Thursday, March 22, 2018
Purchase Patterns of Wealthy Households
There are many stereotypes about how the wealthiest households spend their money. Here are some of the research-based findings on that topic.
According to a The Wall Street Journal article, the most popular cars among people in the wealthiest 25 zip codes in the USA (median home prices from $3.4 to $6.7 million) are: Tesla Model S (starting price: $71,070) (accounting for the most car sales in 8 of the 25 zip codes - all in California), Mercedes-Benz E-Class ($51,905), Jeep Grand Cherokee ($28,690), BMW 3 Series ($33,475) and Ford F Series ($25,065). Notice that the list does not include Bentleys, Bugattis, Ferraris, Lamborghinis, Maybachs or Porsches.
According to the Bureau of Labor Statistics, high income households spend significantly more than average households on food away from home (more than one-half of their food purchases), housing operations, supplies and furnishings, personal insurance and pensions, cash contributions, education, entertainment and apparel and services. High income households also spend more on alcoholic beverages, reading and transportation.
According to Experian's 2011 Discretionary Spend Report, households with discretionary spending of $30,000+ (that is, households with median household incomes of $204,000+) index much higher on airline affiliation cards, American Express cards, paying full balance on credit cards, having home improvement, home equity and mortgage loans, and contributing to arts, culture and humanities organizations.
According to another study high-end department and technology stores and cultural amenities (museums, art galleries, concert halls, etc.) are frequented most by high income households.
According to AdAge, The Wall Street Journal is the periodical with the highest household income, followed by Barron's, The Economist, United Hemispheres, Washington Post Sunday, The New York Times Sunday, The New York Times daily, American Way, Conde Nast Traveler, The Atlantic, Southwest Spirit, Architectural Digest and Yachting. Magazine reading habits of the affluent also include Ivy League Magazine Network publications (alumni magazines (Brown, Chicago, Cornell, Dartmouth, Harvard, Pennsylvania, Princeton, Stanford and Yale) and several other travel magazines (Global Living, Afar, Travel & Leisure and Elite Traveler). Other interesting publications include Boat International (super yachts and luxury yachts), Private Islands (for people who own or want to own private islands) and Black Ink (only available to American Express Centurion cardholders - $7,500 initiation fee).
While the nouveau riche might strive for outward expressions of their newfound wealth to establish their socioeconomic status, old money prefers to downplay their wealth, not only because they are secure in their position but also because they have discovered that too much outward display of wealth only invites unwanted interest.
So, on what types of spending are households with large disposable incomes focused? Mostly services and experiences- travel, fine dining, educational and personal development experiences, cultural activities and charitable activities. And if they are seeking luxury products and experiences, what are they looking for in those products and experiences? Artistry or beauty, exceptional design, quality craftsmanship, limited availability (exclusivity), a rich history and heritage, and a high level of service including respect and civility.
Regarding today's status symbols of the wealthy - college or university (Ivy League is best), zip code, travel (exotic is best), unusual experiences, private jets, multiple homes, equestrian sports, yachting (super yachts among billionaires), wine cellars, ultra-luxury watches, jewelry, art, private clubs, board memberships, civic involvement and ample leisure time.