1: The Affluent Opportunity
The author begins by pandering to the greed of the reader: suggesting that a salesman can earn a lot of money and become personally rich by being successful at selling things to people who are wealthy.
However, the definition of affluence is elusive, though most seem to fall into two categories: income or assets.
- Income considers the amount of money a person "makes" each year, which is significant to marketers who are interested in a one-time sale.
- Assets considers the amount of money a person has "in the bank" and is significant to marketers who are seeking a long-term relationship.
People who have both are clearly affluent, but those who have one but not the other fall into a gray area. Some researchers differentiate, others do not, and the author seems to fall on the side of considering a person to be affluent if they have either of the two.
The Asset View Of Affluence
When we refer to someone as a "millionaire", we are considering the amount of assets they have, rather than their income. The author makes a specific distinction between all assets (home and possessions) and liquid assets (cash and investments). A person who has an expensive home is not considered affluent if he has little equity in the property (home value less mortgage debt), and some research excludes the value of hard assets entirely.
The author implies, though does not state directly, that "millionaire" is the point at which a person should be considered affluent, and cites research suggesting that the number of millionaire households is growing, but still accounts for less than 4% of all US households.
(EN: This is changing, and given that even a person who begins working today at minimum wage and saves 10% of their income, earning only market rate, can retire a millionaire - not to mention the debasement of currency - it is likely not a tenable standard.)
It's mentioned that millionaire households are of intense interest to the financial services industry, who value these whales as clients, and who assert that many of them are not being adequately served by qualified financial advisors.
The Income View Of Affluence
A bit more specificity, "income" is considered to be household income from all sources - not just the salary of the male head of household. Current demographics suggest an average household income of $42,400 for all Americans. Any household exceeding $100,000 is considered affluent, and this includes about 15% of all US households.
(EN: There is a bit of sloppiness in how the details are represented. There are about 350M people and 100M households, and references to "the population" seems to assume it is evenly distributed, which is not true: there are more people per household for lower income than higher.)
A further breakdown:
- Super-affluent: includes households with incomes over $200,000. This is about 2.5 million households, about a third of which are over age 55, indicating wealth comes from retirement savings. About 80% are family households, and many are either highly salaried professionals (executives, doctors, attorneys), business owners, or those who have inherited wealth.
- Affluent: Includes household incomes of $100K but under $200K. This is about 10.5 million households, people ages 45 to 54 living in metropolitan areas (though 12.1% include a head of household under age 35). Ethnically, 86% are white, 5.7% are black, and 5% are Asian. Typical professions are skilled professionals in mid-career positions.
- Near-affluent: Includes household incomes of $75K but less than $100K. This is also about 10.8 million households, and has grown through recent decades. Ages are from 35 to 54, and includes younger professionals, and the more prosperous ranks of skilled laborers.
Also, American culture has shifted away from the ideal of being happy as a member of the middle class. Even those on the poorest levels of society desire to have the things that affluent people have, which leads the author to define yet another class:
- Aspiring Affluent - Households with income of less that $75K per year, but who seek to present themselves as being affluent by purchasing the goods and services used by others who actually are.
Witness the phenomenon of luxury brands that currently pander to this class of individual, such as the low-end Mercedes C-Class automobile, which offers lower social classes to buy into the brands of the affluent.
(EN: The author does not mention the impact of this on the brand, but it's interesting that this often poisons a premium brand, though somewhat ironic that people who use brands to appear wealthier than they are are disgusted when people "beneath" them use the same brands for the same purpose. The bizarre psychology of conspicuous consumption holds many such paradoxes.)
Growth and Distribution of Affluence
A common misconception of the US economy is that it conforms to a pyramid shape, with few at the top, many at the bottom, and a fairly even slope in between. However, it is reckoned to be more hourglass-shaped, with a bottom twice the width of the top, and is cited as evidence of a "disappearing middle class" that is exaggerated by yellow journalists who look to capitalize on guilt and resentment.
(EN: There are perfectly natural reasons for this, and it really isn't something that should cause a panic or will necessarily lead to a society of ultra-rich and ultra-poor - but pointing out the causes would require a lengthy diversion into economics, which is not the topic of this book.)
The general trend in the US economy is for people to become more affluent over time, and there has been significant growth in income for many individuals.
Given that more individuals are matriculating into the affluent class, retailers and service providers are seeking to gain the business of this demographic, focusing on upscaling their offerings to the interests and preferences of the affluent class, and competition for their attention is increasing.
The Research Behind This Book
The author began studying the affluent classes of consumers in 1999, limited at the time to interests related to the financial services sector. The results of this study were surprising, and it was discovered that generally beliefs about affluent customers were broadly and seriously wrong.
Naturally, this lead to a recognition of the need to throw away the book and start over, casting an unbiased eye on the affluent class to discover their real attitudes and behaviors. This led to a great deal of additional research, culminating in a 2004 project called the "Affluent Purchase Decision (APD) Research" that will be referenced throughout this book.
The study was done with an undisclosed number of participants, largely in income brackets of $100K to $500K per year, widely distributed across the geographical regions of the USA, focused on those between ages 35 and 64, and 82% male/18% female. (EN: This seems odd - it's not a random sample, but neither does it seem to be structured to accurately represent a population.)
In addition to survey research to gather statistical data, undisclosed methods were used with an undisclosed body of subjects to gather more qualitative data to help explain what the numbers were showing.