the rich are getting richer, and they just love it; times couldn’t be better. this is from the citigroup 2006 update to their 2005 report
Back in October, we coined the term ‘Plutonomy’ (The Global Investigator, Plutonomy: Buying Luxury, Explaining Global Imbalances, October 14 2005). Our thesis is that the rich are the dominant drivers of demand in many economies around the world (the US, UK, Canada and Australia). These economies have seen the rich take an increasing share of income and wealth over the last 20 years, to the extent that the rich now dominate income, wealth and spending in these countries. Asset booms, a rising profit share and favourable treatment by market-friendly governments have allowed the rich to prosper and become a greater share of the economy in the plutonomy countries. Also, new media dissemination technologies like internet downloading, cable and satellite TV, have disproportionately increased the audiences, and hence gains to “superstars” – think golf, soccer, and baseball players, music/TV and movie icons, fashion models, designers, celebrity chefs etc. These “content” providers, the tech whizzes who own the pipes and distribution, the lawyers and bankers who intermediate globalization and productivity, the CEOs who lead the charge in converting globalization and technology to increase the profit share of the economy at the expense of labor, all contribute to plutonomy. Indeed, David Gordon and Ian Dew-Becker of the NBER demonstrate that the top 10%, particularly the top 1% of the US – the plutonomists in our parlance – have benefited disproportionately from the recent productivity surge in the US.
and the advertisers have picked up on it.
“As the very rich become even richer,” as Ad Age observes, “they amass greater purchasing power, creating an increasingly concentrated market for luxury goods and services as well as consumer goods overall.”
In the future, if current trends continue, no one else but the rich will essentially matter — to Madison Avenue.
“More than ever before,” the new Ad Age paper bluntly sums up, “the wealthiest households will be the households with significant disposable income to spend.”
On the one hand, that makes things easy for Madison Avenue. To thrive in a top-heavy America, a marketer need only zero in on the rich. On the other hand, a real challenge remains: How can savvy Madison Avenue execs identify — and capture the consuming loyalties of — people on their way to wealth?
Before the Great Recession, the Madison Avenue conventional wisdom put great stock in the $100,000 to $200,000 income demographic, a consuming universe populated largely by men and women 35 years and older.
These “aspirational” households, ad men and women figured, could afford a taste of the good life. They rated as a worthwhile advertising target.
Targeting this $100,000 to $200,000 cohort, the new Ad Age report contends, no longer makes particularly good marketing sense. These consumers don’t “feel rich” today and won’t likely “graduate into affluence later on.”
Only under-35s who make between $100,000 and $200,000, says Ad Age, will likely make that graduation. This under-35 “emerging” tier will have “a far greater chance of eventually crossing the golden threshold of $200,000 than those who achieve household income of $100,000 later in life.”
Mad Men’s real-life ad agency brethren, 50 years ago, behaved the exact same way — for an eminently common-sense reason: In mid-20th century America, the entire U.S. economy revolved around middle class households. The vast bulk of U.S. income sat in middle class pockets.
The rich back then, for ad execs, constituted an afterthought, a niche market.
Not anymore. Madison Avenue has now come full circle. The rich no longer rate as a niche. Marketing to the rich — and those about to gain that status — has become the only game that really counts.
“Mass affluence,” as a new white paper from Ad Age, the advertising industry’s top trade journal, has just declared, “is over.”
The Mad Men 1960s America — where average families dominated the consumer market — has totally disappeared, this Ad Age New Wave of Affluence study details.