Buying Habits of the Affluent
I recently had the pleasure of giving a talk to the inaugural meeting of the Decorative Plumbing and Hardware Association – Southern California region. In addition to seeing many longtime friends from that area, I was forced to do some in-depth homework on the subject of my talk: The Buying Habits of the Affluent. I was joined at the podium by my good friend Ken Rohl (the patriarch of Rohl, LLC - one of America’s leading faucet and fixture distributors).
Ken talked about the state of the current economy as it has affected the very affluent and I zeroed in on how their buying habits have changed - pretty dramatically - in the past five years.
Identifying the AffluentSo let’s get started! First, just who are these affluent folks? They are the top 10% wealthiest households in America. There are 11.2 million of them. That’s a bunch of folks with the discretionary money available to buy your wonderful products. A large percentage of them are baby boomers - age 47 to 67. They’re starting to retire from their main jobs. Many still have a lot of “juice” left and will want to keep working. This is not because they have to - but because they want to!
These baby boomers are the best educated group our country has ever seen. They’re busy. Their time is important to them. This means the more you show and sell, the fewer places they will have to go to find what they’re looking for. “One stop shopping” is one of their goals.
They are knowledge empowered. That means they have a need to know more about the products they’re buying than any other group before them. The way to win them over is to be very knowledgeable about the products you sell. The more facts, features and benefits you can recite the better they will like it.
Yes, they are very internet savvy. They will have been on the computer learning all they can before they come through your doors. But when they do come in, you will have to dazzle them with your knowledge. And you’ll have to “sell” your value and convince them that the little bit of money they may save buying online is way outweighed by the total package you offer.
You might do what I did and Google “baby boomers” and “generation X.” You’ll learn a lot about these folks and it will help you know how to better deal with them when they do come into your showroom.
We all know that new construction is flat and will stay that way for the foreseeable future. That means you have to concentrate on the remodel and replacement market. Yes, the orders will be smaller, but write enough of them and they’ll add up nicely. Do you have a plan in place to go after this strong segment of the market? If not, get busy and do it because your competitors down the street already are working on their plan.
New Face of LuxuryKen’s talk revealed that there’s a “new face of luxury.” Some of the traditional areas where the most affluent folks have spent money have changed. These people are still spending money on watches, jewelry, travel, good hotels, technology and home décor. Even though home décor is up, it’s not tracking as strongly as it has in the past. These folks are not spending as much money on cars, new homes and very large remodel projects, which is bad news for companies with showrooms. It means you will have to be a lot more creative in how you market your business.
Most of the abovementioned items are heavily advertised. Unfortunately, the products you are showing and selling are not. I believe there’s an opportunity for your vendor partners and you to do a better job in this area. As an example, the folks who attended the DPHA meeting in Southern California are investigating the possibility of doing a full-page ad in Architectural Digest three or four times a year. It would be advertising all the DPHA brand and members in that region. A collective effort would make this possible, where individually it just couldn’t happen!
It’s a fact that these more affluent buyers are more involved in the buying process than ever before. It’s also a fact that they still count on professional specifiers (designers and architects) to help them in the purchasing process. These specifiers will direct their clients to the best looking, best displayed showrooms and to those that have the most knowledgeable staff. You’ll need to be that showroom.
Encouraging Economic NewsThe economic forecast is not all bleak! The Dow has grown 85% since 2009. Housing values are beginning to stabilize. Even though current unemployment is high, it is projected that the U.S. workforce will grow by 11% over the next 20 years. Compare that to Europe and Japan where declines in workforce are projected.
The projection on the Gross Domestic Product is also positive. In 1995 the U.S. production of world goods and services was 25%. Today, just 16 years later after a tech bust, a terrorist attack and a housing bust, the United States is still producing the same 25% of global GDP. With rising costs in China, Taiwan and India, we are starting to see more “back sourcing” (products coming back to the United States for manufacturing). That’s certainly great news for America!
Everyone I’ve been talking with the last couple of months is saying they’re seeing a nice increase in showroom activity and that these people are starting to purchase products. Yes, it’s more remodel than new - but it is business!
Another trend is smaller new houses. Floor space is shrinking. Along with that, homeowners are demanding more amenities and conveniences, including water- and energy- saving devices and, of course, all the technological upgrades.
The new reality is that people are going to be in their homes longer. So it is not about investment return, but rather having emotional experiences in their environment that resonates as an improved quality of life. Recently a neighbor of mine said, “When I turn on a quality faucet, the feeling of that fixture reflects how I feel about my home.” What you want to do is be the one who furnished that “quality faucet.”
Top 10 TrendsAs part of the homework I did for my talk, I Googled “The buying habits of the wealthy in the USA.” There must have been more than 200 articles and sources I could have visited. One was titled “The Top Ten Consumer Trends of the Ultra Wealthy;” these people are your main customer focus. Here’s what I learned:
1. They’re spending less and shopping smarter. They want quality over name and/or status.
2. They may not be optimistic, but they are happy: 91% believe we are still in a recession and 60% believe that it will continue for one or more years, and 71% claim to be happy in their relationships vs. 43% of the general population who say they are happy. Who says money doesn’t help make you happy?
3. They say family is important. They are having dinner as a family a lot more often than they have in the past. (I really like this trend.)
4. Cutting costs is stylish! They are shopping at the Big Boxes, using coupons and taking advantage of online deals. They are buying more generic brands and are buying in bulk.
5. They are less worried about their jobs going away.
6. They are doing more online shopping. They’re dealing with fewer “real people.” They much prefer doing their research online. (I don’t like this trend - but it is what it is! You must learn to sell against it!)
7. They claim to be better communicators - especially with their families. (I’m pretty sure this is what has helped slow the divorce rate in America. It’s finally trending downward.)
8. They feel less guilty about being rich. It’s OK to be affluent!
9. Their loyalty to brand is increasing. This is particularly true in fashion. (Aren’t your products part of fashion?)
10. They claim that print advertising may be making a comeback: 69% pay more attention to print ads than to those online. Forty percent have Facebook accounts, but only 8% use Facebook to make purchasing decisions.
So what does all this mean to you, the showroom managers and sales consultants? The more you understand about the mindset and buying habits of your main customer group, the better you will be able to serve them.
In summary, particularly the affluent are ready for broad changes and possibilities. They are gathering their resources and making plans to actualize their thoughts and dreams. Regardless of what’s in the news media, the affluent are going to make the next five years (and beyond) productive for you!
My thanks to Ken Rohl for his insight and input into this message.