Industry Research

Wealthy Limo Clients Take On New Attitudes

Martin Romjue
Posted on December 22, 2011

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.

Dr. Jim Taylor, vice chairman of Harrison Group, spoke about wealth trends at the 2011 LCT Leadership Summit.

Recession reality
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.”

New outlook
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.”

Five-star strategy
Taylor encouraged operators to pursue the most lucrative slice of the limousine customer market, known as the five-star traveler. The luxury study paid close attention to this elite demographic group. The five-star traveler consists of a 16% share of Americans who overall are considered wealthy and affluent. They generally fall into the top 20% of the top 10% of wage earners in America.

“2% is what you have access to,” Taylor said. This small segment resorts to “extreme spending” of an average of $32,000 annually on travel. Of the five-star travelers, 32% are Gen X, ages 33-46, and 49% are Baby Boomers, ages 47-65.

Some key characteristics and traits cited by Taylor:

  • The average annual discretionary income of the most likely customers is $862,000 per year; the average asset pool is $54.7 million; the median asset pool is $7 million.
  • 65% of five-star travelers grew up middle class, lower middle class, or poor, while the remaining 35% were raised in the upper middle or wealthy classes.
  • 53% of five-star travelers book lodging directly with a provider, and 67% buy tickets directly from airlines, the study shows. About one-third own a tablet and a smartphone.
  • About 18% of the five-star wealth market is considered newbies, with one to five years in that category. About 35% have been wealthy for 6-14 years, and 48% have been wealthy 15 years or longer. “The art of being wealthy and spending and using money is developed over time.”

Long-term outlook
Luxury-based services that survive are those who reject sacrificing profit margin to preserve market share, Taylor said. It ultimately devalues a service and hurts the ability to recoup profits in the future. “This is not a market for economic cowards; this is a market for resolution. Be bold.

“This is an industry where the losers will disappear, Taylor said. “Discounting will approach the price of taxis. The new taxi in New York is the new benchmark. But it’s not good enough for craftsmanship, quality, and service in this industry. Those who outlast this problem are those who understand not to be cheap or skittish.”

He advised operators to define offers by what it does for clients now. “Put your service into the category of things people need; not only something they do when they want to.”

The veteran business traveler added, “I wouldn’t give up my limo.”

TIPS: Ways To Net Wealthy Clients

Wealth marketing expert Dr. Jim Taylor recommends to chauffeured transportation operators the following approaches to netting more affluent and wealthy clients:

  • Make them comfortable. The wealthy don’t want to be seen in a way that makes them uncomfortable as middle class people. “They don’t want to pull up to the Met in a limo.”
  • Watch the door. Some don’t want you to open door because it’s embarrassing. Deliver a clean vehicle on-time and be polite.
  • Emphasize worth over value. Value means the lowest price for optimum service. “What our clients depend upon is your reinforcement of their quality of life — not how cool did I look, but did you get them there on time with good service. Was it worth it?” Worth is the aspiration, not the price.
  • Seek excellence. Luxury is the point of distribution that distinguishes the truly sublime from the merely excellent, he said. If something is reliably worthwhile, people will chase it. “Merely excellent is something people can negotiate away at the margins. They know their dollar is worth more to you than your service is to them. The power in value negotiations goes to consumers now.”
  • Avoid discounts. Taylor recommends a “Four Seasons” approach: When you discount, you tell them what it is worth. Instead, market for luxury distinction and don’t just give it away. “Favor the worth equation.” Citing another hotel example, St. Regis makes a lot of money, but from a lower cumulative customer base, he said.
  • Be relevant. You have to emphasize the value of your product to the quality of their lives. Speak to them where they are.
  • Engage clients. Train chauffeurs to become docents for the communities in which they operate. A docent walks people around a museum and tells stories. It gives people more meaning than just directing them. Know something that animates the client’s interest. Create magic moments by knowing what animates clients’ interests. The biggest variable in terms of quality of experience is the chauffeur.
  • Ask. Be curious. Don’t be afraid to ask them how to improve. Treat clients with the respect of survivors, not based on wealth status.
  • Serve. Service people have to radiate happiness — that you are not a loser.
  • Market direct. E-mail and direct mail are the best ways to market, he said. There is no single way to connect to the marketplace, with only 3% of companies having sold anything on Facebook, and mostly via “ridiculous couponing and discounting.” He also added, “People who rely on word-of-mouth are kidding themselves. It affirms your reputation, but it does not expand your marketing.”

Related Topics: building your clientele, client markets, customer service, industry trends, LCT Summit, wealthy clients

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