The affluent consumers at the top 20% of household incomes are sitting pretty financially and their numbers are growing. But it's not the affluents' positive financial circumstances that will influence their spending on luxury in 2016. Rather, it will be their mood, feeling and mindset. This new trend report, Brand Stories that Sell to HENRYs: Marketing Luxury in a Brand New Style for High-Earners-Not-Rich-Yet Consumers, reveals how to link brands with the new psychology of today's largest and most profitable consumer segment: The HENRYs — high-earners-not-rich-yet.
Marketing to Affluent Consumers
Affluents' impact on the U.S. economy is huge
Affluent households number some 31 million strong, defined as those in roughly the top quintile of all households. It includes some 27 million HENRYs (high-earners-not-rich-yet) with incomes from $100k-$249.9k and 3.8 million ultra-affluents ($250k+).
And while luxury brands focus on the outsized spending potential of the ultra-affluents, the income segment just under them, the mass-affluent HENRYs, actually far outnumber the ultras and account for much greater combined spending, just under $5 trillion as compared with $1.2 trillion for ultra-affluents.
"That makes the HENRYs the juggernaut of the nation's consumer economy," says Pam Danziger, president Unity Marketing and author of the new report.
Marketing to affluent consumers should be done wisely with newspaper ads, because AudienceSCAN found 30.6% took action after seeing print ads in the past month.
In the current economic climate, however, the affluent are choosing to forego extra spending and hold onto their plentiful cash. The young mass-affluent HENRYs, in particular, are signaling caution about trading up to luxury. That means brands that aspire to capture their discretionary spending must make a compelling case why their brand is worth it.
It requires telling the story of luxury in a brand new way in tune with the values of these consumers when marketing to affluent consumers. The old ideas of luxury have given way to new ways of interpreting and participating in a luxury lifestyle.
Luxury is a mindset, not a brand or a price point
Today's luxury brands must align with the new consumer psychology of today's careful affluent spenders. Especially among the Gen X and millennial generation affluents, the old style of luxury has taken on negative connotations. For them, old luxury reeks of over indulgence, conspicuous consumption, elitism, extravagance and, most especially, reflects income inequality and the excesses of the 1%. Brands, when marketing to affluent consumers, need to market luxury in a brand new style that reflects the next generations' values.
Retailers should keep these changing views on extravagance in mind when marketing to the Affluent. Businesses might consider running daily deals to appeal to the younger affluent crowd. AudienceSCAN reports the Affluent audience is 38% more likely than other audiences to take action after seeing a daily deal.
Rewards and growth will come to brands that get a firm fix on the young HENRYs, the demographic of the Gen Xers and millennials on the road to affluence.
Danziger says, "Mistakenly, too many luxury brands call the HENRYs 'aspirational,' which implies their aspirations align with their old style of luxury. Aspirational the young HENRYs may well be, but not necessarily for the old luxury that the brands are selling. Rather, they are aspirational for an authentic lifestyle and true happiness, which research shows comes by what you do and experience, not what you have or own."
Young HENRYs reject their parents' and grandparents' ideas of luxury in favor of concepts that are more practical, functional, inclusive, democratic and, ultimately, more affordable.
"Surely, they want high quality, superb workmanship, and all the other quantifiable features that luxury brands promise. But they also want to align their consumer behavior with their personal values," Danziger concludes. "Too many young people believe that 'luxury' is just a marketers' label that signifies something is over-priced."
The key challenge for luxury brands when marketing to affluent consumers is not about how they connect — internet marketing tactics are a given — but rather on how to create new and compelling reasons why their brands are meaningful and important to this digitally-empowered generation.