The latest Federal Reserve Bulletin shows that the share of total income of the top 3% of Americans grew to 30.5% in 2013 (from 27.7% in 2010). Further, the top 3% saw their share of wealth rise from 44.8% in 1989 to 54.4% in 2013.
The next 7%, who are wealthier than 90% of the rest of the nation, have a minimum net worth of $941,700 in 2013, according to the Bulletin. That makes virtually everyone in the top 10% of U.S. households a millionaire. Their share of wealth has hovered between 19% to 22% over the past 25 years and registered 20.9% in 2013.
The Federal Reserve Bulletin puts the total number of millionaire households at 11.53 million. That means the U.S. has 11 times more millionaires than China, which the Shanghai-based Hurun Research Institute placed at 1 million in its recently released Hurun Wealth Report.
A new study is being conducted to find out how marketers can tap into the wealthy's wealth.
"While marketers, especially those promoting luxury brands, are eager to entice the wealthy to purchase their goods and services in order to live the 'good life,' the fact is most millionaires do not spend extravagantly, as documented by the research of Thomas Stanley in his book "The Millionaire Next Door" and other books," said Ron Kurtz, president of American Affluence Research Center (AARC). "Rather, millionaires are careful shoppers and aggressive savers who typically live well below their means."
For most luxury marketers, the millionaire market remains to be tapped. Pam Danziger of Unity Marketing and Kurtz put their heads together and decided to launch an in-depth marketers' study of millionaires. "While there are plenty of studies of millionaires that focus on their investment behavior, those studies play to the wealthy's natural inclination to save. They reveal nothing about how to market luxury goods and services, other than financial, to the millionaires. Our study, Millionaire Market Monitor, will fill the gap and deliver insights to marketers that they can translate into marketing, branding, sales and advertising strategies," Danziger explained.
The need for such a marketing focused millionaire study was made clear in a recent survey conducted by the American Affluence Research Center among those in the top 10% of net worth. It revealed that the wealthy have little understanding of what luxury means or the brands and price points that qualify as true 'luxury.'
Kurtz explained, "With the exception of six luxury brands—Clinique, Lancome, Nordstrom, Four Seasons, Ritz-Carlton and Lexus—a quarter or more of the affluent surveyed said they believe luxury brands are over-rated. Nearly 44% of those surveyed felt Louis Vuitton in particular is over-rated and is aimed at status seekers rather than the consumer who is quality conscious." More than one-third of those surveyed said that Hermes, Gucci, Prada and Rolex were other over-rated luxury brands as well.
"The affluent, for the most part, have little understanding of luxury price points and luxury brands. It's only when you get to the top 1% of U.S. households that you begin to see some understanding of the price point and brands. People who appear in the media most—corporate executives, athletes, celebrities—they are a very small percentage of the wealthy. And they are the ones who tend to be the conspicuous consumers of luxury brands," Kurtz added.
According to Danziger, the challenge for marketers targeting millionaires is that they haven't done a particularly good job at positioning their brands as reflecting the ultimate in quality that will deliver superior customer experiences worth the extra costs they command. The wealthy view most luxury brands primarily as status symbols that are meaningless to them.
"This is the nut that Ron and I plan to crack. How should marketers position their brands as a good investment in the millionaires' lifestyle. If they don't need status symbols, which they don't, how should marketers tell their branding story in such a way that is meaningful to the millionaires and that will get them to share their hard-earned money on those brands," she said.
Kurtz sees the Millionaire Market Monitor as a way for luxury brands to understand how to capture an untapped market of consumers who could be reached through more tailored and more informative marketing. "Over 80% of millionaires are self-made, and they were raised in lower or middle income households that were not familiar with true luxury items," he explained.
The U.S. millionaire's market potential is many times larger than in any country in the world
The Millionaire Market Monitor is designed to help marketers gain new insights and understandings of the purchase motivations and desires of America's wealthiest, which by any measure represents the largest luxury marketplace in the world. For example, the size of the U.S. luxury market, which reached $78.3 billion in 2013, is nearly 3.5 times larger than the next largest market, Japan, according to estimates reported by Bain/Altagamma in its 2013 Luxury Worldwide Market Study.
Research sponsors needed to guide and direct the Millionaire Market Monitor survey
A select group of research sponsors will determine the questions and focus of the Millionaire Market Monitor study. To learn more about sponsoring the research study, click this link. The study will be fielded in early 2015 among a representative sample of millionaires, those high-net-worth (HNW) and ultra-high-net-worth (UHNW) consumers who represent the best target customers for high-end luxury goods and services companies. The survey will be conducted by mail among a sample of 4,500 households identified by AARC's exclusive targeting system which identifies consumers who meet the wealth criteria—households with $1 million or more net worth.
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