Luxury Insights

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.

Watch the blog for more tips and insights on LifeStyle™ Marketing.

If Martha Stewart Were Your Prospect...

It took three years and cost more than $1.5 million, but after surveying more than 4000 wealthy individuals, Premium Knowledge Group, an international marketing research and consulting company told us they had broken the “affluence code” and can now anticipate the behavior of the wealthy based on their lifestyles.

Marketing to the wealthy
We looked at their information and agreed that they not only had a new research-based approach to marketing to wealthy individuals, it was information that could give luxury home agents a new marketing tool to leave their competition in the dust.  So, we have negotiated the exclusive rights to this information for the real estate industry. Here’s what we plan to do with it -- develop an advanced training program for our members and create a special white paper report on Affluent Lifestyle Marketing™ (and the six distinct wealthy lifestyles).

We given you one sneak preview of the information in a previous article and offer more information here.  This information cost us a bundle, so we hope you’ll find this snippet interesting and understand why we think it can provide lots of insights when marketing to the wealthy.

According to Affluent Lifestyle Marketing™ there are six different affluent American LifeStyles™. In a previous article we looked at the Unmistakable Affluent  -- the flamboyantly wealthy who “live large” -- and compared them to the Understated Affluents who not only don’t flaunt their wealth, they strive to be low-key.  This time around, we thought we’d give you a sneak preview of  Tasteful Affluents along with some ideas for how to use the information. 

Martha and Ralph
If we want a “poster person” for the Tasteful lifestyle group, we can’t go wrong with Martha Stewart. Ralph Lauren would be another good choice.  Interestingly, each of these successful individuals has built a business around interpreting taste for the consumer. 

Members of this group pride themselves on being a bit different. They want to show good taste, but it’s more important that the things they have be distinctive and set them apart from the crowd. Fitting in isn’t important to these folks. Instead, they wish to be distinct personalities and typically look the part. 

A primary motivator is how they feel about themselves. Tastefuls enjoy shopping and don’t always make decisions based on price.  The written word is important to this group.  They read magazines focused on the home, dining, fashion and travel. You’ll frequently find them Online. They like the beach and are typically interested in wine.

A desire to be different
In short, this wealthy market segment is always looking for something that reflects their sense of being different, their individuality. This difference is often best demonstrated through a sensibility for and knowledge of wonderful design, great workmanship and very high quality materials. Connoisseurship is very important to Tasteful Affluents.

If you are showing homes to a prospect who exhibits these characteristics, don’t talk about the popularity of granite kitchen counters as everyone’s must-have feature. If everyone else loves granite, this group will want something more distinctive.  Instead, point out the unusual grain and the craftsmanship exhibited in the way the edges of the granite slabs have been shaped.  Talk about the uniqueness of the cork kitchen flooring.  Highlight what is unusual, tell stories that focus on the workmanship and quality of things, acknowledge that they may have seen the high-end European dishwasher in Architectural Digest.  Ask which aspects of the home “are them.”  Understand that they are looking for a home based on how it will make them feel about themselves.  Remember, they view themselves as having good taste and pride themselves on being a bit “outside the box” with regard to their style. They also want to be connoisseurs.

Expect Tastefuls to have “Shopped” for homes Online. They do like to shop and may want to actually see more homes in person than some other lifestyle groups.  Price will not be the primary decision factor in their buying decision, but they will want to feel that they are getting value and functionality – as well as something distinctive for their home buying dollar.