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MIAMI BEACH, Fla. — In this decade’s troubled and unforgiving economy, limousine operators need to understand the new ways their affluent clients think and behave.
Tapping this changed clientele is crucial to keeping a chauffeured service relevant and successful in coming years, says a national expert on luxury spending and clientele.
“Why people are less inclined to use your service has less to do with you than changes in them, and the failure to understand it,” says Dr. Jim Taylor, vice chairman of Harrison Group, a research, marketing and branding consultancy whose clients include Lincoln and Mercedes-Benz. “What you need to do is to build confidence among remarkably loyal consumers and know how to sell to the wealthy.”
Taylor spoke to operators on Sept. 14 during the 2011 LCT Leadership Summit at the Ritz-Carlton South Beach. His seminar, drawing upon detailed studies of U.S. affluent consumers, focused on how operators can market to and build an affluent clientele. The same people who enjoy luxury goods and high-end travel are often the same customers who use chauffeured transportation.
Taylor focused on findings from the Harrison Group’s “2011 Survey of Affluence and Wealth in America.” As of September, the survey had sampled about 2,700 households with discretionary incomes of $100,000 or more, or 10% of all American households, known as affluent. Of the five segments sampled, the highest category, dubbed the wealthy, have annual discretionary incomes of $500,000 or more, or .6% of all American households.
Taylor, who says he spends about $40,000 per year in chauffeured services, brought an analytical and personal perspective to the future of the industry. “Most wealthy people don’t know how to use limo services,” he said. “They grew up middle class.” Few limousine services explain how they work, serve, or engage clients. They don’t teach prospective clients how to use a limousine service.
“It’s not clear why they should love you anymore,” Taylor said. “This is a business in the presence of historically difficult market forces that can assert itself again, but it has to play with a different set of rules.”
Dr. Jim Taylor, vice chairman of Harrison Group, spoke about wealth trends at the 2011 LCT Leadership Summit.
The recession has altered perceptions and uses of wealth, and the attitudes toward it, said Taylor, citing numbers that show 92% of American households have taken a financial hit, with 24% losing a job. Of those people who lost a job, half found another one and the other half became permanently unemployed.
“This has been horrible,” Taylor said. “The Feds keep publishing that it’s been over for two years, but no one believes that. Every single month people believe the recession is still on.”
2006 was the year consumers started changing spending patterns, Taylor said. Based on spending, September was the 63rd month of recession. “This hasn’t happened since 1873 when you had a crash, a collapse, and no growth quarters for five full years. This has been astonishing.”
An analysis of behavior among families and consumers generally indicates there is a sea change in how Americans value their assets, he said. “Many people are learning to deal with economic privation who have never learned how to deal with it. We’re no longer an economy of people trying to outspend their cousins in search for materialism.”
As of August 2011, 85% of affluent and wealthy consumers believe the economy is still in a recession, so they limit shopping. 83% believe the recession will last another year. 65% say there is no double dip; it’s the same recession.
“They don’t buy anything to put them at risk,” Taylor said. “They have shifted from buying stuff they wanted to buying what they need.” The affluent lost an average of 37% of their net worth between Oct. 2008 and Feb. 2009.
The recessionary mood will last for another five years, Taylor predicted. “People have come to see themselves as more successful because of restraint than when as materialistic competitors.”
More affluent consumers plan to decrease spending than increase it. “It’s difficult, but not catastrophic. There’s no panic like in 2008. They are more prudent. We believe much of this will settle down.” Affluent Americans are saving income at double-digit percentage rates, instead of the more typical single digits of the middle class.
What’s next for luxury spending?
The best predictor of consumer behavior in the market is the degree to which people feel happy. “Happiness is the end goal of wealthy people today,” Taylor said. “Very few want money, very few are confident in their jobs, but they are confident about controlling the quality of life.”
Happiness rose among wealthy people because of increased resourcefulness and closer communication in families.
Resourcefulness is a source of pleasure and pride for the wealthy. Seven in 10 say they have become more resourceful as a result of the recession. About 60% say they have become closer to their spouses and families because of the recession. “Now, the act of surviving and thriving and doing well have made wealthy people feel more successful about themselves. We buy things now because we are happy; we don’t get happy by buying junk.”
One route to happiness is travel, still an important spending category in wealthy families, Taylor said. “It beats the car, beats the house, and beats the vacation house.” If an operator can add to the worth of a travel experience, then price is irrelevant. “If you can’t, it’s subject to negotiation that can get rid of the ride.”