By Al McClain
According to panelists at a recent NRF workshop entitled “Retail Marketing to the Mass Affluent,” these consumers – defined as the 10-20 percent of the population that have a disproportionate amount of discretionary income – aren’t really so different than the rest of us, as they have high expectations for service, value, and staying on-trend.
The panel was moderated by David Braunstein, VP consumer services at MBS and included: Lisa Gavales, CMO, EXPRESS (recently of Bloomingdale’s); Karl Haller, VP strategy & business development at Brooks Brothers; Sylvia Morrison, director database marketing for the Cleveland Clinic; and Tom Jarrold, SVP global marketing & creative at Armani Exchange.
The panelists described some differences in their market positioning. Lisa Gavales said that the EXPRESS customer is aspirational and wants to be on-trend but is not affluent yet, while Bloomingdale’s makes brands accessible to the mass affluent. Karl Haller noted that Brooks Brothers was founded in 1818 and stands for high quality, fair prices, and value. Sylvia Morrison said that the Cleveland Clinic has 37,000 employees, is the third largest hospital in the U.S., and is ranked by U.S. News & World Report as among the top five American hospitals overall and as the #1 heart center. Armani Exchange, according to Tom Jarrold, targets 18-28 year olds, who are social and club-going types, providing them with accessible Armani.
Ms. Gavales of EXPRESS said that mass affluents don’t want to be categorized and need to be treated individually while Mr. Haller of Brooks Brothers said that the expectations of many consumers are similar, it’s just that their ability and willingness to spend is different. Brooks Brothers relies heavily on its in-store associates to build one-on-one customer relationships.
Mr. Jarrold feels that the expectations of the mass affluent are higher and it’s important to use emotional ad campaigns with this group. Armani Exchange runs four new ad campaigns per year, has a focus on using the latest dance music to provide an in-store “club-like” music experience for shoppers, has its own music label producing two new CDs per year, has its own style website – www.styletraxx.com – and creates its own music videos for fashion shows.
The Cleveland Clinic finds baby boomer consumers expect quick answers from physicians so they pride themselves on answering patients’ (and prospective patients’) e-mails rapidly. They even provide patients with the cell phone number of a contact at the hospital. The Clinic also provides a medical concierge service for high spending patients, offers a high-end hotel on its campus (with room rates ranging from $250 to $1,000 per night), has special floors and rooms for the affluent, and partners with The Canyon Ranch to provide special cuisine.
Armani Exchange believes clothes are about fun in addition to comfort and that the lifestyle it offers shoppers is a magnet. They offer 12 new clothing collections per year and have a universal brand message with local touches as well.
Clientelling (keeping a “black book” of regular customers and contacting them for special sales, etc.) is important to all the panelists as they want to ensure that consumers are getting relevant messaging. Brooks Brothers is looking to use clientelling to help them organize around customer needs in addition to store events. Armani Exchange is moving marketing dollars online with programs such as a MySpace page and their Styletraxx website, and making sure its marketing plan delivers short, loud bursts around its collections or product launches.
Overall, it seems that the key trait of the mass affluent is that they are big (but not the biggest) spenders with great upside potential as their income climbs. But, they need some sort of special treatment if retailers are to attract them.
Discussion Questions: How are the mass affluent different from mainstream consumers? What marketing and merchandising do consumers with above average spending habits respond to best?
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I love Ian’s car shopping story. I was 17 years old, standing in a Porsche/VW dealer (you can guess which I was there for!) when I watched a “farmer” in overalls buy a new 911 for cash on the show floor. Never forgotten that.
But in an interesting juxtaposition to the more fashion oriented categories discussed above, one of those other blogs carries a story today talking about how the surprisingly spartan Fresh & Easy (Tesco) stores are doing better in upscale enclaves. I saw my first F&E last week in Irvine and it was vacant at lunch time. The store manager had time to come over and chat to ask what competitor we were from! Guess that’s who most of her “customers” had been lately.
But the referenced author claims a store in an upscale area of Phoenix was booming with “affluents” who were loving carrying out their self-checked bags of pre-prep meals and packaged produce to their Beemer’s in the parking lot. Maybe this is the food equivalent of the “soccer mom in the sweat suit filling her new Mercedes at the self-serve pump” that we were all fascinated by in the early 80s???
When you include the affluent market with the “near-affluent” and then add in the “affluent-minded,” you’re talking about nearly half the population! (well, at least 40% anyway). The point is that the expectation of quality and luxury has now become a mass phenomenon.
How to reach and sell and establish loyalty among the new affluent market? I would say most of all, individualization, or in other words, mass customization. The processes and technologies that make this possible are more available and affordable than ever. It is up to retailers and providers of goods and services to equip themselves to treat every one of their customers as an individual. This will increase number and size of sales, visits, loyalty, referrals, income and profits. It is the way of the future.
I’d like to disagree with one of the general themes emerging from this discussion. From my work with smaller and independent retailers, who target a generally more affluent customer, the affluent, near affluent and affluent minded (to use Roger Selbert’s term, ARE different.
These customers are not nearly as price driven as the broader mass market customer. They have absolutely no inclination to overpay, but they are more than willing to pay for those things of value to them; better merchandise, unique and compelling items, unique and compelling experiences, brand cache that reflects their unique lifestyle, state-of-the-art product knowledge, exquisite customer service and an engaging, pleasant shopping environment.
The retailers who focus their core mission around meeting and exceeding these expectations find that the price/value relationship is based on much more than the base intrinsic value of any given item, and that maintaining price integrity, and sustainable margins, is a much easier proposition.
Mark Lilien maintained that “the panel members all come from higher-margin businesses that can afford gracious customer treatment”. I would turn his formulation upside down; these retailers are able to maintain higher margins BECAUSE they offer gracious customer treatment.
Affluent consumers are not different than mainstream consumers. They both respond to messages that address their purchasing behavior, media habits, and needs–real or psychological. They are definitively a consumer segment market. And as with any segment market, mainstream marketing programs will simply not apply.
Retail Marketing to the Mass Affluent is very much like retail marketing to the middle income markets except that in most cases there might be an elevation of elasticity and breaking points. However, the mass affluent do not like to consciously over-pay for any item either when comparing “apples” to “apples.” Many consumers in this category will gladly pay more for a “better” apple. The most successful approach to marketing to this group is to sell quality, points of difference, and lasting value.
Someone has to mention that we all put our pants on one leg at a time. Everyone wants respect and service (those two words are synonyms) from sales people and all want value for the whatever money is spent.
I remember taking a break from a yard-work project for which I was dressed in old sweats to go down and look at a car I intended to buy. As I looked at this beautiful major purchase in the showroom a sales person came up and said “Do you have any idea how much that costs?” As the Scriptures say: “Treat the peasant with love and respect, he may be a king in disguise.” I’m sure no king, but I didn’t buy from that dealership either.
My biggest issue with high end merchandise (and I know this is slightly off topic) is that it seems to fall apart faster than cheap stuff. Wouldn’t you think that a $500 pair of shoes would outlast a $50 pair? You don’t expect a $200 suit to make you gasp in delight every time you put it on but you do expect a $2,000 one to; too often it doesn’t.
I was in St. Barth recently where a beer costs $9. I’ve never seen prices like that and yet when my wife picked up a $1,700 purse (just to look at!) the clasp didn’t work. And in most of the designer stores sales people wouldn’t even look up when I walked in. Maybe I need a new sweat suit.
While there are many attributes shared by this group compared to all others, the mass affluent seem to respond with a greater share of their wallet when they feel they have received extraordinary and unique service. While it is likely true that all customers appreciate this type of attention and service, the club environment will open the purse strings.
Demonstrate that an affluent shopper has platinum privileges, that they are recognized and that their personal preferences are known and included in their shopping experience and you’ll gain and retain the wealthiest of shoppers.
This treatment does not fall on deaf ears with the next wealthiest group of shoppers, though. Those that are middle to upper middle class also appreciate this treatment and typically end up spending far more than they expected to spend (and maybe even more than they should spend). The real question is…what approaches will allow you to know your customers the way the shop keepers of the 1880s did?
There are many CRM products…their typical downfall has been that many identify the best customers, but they are not so good at the execution side of the equation. This is where the customers feel it the most…and retailers who get it right will win and win big.
The Mass Affluent want gracious treatment. So does everyone. The panel members all come from higher-margin businesses that can afford gracious customer treatment. The big trick: getting loyalty from the Mass Affluent when your margins are awful. The long-time winner and champion of that contest: Costco.