Luxury Insights

Rich...but oh so different

Today Robert Frank posted Remembering a Modest Billionaire, a thoughtful tribute to William Cook the billionaire founder of Cook Medical who died last month.  

By all accounts, William Cook was a modest, hard-working man who built his own fortune through hard work and lived extremely modestly in a small 3-bedroom house.  In his business he created the tools to save lives, and in his personal life pursued a passion for local historic preservation--giving millions to help preserve the spirit and historic architecture of his community.   As Frank notes:

Today, so much wealth (is) created through financial engineering, trading and investments that fail to add concrete value. The Cooks of the world are slowing being displaced on the Forbes list and the ranks of the rich by hedge-funders, private-equity chiefs, commodity traders, and passive tech investors.

Maybe Americans wouldn’t resent the rich so much if more of them were like Mr. Cook.

Contrast this with his post from Monday: Young, Rich and Shopping for a Mansion which highlights a new reality show in the UK on BBC3.  As Frank describes it:

...a new British reality-TV show starting today offers the ultimate in wealth escapism: following around rich kids as they shop for a starter mansion. It’s like “Gossip Girl” meets “House Hunters,” with a dash of Kardashians.

Here's the first episode on YouTube:

 

Some of the other online reviews have been a bit less forgiving of the show and it's cast.  

Criticisms and value judgements aside, what's really striking is the huge difference in the lifestyles--and presumably also the beliefs and values--of these young househunters and William Cook.  

Successful luxury businesses recognize these differences, have a meaningful model for grouping or segmenting their customers based on these attributes, and deliver a service or offering tailored to fit.

It's no different in real estate.   How you write copy, stage homes, show properties, even design listing presentations to better attract, communicate with, and satisfy affluent clients and customers should be informed by an understanding of their values and lifestyles.  

You certainly couldn't successfully market a home to Mr. Cook and these young househunters in the same way, could you?  

Is it really about the shoes?

There is a good article (To Sell an Apartment, No Detail Is Too Small) in the Times today  that highlights the importance of staging and enhancing how a property shows.  

Of course you know the importance of this already, but the article is novel because they attempt to put a dollar value on simple staging and repairs with examples from NYC agents and their listings.  For example:

• Clutter: Subtract 5 to 15 percent.
• Fresh towels and throw pillows: add $25,000. 
• Dirty rugs: subtract $5,000. 
• Regrouting tile: add $100,000 (to a $3 million apartment, that is). 
• New fixtures and appliances: add $250 in rent. 
• New lights: add $32,500. 
• Replacing cabinets: add $107,000. 

Of course in your market, mileage may vary!  They nailed it at the end though with an insight about the fact that buyers aren't buying a home, they are buying a LIFESTYLE:

An expensive shoe closet: worth every dollar. Michele Kleier of Gumley Haft Kleier has found that when buyers walk into a closet filled with Christian Louboutins, they are likely to pay more of a premium than what the seller spent on her shoe collection. She advises sellers, “You can buy 25 pairs of designer shoes, put them in your closet, and they’re going to get more than you spent on them.” That’s because, Ms. Kleier said, “people want to step into your life.”

If the shoe fits...

2010 - Best Online Marketing

2010 Marketing Awards:
Best Online Marketing

Winner: Jennifer Kirby
Exit Realty Ventures, Farmington, Minnesota

Jennifer's online marketing strategy is centered around her blogs.  Her Minneapolis Luxury Real Estate Blog  features well-written content that is relevant and interesting to current and potential homeowners.  It demonstrates her local knowledge, market expertise, and helps to position her as the local luxury expert. Her well-crafted posts and beautiful photos highlight design trends, historic homes, what does and doesn't work when marketing luxury homes, local market stats, and so much more. 

The bottom line:  the content is rich, engaging, and useful.  Google aggrees.  Her blog enjoys the #1 spot in organic search results for "Minneapolis luxury real estate." 

In addition to her main luxury blog, Jennifer has additional blogs based on specific market segments or lifystyles that are relevant to her own expertise and the markets and propects she is targeting.  For example:

• Historic Homes of Minnesota
• The Minnesota Garden
• Fine Homes in the Twin Cities

Her blogs are built on Wordpress, and have excellent usability--she has chosen layouts and themes that are simple, clean, easy to read, and easy to navigate.  She has been blogging consistently since the beginning of 2007.

Jennifer is a great example of a successful online strategy based primarily on blogging.   Her blogs are driving new business--directly delivering luxury listings and sales.

Congratulations to Jennifer on a simple-but-effective online strategy very well-executed!

Luxury is About the Stories

In their Luxury Magazine supplement, The New York Times has been running a series of interviews with fashion insiders on the subject of LUXURY, asking each of them the following eight questions:

1. What is your most treasured possession?
2. What is the quality you most desire in a fine product?
3. If you were a handbag, what would it look like?
4. If “luxury” changed its name — what should it be called?
5. Is your idea of luxury tangible — or a sensation/ experience?
6. Can luxury be virtual as well as actual?
7. What do you consider the most overrated luxury?
8. Is your ultimate luxury time — for yourself?

The interview with Imran Amed, the Founder of Business of Fashion and a strategic consultant for international luxury brands, particurarily caught my eye. 

Here are a few of his answers:

What is your most treasured possession?
It’s a tie between a durable, boiled cashmere blazer by the Japanese bespoke tailors ICHO and a vintage Heuer Carrera watch from the late 1960s. Both are high-quality, versatile items suited to my taste and style, with deeply personal stories attached to them. And both — if cared for properly — will last forever.

What is the quality you most desire in a fine product?
It must enable me to reflect my own personality and fit with the way I live, rather than stamp me with a logo or reflect the current fashion trends.

If “luxury” changed its name — what should it be called?
During a period of unrestrained economic expansion, prices of so-called luxury products had risen to an all-time high, while quality and workmanship suffered. In short, consumers were paying more for less. This is why new luxury must focus on traditional luxury values: craftsmanship, personalization, heritage, quality at a fair price.

Is your idea of luxury tangible — or a sensation/ experience?
For me, luxury is about the stories, feelings and meaning attached to objects, as opposed to the actual objects themselves. For example, a traditional, handmade Alpaca scarf I discovered in a small, hidden shop in the San Telmo district of Buenos Aires is so much more luxurious to me than a mass-produced cashmere scarf piled up next to hundreds of others in a generic luxury flagship. True luxury must offer life-enriching experiences and stories, as well as attractive objects. Indeed, these kinds of stories may be the most enduring form of luxury of all, because they never expire.

Think about this as it might be applied to luxury real estate.  Many of your potential buyers may share Imran's values and outlook.  Will your marketing materials resonate with them?  Does your copy reflect these or similar values?  What are the values of your targeted buyers?  As we've long said, "Every home has a story.  It is your job to find it and tell it well."   

2010 - Overall Excellence in Personal Marketing

2010 Marketing Awards:
Overall Excellence in Personal Marketing with an Emphasis on Agent Branding

Winner:  James Anderson
Pacific Luxury Group, Santa Monica, CA

Lots of agents do clever things. James Anderson does clever things which are strategic. 

He has created a brand that is not his name – Pacific Luxury Group.  His blue and brown colors represent the sand and the sea of the coastal area he serves and the blue also evokes the luxury of the Tiffany’s blue box.  The lion on his logo is a symbol of success.  James’ business cards define the design rules for elegance and professionalism. 

   

Even his property marketing is part of his personal branding – for instance his custom signs are so distinctive that you know instantly that they are his Pacific Luxury Group’s signs.  Instead of saying for sale, each sign has a witty and effective headline…

• “Repeat after me, ‘I deserve this house.’”
• “Whoever said you can’t buy happiness, never owned this house”
• "Location, location, location, and ungodly amounts of square footage!”  

James Anderson is raising the bar in real estate marketing and agent branding.

2010 - Best Marketing Campaign for a Property

2010 Marketing Awards:
Best Marketing Campaign for a Property

Winner:  Susan Lowe
Chase International, Lake Tahoe, NV

A $100 million dollar property represents a special marketing challenge.  You must target market effectively while maintaining the owners’ privacy.  Details about the property need to be limited to qualified prospects.

To acheive this, Susan Lowe and Shari Chase at Chase International created a marketing campain with three levels of marketing collateral, each with an increasing level of information and detail:

1. The first is for the public and casual enquires
2. The second for other agents and not-yet-qualified prospects
3. The third is limited to serious prospects who have been qualified.  

There are both print and online resources at each level. 

   

The marketing support pieces they have created highlight the property’s uniqueness and illustrate the point that the quality of the materials must reflect the quality of the property.  For example, their 16-page brochure includes beautiful professional photography--each image accompanied by a haiku poem.  The cover features an original watercolor of one of the home's views printed on fine watercolor paper.  As the judge told us, these materials are “perfectly appropriate” for this level of the luxury market.

Their marketing plan goes beyond advertising and collateral--there is a stong communication component.  They have done a masterful job of leveraging public relations for property exposure -- the listing was first announced in a major story in The Wall Street Journal and there has been follow-up coverage as well.

Congratulations on a superb campaign Susan!

Old Money, New Money, Patricians and Parvenus

When looking at the attitudes and spending habits of the affluent, many people think in terms of "Old Money" and "New Money."  It is a simple model, but it is not always accurate or useful. 

As we discuss in our training, categorizing the affluent is more a function of attitudes than the age of the money.

In his post, "The Four Species of Wealthy Consumers" Robert Frank of The Wealth Report highlights a recent study that looks at the issue of social status and brand prominence and suggests a new segmentation model that uses attitude to build on the Old/New Money model.  The study groups people into four categories based on their relative level of wealth, desire for social status, and desire to associate or disassociate themselves with their own or other groups:

Patricians are wealthy and understated.  Their primary concern is associating themselves with other Patricians using subtle cues.  They buy high end luxury goods without prominent logos and branding.

Parvenus are relatively wealthy and crave status.  They seek distance themselves from less affluent the Poseurs and Proletarians, and to associate themselves with other affluents, both Parvenus and Patricians.  The study suggests that they like prominent logos, particularly Louis Vuitton.  (What we might call "flamboyants").

Poseurs want to be Parvenus but lack the financial means.  They are "highly motivated to consume for the sake of status" but often can't afford luxury goods.  They are consumers of counterfeit luxury goods.

Proletarians are generally not consumers of luxury goods.  They are neither affluent nor status conscious (when it comes to brand prominence).  They don't seek to associate themselves with the "haves," nor do they seek to distance themselves from others of "humble means."

Robert raises an interesting question in his post when he asks,"Which category do you think you fall in? Or is there a fifth category? (Would Warren Buffett be a billionaire proletarian?)" 

This study looked only at wealth, logo prominence, and desire for social status.  The resulting data suggested these four segments.  If these are overly broad and you want a fifth category, you need a new study!  (For a more detailed model that will accommodate folks like Warren Buffet nicely, I would suggest PKG Lifestyles).

Let's cut to the chase:  Is this a useful model?  Can you apply this in your business? 

I would say maybe.  In luxury real estate, you'll only be dealing with the affluent Patricians and Parvenus (you'll screen out any Poseurs that try to sneak in when you qualify your prospects), so this model doesn't provide many useful insights beyond the old notions of Old  and New Money.  It is certainly not as specific or as useful as the PKG Lifestyles model. 

That said, using the notion of Patricians/Parvenus is certainly better than nothing at all.  Identifying prospects and clients as Patricians or Parvenus and determining which group a property is likely to most appeal to could be quite useful, particularly when it comes to understanding client wants and needs and choosing the language that you use in dealing with clients or prospects and in positioning properties. 

Staging, marketing and storytelling

"The Story Seller" is the title of an article that ran in the New York Times Magazine a couple weeks ago.  If you haven't read it, check it out--it's a nice profile of Meridith Baer whom the NYT calls the grandest of the grandes dammes of home staging.

The piece gets at the heart of good staging, and for that matter good marketing.  It is all about helping the prospect envision themselves living a happy life in the home.  As Baer herself puts it:

“We’re not finding the cure to cancer,” Baer says. “But we are helping people see how they’ll live in the house — where they’ll hang art, where they’ll eat. The kind of thing they’re not good at because they are finding the cure to cancer.”

Whether one is writing advertising copy, staging the home, or planning a real estate soiree, the trick of course is to understand the lifestyles, tastes, and values of your prospects and to craft experiences that satisfy these and at the same time provide a tempting aspirational tickle. 

It is about crafting a compelling and pleasing story or vision into which your prospects can place themselves.  Baer has taken her experience as a screenwriter doing just this and applied it to the staging of homes.

CAT Scan of 'The Upper Crust'

Just wanted to plug the current issue of lore Magazine, which has an article about The Institute and the valuable insights into the minds of the affluent that LifeStyle marketing provides.

The second page of article features a nice summary of the six affluent LifeStyles.

Here is a little taste:

The Unmistakables, who represent about 15 percent of the wealthy, demand a high level of service from their real estate professional. They also expect their sales professional to be well-turned-out and fashionable − like themselves. Because Unmistakables like to turn heads and make a statement, they would be great prospects for that posh property on a busy street. "They'll love the idea that so many people will be able to see their fabulous home," says Moore-Moore.

Thanks lore!

Affluence and Attitude: Slicing the Affluent Pie

If you've studied marketing or spent any time hanging around marketing geeks, then you know something, probably quite a bit, about "consumer segmentation".   It is one of the fundamental tools of modern marketing.

Segmentation is simply the process of dividing your potential customers into different groups, the notion being that it is easier and more effective to tailor an offering to a relatively small group of people with similar wants and needs than it is to try to mass-market something to the world.  (It’s surprisingly difficult to sell worms to people who aren’t fishermen, gardeners, or practical jokers).

Segmenting our potential markets is something that we all do intuitively.  We know that most products, or homes for that matter, are not going to appeal to everyone.  So, we try to define in our minds the “perfect buyer”.  Segmentation models are typically built around demographics (age, income, gender…), psychographics (lifestyle, personality, values…), geography (city, neighborhood, zip code…), and other personal attributes.

It is common to see people segmenting their potential customers based on things like gender and zip code, in part because it is easy to get this information, and get it in a form that can be immediately put to use.  There are more than a few list brokers who will sell or rent you a list of women 55 and older who live in zip code 90210.

The big question when looking at segmentation is: Are the segments and the attributes that define them really distinct and useful IN THE CONTEXT OF YOUR OFFERING?  A good segmentation model should be based on sound data, give you a sense of what the key purchase criteria for each segment are likely to be, and by extension how best to communicate with them.

Income and net worth are common attributes in segmentation models.  Everybody wants a piece of the folks with the fat wallets, and understandably so.  Robert Frank, the author of Richistan, the popular book on the affluent, divides the wealthy into three main groups (based on net worth):

• Lower Richistan: $1-$10 million
• Middle Richistan: $10-$100 million
• Upper Richistan: $100 million-$1 billion

Segmentation by net worth or income is an obvious approach.  It is particularly useful for qualifying potential purchasers and looking at potential market size, but it isn’t always as useful as one might think in a working segmentation model.  The reason is simple.  While the groups affluent may be economically homogeneous, when it comes to the decision to buy or not buy a particular good or service, they can be very different and in fact have more in common with those outside their group than those within.

Let’s take the new Apple iPhone as an example.  While the members of all of the Richistani groups can obviously afford a $600 mobile phone, it is unlikely that the Lower, Middle, and Upper Richistanis who have purchased iPhones have done so for reasons related to their net worth.  It is much more likely that they share some common “needs” completely unrelated to net worth, and they have purchased the iPhone in an attempt to satisfy those needs.   When it comes to the factors that influence iPhone purchase, these Lower, Middle and Upper Richistanis have more in common with each other than they do with their peers who share the same net worth.

The same is true with luxury homes.  While income and net worth are qualifying factors in terms of ability to purchase, they may or may not have any bearing on the desire to purchase, or actual purchase criteria.

If that’s the case then how should we segment the affluent?  Every year, companies spend millions of dollars on research and analysis in attempts to find better ways to answer this question.   Estee Lauder, Forbes, deBoulle, and Maybach (Daimler Chrysler) have all turned to Premium Knowledge Group (PKG) for insight.  As we've noted in previous articles and posts, we have too.

PKG has conducted perhaps the most rigorous and comprehensive research on the affluent available, and based on this research, has developed a unique segmentation model.  Their Affluent LifeStyle™ Marketing model identifies six distinct (statistically significant) segments among the affluent, each unique in terms of priorities, motivations, and preferences (but notably, not income levels).

The six Affluent LifeStyles are:

1. Unmistakable
2. Tasteful
3. Dependable
4. Understated
5. Economical
6. Practical

Previous article on Unmistakable vs. Understated affluents.

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