outlook and spending plans of the affluent in our Fall 2011 survey, this new survey shows that the affluent have returned to a more positive perspective (similar to the Spring 2011 survey results) on current business conditions and their 12-month outlook for business conditions, the stock market, and their personal household income and net worth. These results are consistent with the general Consumer Confidence Index reported by The Conference Board, and similar measures of consumer mood tracked by Bloomberg, Gallup, Discover Financial Services, and others. As in the Spring 2011 survey, the relatively improved mood of the affluent appears to reflect a number of factors which include first quarter gains in the stock market and an improved outlook for their personal household income and net worth. Spending plans for the 8 major items and the indexes for the change in spending for the 17 products and services tracked by these surveys are about equal or above those reported in the Spring 2011 survey. There are pockets of particular strength in the spending plans, especially among the wealthiest one percentile. The purchase intentions for major items rose slightly from the Fall 2011 survey for a new motor vehicle, major home remodeling, and acquisition of a vacation home. The other major purchase items showed slight declines from the Fall 2011 survey. A substantial amount of possible additional purchases are represented by the respondents who are “undecided” about the acquisition of a cruise, auto, remodeling, a primary residence, and a vacation home. The index for change in spending for all 17 product categories rose from the Fall 2011 survey. Increases were primarily single digits but 5 categories rose by double digits: domestic vacation travel, international vacation travel, dining in upscale restaurants, collectibles, and political contributions. Some of the highlights of the special topics covered in this survey include: 56% have a financial advisor or planner and two-thirds of these respondents believe the advice they have received since 2008 was excellent or good; 32% named Apple as the highest quality product or service; 25% named Costco as the best retail chain; 47% subscribe to a daily deal promotion (with Groupon having a 60% share); and 81% belong to some type of customer loyalty program. Rolex was a clear winner as the fine watch brand for the two attributes of best quality regardless of price and most prestige. With the exception of Chanel being named for most prestige, especially among women, there were no real winners for the category of lady’s designer/couture apparel. Armani was a relatively strong winner as the man’s designer suits/clothing brand for the two attributes of best quality regardless of price and most prestige. For automobiles, a different brand was in first place for each of the three attributes, with Lexus named for best quality and Mercedes Benz for most prestige. About 81% of the respondents report they belong to one or more of the 14 types of customer loyalty programs listed. Among those who do participate in such programs, the average number of programs is 10. About 5% of the affluent belong to 25 or more programs. On average, the respondents identified 2 features of loyalty programs that are most important. In general, the most important feature of a loyalty program is the value and type of rewards that can be earned, which was named by 65% of the respondents. Of the various loyalty programs in which the respondents participate, American Express, on its own and in combination with Costco, was named as the best overall loyalty program provider. Over half of the respondents say that the loyalty program influences them to spend more with the business than they would otherwise spend with that particular business. The new, expanded report format with graphs and charts will help you to identify and understand the differences between the affluent consumers and the true luxury consumers. These graphic elements, plus the executive summary and highlights sections, will facilitate a quick read of a report rich with data. This report provides extensive current and historic trend data on the following: Purchase intentions for 8 major expenditures including autos, primary residences and vacation homes, cruises, and major home remodeling Expected changes in spending for 17 products and services including vacation travel, dining out and recreational and entertainment activities, various durables for the home, apparel, and fine jewelry and watches Special topics included in this report include: Brand Perceptions (unaided) Identification of the brand offering the highest quality product or service Best overall retail chain Best quality, best value, and most prestige for brands of autos, watches, lady’s designer apparel, and men’s designer suits Financial Advisors and Planners Identification of the firm they use, if any (unaided) Satisfaction with advisor’s recommendations since spring 2008 Assessment of financial security now versus spring 2007 Loyalty Program Participation Which of 14 types (and how many of each) they belong to How each program influences spending with the sponsor Most important features of loyalty programs Identification of provider of best overall loyalty program Daily Deal Promotions Which programs they subscribe to How many programs they subscribe to This is report #21 in the original and only twice-yearly tracking study of the mood and spending plans of the wealthiest 10% of U.S. households, which account for almost half of all consumer spending. These surveys are 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 Which segments of the affluent are generally reducing expenditures and which are not Use of and satisfaction with financial advisors and planners The brand of the highest quality product or service The best retail chain The brand perception (highest quality, best value, and most prestige) of automobiles, watches, lady’s designer/couture apparel, and man’s designer suits/clothing Subscriptions to daily deal promotions Participation in each of 14 different types of customer loyalty programs; Identification of the most important features of a loyalty program The provider of the best loyalty program

Additional Information

Top 4 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) 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.

Survey and Report Content

This is the 21st in a continuing series of twice-yearly surveys that focus on the 11.4 million households that represent the wealthiest 10% of all U.S. households, as determined by The Federal Reserve Board, based on net worth. 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. In addition, each survey contains special questions exploring new topics.

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 and which will not, which factors will most influence a return to pre-recession levels of spending, the expected change in net worth over the next 12 months, assessment of current financial security versus 2007, and expectations of the length of time before unemployment and the stock market recover to pre-recession levels. These are all important factors that influence the mood and spending plans of the affluent. They help explain current and near term spending of the affluent and provide a perspective of what to expect over the next year or so.

This survey also contained a series of questions to identify use of and satisfaction with financial advisors and planners; the brand of the highest quality product or service; the best retail chain; the brand perception (highest quality, best value, and most prestige) of automobiles, watches, lady’s designer/couture apparel, and man’s designer suits/clothing; subscriptions to daily deal promotions; participation in each of 14 different types of customer loyalty programs; identification of the most important features of a loyalty program and the provider of the best program.

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 10.1 percent, thus showing the importance of this survey to the respondents, who have been a leading indicator of economic conditions, as when they called the recession in our March 2008 survey (well ahead of everyone else).

This report is based on the responses from 372 men and women who promptly responded and met the minimum net worth requirement of $800,000. Their households have an average annual income of $267,000, an average net worth of $3.1 million, average investable assets of $1.8 million, and an average primary residence value of $1.2 million.

The survey respondents represent 27 states and the District of Columbia. Eighty-six (86) percent are married. The average age is 59. Sixty-one (61) percent are males and thirty-nine (39) percent are females.

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

Additional Information

The research available from The Federal Reserve Board provides the following profile of the wealthiest 10% of U.S. 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.