For Affluents, Luxury Has to Be Experiential, Not Just Expensive
Chief Insights Officer
Gone are the days when luxury was only associated with sprawling mansions and fancy cars. Modern-day affluents are hard workers that value experiences more than expensive things, and most prefer Hondas and Toyotas to Italian convertibles. Steve Kraus, chief insights officer at market research firm Ipsos, spoke with eMarketer’s Maria Minsker about the New Age rich.
eMarketer: There’s an old stereotype of the “idle rich,” which suggests that wealthy people don’t work hard for their money. Has that stereotype changed?
Steve Kraus: By and large, modern-day rich people grew up in middle-class families. They had a long period of comfortable living, but real wealth came suddenly when their company went public or was bought, for example. People often think that the wealthy don’t have to work very hard, but that’s not the case.
eMarketer: Does that mean most modern-day affluents are newly rich?
Kraus: More than 90% of people who are rich today created their own wealth in their own lifetime by creating or building a company. We’re not talking about descendants of Carnegies and Rockefellers who inherited money anymore, because there are almost none left.
“More than 90% of people who are rich today created their own wealth in their own lifetime by creating or building a company.”
eMarketer: Does the economy play a role in people’s perception of their own affluence?
Kraus: Back in 2006 or 2007, affluent people felt a lot richer than they actually were. Everybody thought they were rich because of the housing prices. Today is the opposite. Everybody feels poorer than they actually are.
Affluents are the top 25% to 30% of the country, but even they feel less rich than they actually are because they’re comparing themselves to Bill Gates and Richard Branson.
eMarketer: Are there specific products or product categories that people tend to upgrade to when they become affluent?
Kraus: Affluents outspend non-affluents in 92% of product categories. The only things non-affluents spend more on are cigarettes, rent, Medicare and a few other areas. The biggest differences in spending are in experiential categories, such as travel. When it comes to luxury, affluents would rather go on a luxury vacation than buy an expensive watch or piece of apparel.
eMarketer: Is there a consensus among affluents on what makes the ultimate status symbol?
Kraus: There used to be, but there isn’t anymore. Back in the ’80s, everyone aspired to own a yacht, a mansion or a fancy car, but now luxury is much more in the eye of the beholder. Different people want different things. That means luxury is a little bit less about getting expensive things and more about personal experiences. Now, the luxury is not in staying at a seven-star hotel, but in visiting a special place, having a great connection with the local community and going to a restaurant in a remote place.
“Now, the luxury is not in staying at a seven-star hotel, but in visiting a special place.”
eMarketer: When it comes to media usage, affluents were the last loyalists of print media. Is that fading away?
Kraus: Affluents’ consumption of traditional print is down a little. It tends to be generational, though. There’s less print readership among young affluents, for example. There’s still a very strong draw to well-known and respected brands such as The New York Times or The Wall Street Journal, though often content is consumed digitally.
eMarketer: Is traditional TV still an important medium for affluents?
Kraus: It certainly is. Nearly all affluents watch TV. Cord-cutting is a millennial concept, but not so much for affluent millennials. Viewership of individual networks is down slightly, but that’s been a consistent trend over the past few years. It’s also clear that demand for video streaming has grown over the past couple of years, and it’s no longer just millennials that are driving growth. Generation Xers and baby boomers are playing catch-up, and that’s bringing the overall numbers up.