It is no secret that wealthy consumers, with their outsized potential for discretionary spending, represent a highly desirable demographic group for firms of all stripes. The challenge for marketers, however, is figuring out what works when trying to cater to this coveted crowd-- especially online.
In order to find out how businesses can best target their online marketing efforts to the rich, the Luxury Institute went directly to wealthy consumers and asked them about their internet habits and what turns them on -- and turns them off -- when they browse the web. Households surveyed had a minimum net worth of $1 million (includes home equity), with a median net worth of $1.7 million and median annual income of $306,000. Sixty-five percent of respondents were men, and 35 percent were women, and their average age was 56.
Without a doubt, the wealthy are no strangers to the web. The average wealthy American uses the internet seven days a week for an average of 3.2 hours per day; those under 50 and worth more than $5 million are heavier users. Twenty-seven percent of the wealthy are online for more than four hours a day. Almost all (98 percent) of the wealthy use the web at home, and more than two-thirds use the web at work, including more than 80 percent of wealthy people between the ages of 21 and 49 and more than four out of five wealthy individuals with incomes between $200,000 and $500,000.
What they're doing online
Email is still, by far, the killer application for the wealthy. Ninety-two percent tell the Luxury Institute they “frequently” use the internet to send and receive email. The second most popular use cited by the wealthy is checking news and weather (58 percent). Other frequent uses include planning travel and making reservations (42 percent), and paying bills (40 percent).
As far as shopping goes, more than half (51 percent) of wealthy consumers tell the Luxury Institute that they frequently use the internet to research products and services, although only 43 percent say they buy products and services online. Younger consumers under 50, and those with higher incomes and net worth, show a stronger tendency to buy online, and this same cohort of younger and wealthier consumers also show a greater propensity for other web activities such as using instant messaging, reading a blog, and buying music online. Just two percent of the wealthy use the web for gambling. High-income young wealthy men are the group most likely to use the web for adult entertainment.
Blogs are beginning to catch on. Nearly one-fifth of the wealthy tell the Luxury Institute that they read web logs on at least a weekly basis, and 28 percent of wealthy Americans report being very familiar with blogs. Frequent blog readership is highest among the youngest wealthy consumers, and among men of higher levels of income and wealth. The youngest and the wealthiest are also most likely to keep blogs of their own.
How to reach them
The most effective way to reach wealthy consumers online is through search engine results-- including paid placements. In fact, search results are the only online marketing method viewed as more effective than ineffective by wealthy consumers themselves. Overall, clickthrough banner ads are the least effective way to create a positive impression and to get browsers to buy a product, and yet the youngest and wealthiest consumers were unusually receptive to clickthrough ads. Nearly one third of consumers worth $5 million or more visited a website after being prompted to do so in another medium such as print or television. One sure way to turn off the wealthy is to bombard them with unsolicited emails.
In terms of building a database, marketers will find that younger wealthy Americans are generally receptive to parting with contact information in exchange for offering access to special reports and white papers. Women are more likely than men to divulge contact information to sign up for free email alerts.
The biggest online concerns of the rich?
Hackers and spammers. Wealthy Americans are most worried about email working as a conduit for viruses, unsolicited spam and possible identity theft, and these concerns increase with age. Concern over being tracked on large corporate databases, however, is greater than the apprehension over becoming a victim of identity theft by a margin of 85 percent to 59 percent.
Who should target these people?
Online music selling has lots of room to grow. Only six percent of the wealthy say they frequently buy and download music on the web, although this percentage more than doubles for those under 50 and for households with incomes above $500,000 per year.
The online market for luxury goods and services continues to develop at a rapid pace. We knew from comScore Networks that apparel and accessories sales on the web popped 41 percent in 2005, while sales of jewelry and watches surged 31 percent. Tiffany reports a 47 percent increase in shoppers at its site.
The web is also developing secondary markets in luxury goods, some that provide real value to buyers and sellers alike. Portero, a trader of luxury goods through eBay, certifies and guarantees every item it sells against fraud and forgery. Instead of depressing sales of luxury goods, Portero provides liquidity in a pinch for somebody unloading last year's fashions to make room for more buying. By eliminating transaction risk, Portero adds trustworthiness, objectivity, and competence to the buying and selling process.
We believe that luxury goods firms should, and will, eventually control secondary markets for their products. Think of what "pre-owned" cars did for luxury automakers versus traditional used car dealers in terms of brand control, customer loyalty and profitability.
Keeping abreast of the attitudes and practices of the wealthy will go a long way toward ensuring that online marketing efforts are effective and profitable. Stay tuned for follow-ups.
Milton Pedraza is founder and CEO of the Luxury Institute, a New York City-based research firm which publishes "The Wealth Report," and consults to senior management of companies targeting the Wealthy. Luxury Institute clients include: Flight Options, Abercrombie & Kent Destination Clubs, U.S. Trust, and MasterCard.