Where the Millionaires Are: Online

It is no secret that wealthy consumers, with their outsize potential for discretionary spending, represent a highly desirable demographic group for firms of all stripes. The challenge for marketers, however, is figuring out what works when trying to cater to this coveted crowd—especially online.

In order to find out how businesses can best target their online marketing efforts to the rich, we at the Luxury Institute went directly to wealthy consumers and asked them about their Internet habits and what turns them on—and turns them off—when they browse the Web. Households surveyed had a minimum net worth of $1 million (including home equity), with a median net worth of $1.7 million and median annual income of $306,000. Sixty-five percent of respondents were men; the average age was 56.

Without a doubt, the wealthy are no strangers to the Web. The average wealthy American uses the Internet seven days a week for an average of 3.2 hours a day; those under 50 and worth more than $5 million are heavier users. Twenty-seven percent of the wealthy are online for more than four hours a day. Almost all (98%) of the wealthy use the Web at home, and more than two-thirds use the Web at work, including more than 80% of those between the ages of 21 and 49 and more than four out of five wealthy individuals with incomes between $200,000 and $500,000.

E-mail, news, and research
So what are they doing online? E-mail is the still, by far, the killer application for the wealthy. Ninety-two percent said that they “frequently” use the Internet to send and receive e-mail. The second most popular use cited by the wealthy was checking news and weather (58%). Other frequent uses included planning travel and making reservations (42%) and paying bills (40%).

As far as shopping goes, more than half (51%) of wealthy consumers said that they frequently used the Internet to research products and services, although only 43% said they actually purchase products and services online. Consumers under 50 and those with higher incomes and net worth showed a stronger tendency to buy online. This same cohort of younger and wealthier consumers also showed a greater propensity for other Web activities such as using instant messaging, reading a blog, and buying music online.

Blogs, in fact, are beginning to catch on. Nearly one-fifth of the wealthy said that they read Web logs on at least a weekly basis, and 28% reported being very familiar with blogs. The youngest and the wealthiest were not only more likely to read blogs but also the most likely to keep blogs of their own.

Just 2% of the wealthy used the Web for gambling. High-income young wealthy men were the group most likely to use the Web for adult entertainment.

Online music selling has lots of room to grow. Only 6% of the wealthy said they frequently buy and download music on the Web, although this percentage more than doubles for those under 50 and for households with annual income of more $500,000.

The most effective way to reach wealthy consumers online is through search engine results, including paid placements. In fact, search results were the only online marketing method that the wealthy consumers themselves viewed as more effective than ineffective. Overall, click-through banner ads were the least effective way to create a positive impression and to get browsers to buy a product, and yet the youngest and wealthiest consumers were unusually receptive to click-through ads.

Nearly one-third of consumers worth $5 million or more visited a Website after being prompted to do so in another medium such as print or television. One sure way to turn off the wealthy: bombard them with unsolicited e-mails.

In terms of building a database, marketers will find that younger wealthy Americans are generally receptive to parting with contact information in exchange for offering access to special reports and white papers. Women are more likely than men to divulge contact information to sign up for free e-mail alerts.

The biggest online concerns of the rich? Hackers and spammers. Wealthy Americans were most worried about e-mail as a conduit for viruses, spam, and identity theft, with older respondents more concerned than their younger counterparts. Concern over being tracked on large corporate databases, however, was greater than the apprehension over becoming a victim of identity theft by a margin of 85% to 59%.

The online luxury market
The online market for luxury goods and services continues to develop at a rapid pace. We knew from comScore Networks that apparel and accessories sales on the Web climbed 41% in 2005, while sales of jewelry and watches surged 31%. Upscale jeweler Tiffany & Co. reports a 47% increase in shoppers at its Website.

The Web is also developing secondary markets in luxury goods, some that provide real value to buyers and sellers alike. Portero, a trader of luxury goods through eBay, certifies and guarantees every item it sells against fraud and forgery. Instead of depressing sales of luxury goods, Portero provides liquidity in a pinch for somebody unloading last year’s fashions to make room for more. By eliminating transaction risk, Portero adds trustworthiness, objectivity, and competence to the buying and selling process.

We believe that luxury-goods firms should, and will, eventually control secondary markets for their products. Think of what “preowned” cars did for luxury automakers vs. traditional used-car dealers in terms of brand control, customer loyalty, and profitability.

Milton Pedraza is founder/CEO of the Luxury Institute (www.luxuryinstitute.com) and may be reached by e-mail at [email protected].