Megatrend 7 – Catering to the 1%
Wealthy people already have everything they need. In many cases, they also have everything they want. As you accumulate more and more stuff, you hit diminishing returns of satisfaction. The sugar fix is shorter. The novelty wears off faster. So you need to generate some desire.
One successful strategy is to create some exclusivity, either of ownership or of experience. Think about the deliberately small production run of supercars like the La Ferrari or the Porsche 918. A seven figure price tag. The entire production sold out before the first car was made. Celebrity chef Gordon Ramsay already owns one La Ferrari. He was offered first dibs on a new short production run model and put down a chunky deposit. His reward? A lacquered wooden box containing the key to the new car, to be used when he’s invited to the Maranello factory to take delivery. So he gets the cache of showing the key to his mates (and a few million Top Gear viewers) as well as the rare experience of a factory tour to collect his new toy.
Making life more convenient for them is another winner. At one level Disney does this with its ‘jump the queue’ passes which cost hundreds of dollars but make your experience so much better than the plebs standing in line. At another level is private jet travel. I spoke recently with one of the top sellers of private jets and was fascinated by her pitch. Nothing to do with leather seats, fuel capacity or speed. Everything to do with attending that important board meeting and still being home in time to watch your kid’s football game. Thankfully I don’t have any kids so clearly I have no need of a private jet.
A friend of mine runs a security business that looks after the super rich including presidents and billionaires. It’s an eye opener to see what lengths people go to, especially to protect their kids. One client wanted his son to enjoy a cycle ride in the English countryside with his private school classmates. The operation involved a Range Rover specially equipped with GPS tracking gizmos and extensive medical equipment following at a discreet distance, while a second security guard posed as a friend of the teacher and joined the kids on the ride. Thousands of pounds invested so little Johnny Rich Kid can spend an hour on two wheels with his mates.
There’s an important clue for business owners or investors here – its making the emotional connection that opens the wallet to whatever it is you offer. So, assuming you have a product or service perceived as useful by the super rich, how do you earn the right to sell it to them? They tend to be a very insular crowd, fed up with being pitched for money by everyone they come across. Never sure who they can trust, they tend to rely on personal recommendation from their peer group. Perversely, that behaviour is exactly why so many of them were taken in by Bernie Madoff.
So bagging your first billionaire is the golden key to opening this market. Who can you partner with who already has a presence in this market? Can you get yourself invited to a charity event where you can donate a unique experience they’ll bid for? If you have a big budget you can advertise in places like the Robb Report, the Financial Times glossy magazine How To Spend It or even publications that only appear on private jets. As a business owner, it’s worth a significant up front investment to gain a foothold in this market.
As an investor, look for companies who already have that presence but also have a track record of finding new ways to keep the attention of their wealthy clients so that the cash register keeps on ringing. Even the biggest brands took a pasting when the Chinese government cracked down on gifts that were lavish enough to count as corruption, so you can still be hit by a curved ball even in this market. But, give me a choice between a wealthy niche and the mass market, and I’d aim for the high end every single time.
Thanks for watching.