The Store | Managing: 21st Century Consumers
The Affluence Boom
The new book Mass Affluence says the middle class has moved upscale. Are you marketing
to this demographic effectively?
The rules of marketing have changed, say Paul Nunes and Brian Johnson, authors of Mass Affluence (Harvard Business School Press, 2004). Jewelers and other marketers need to adjust their outreach to a new demographic group the authors call the moneyed masses. These consumers, who still consider themselves part of the broad middle class, earn a greater share of total income and also have more discretionary income than ever.
Nunes and Johnson list seven rules to help you understand who these people are, why the marketing strategies of the past dont reach them effectively and what you can do to bring more of them into your store. Over the next few months, well look at some of their ideas. For now, heres a description of the moneyed masses, along with some reasons Nunes and Johnson think retailers should go after them:
Between 1970 and 2001, the percentage of Americans earning over $100,000 (in todays dollars) rose from 3.7% to 13.8%.
During that same period, the percentage of people earning $75,000 to $100,000 rose from 4.4% to 10.8%.
Nearly one in four households now earns over $75,000 per year.
Between 1979 and 2000, the top 1% of earners share of total national income rose from less than 10% to 21%.
Despite all this extra cash lining more Americans pockets, Nunes and Johnson show that affluent people are spending less and saving more than in the past. Among the top 20% of earners, the percentage of expended household income dropped from 74.6% to 68.6% between 1984 and 2000.
The most important reason: they cant find products that meet their desires in a price range they can afford. Therein lies the opportunity for jewelers. These consumers comprise a sizable middle market that appreciates quality but doesnt particularly need the products marketed to the megawealthy.
The authors cite the story of Crest Whitestrips as an example of a marketing campaign that reached out to this moneyed mass in the middle. Consumers have several choices for whitening their teeth. Toothpastes range from $1 at discount stores to $7 for special whitening formulas. The next choice is professional whitening in a dentists office for about $400. Proctor & Gamble came up with Crest Whitestrips for about $40. The strips wild success proves that while many affluent folks arent willing to step up to a $400 treatment, they will pay $40 more than five times the cost of the most expensive whitening toothpaste.
In recent years, jewelers have been exhorted to avoid the middle-market and move toward selling premium goods. But Mass Affluence shows that seizing the new affluent middle ground may be a better bet. The key, say the authors, is to move above the best of conventional offerings but below ultrapremium products.
Retail jewelers are in a good position to dominate this middle ground and to offer products and services for which the moneyed masses will be willing to pay higher prices. The key is to offer sufficient value so these customers will spend their discretionary income on jewelry rather than other products. In the coming months, well explain how Nunes and Johnson say its done.