Sunday, August 3, 2014

Mass Mailers for Millionaires

Somehow I am fascinated with mass marketing pieces that primarily target millionaires. They try not to be obvious about it because of course most consumers are not millionaires, but if you look closely you can get a sense of how little the rest of us, the submillionaires as we have lately been called, matter. The word submillionaire was coined independently by dozens of writers, as far as I can tell, because of the obvious need for a word to identify customers and prospects who have an individual or household net worth less than $1 million. A word for these lesser customers is needed for the many marketing contexts in which millionaire status is ordinarily assumed. This may have started, I imagine, in private banking and wealth management, the two elite areas of banking where customers are expected to have millions of dollars in play. There are reasons why people who have less than this might need the same services, yet the bankers want to be careful not to waste time trying to sell higher-cost services to these customers who probably can’t afford the fees.

It startled me when I started to see billboards and television ads for wealth management services, along with enterprise information technology services, around the time of the dot-com bubble in 1999. Why use a mass advertising medium to reach an audience of dozens? My marketing friends explained to me how hard it was to reach business owners and executives. They don’t read their own mail or answer their phones. Some are potentially so lucrative as customers that it may be cost-effective to spend $1 million in advertising just on the chance of bringing in one new customer. That’s why you can be unemployed, on your way to a job interview perhaps, and see a message that’s meant for a multimillionaire to read.

The spending power of millionaires nearly doubled with the tax cuts of a decade ago while the spending power of submillionaires continued to decline, so that a wide range of businesses, including many that would think of themselves as serving the middle class, are forced to try to reach millionaires with their advertising. This is the idea of department stores such as Target, which has had success in positioning itself as the happier alternative to the thoroughly depressing aisles of Walmart. The trend includes restaurants like Ruby Tuesday and auto service centers such as Jiffy Lube. They must get their share of millionaire customers to stay in business. If you are a submillionaire at Target or Ruby Tuesday, these businesses need revenue from you too, but you are also there partly as window dressing to help persuade the millionaire customers that they are getting a good deal. By now, the word submillionaire is essential in describing a broad range of marketing for businesses that get the lion’s share of revenue from millionaires, but where most of the advertising impressions go to submillionaires. To be blunt about it, the goal of a lot of the advertising you see is to motivate millionaires. It must at the same time avoid putting off submillionaires. This is not always an easy tightrope to walk.

I showed an example yesterday, a congratulatory mailer from Discover Card, but Discover Card is not the only one promoting to millionaires without openly admitting it. Look at this detail from a broker’s promotional piece, which also arrived in my mailbox this week. Earn a $2,500 bonus! Who wouldn’t want to do that? Sign me up!

It is only when you look at the smaller print inside that you find you have to actually have a million dollars. As an average middle-income customer, you may qualify for the lesser $200 reward. You can see this as a case of bait-and-switch if you like, but it more fundamentally represents the tension of advertising to millionaires while incidentally reaching submillionaires too.

I personally would not have released this broker mailing piece. I don’t think it is subtle enough in the way it marginalizes submillionaire customers. The full page from which I have taken the second detail above shows one row of three reward categories for millionaires and a second row for submillionaires, potentially creating a sense of winners and losers, where the advertiser’s intention is to make everyone feel like a winner. The monetary disparity between the $1,200 reward and the $200 reward, for example, could trigger a range of emotional reactions. Consider these possible reactions:

  • Gloating. “I’m a success, so I get the bigger reward. The rich get richer!”
  • Anxiety. “What if my stocks go down during the year? Will they take the reward back?”
  • Aspiration. “Someday I’ll be rich and I’ll qualify for the bigger reward.”
  • Resentment. “What? A webcam? That’s all they think I count for?”
  • Defiance. “Even if I did have a million dollars I wouldn’t invest it with this stupid broker!”

Note that there is a marketing risk in all five of these reactions I highlighted. The bigger risks, though, are toward the end of the list. Once a customer reaches a state of defiance, it is almost impossible to ever win them over again. The customer, in that case, will usually outlive the business that has slighted them. Marketers may not stop to think about the full spectrum of reactions when their target audience is primarily millionaires. Yet when the vast majority of impressions are made on submillionaires, the reactions of resentment and defiance are almost certain to outnumber the millionaires who are motivated to open a new account, the intended result of the promotion.

The opinions of submillionaires cannot be ignored, and not just because millionaires start out as submillionaires. In many categories, it is no longer the millionaires who give a business its cachet. Ruby Tuesday, as an example, may make most of its profit from millionaires, but it needs more customers than that to create the air of success. If submillionaires abandon the restaurant chain, and millionaires go in and see the place empty, they will sense that something is wrong and they will stop going too. Millionaires are suspicious of businesses that aspire to cater only to millionaires. They conclude, quite rightly, that there must be a better deal somewhere else. And so, many businesses must bring in the submillionaires for cachet or legitimacy and the millionaires for operating profit.

The risks to a business that mass-markets to millionaires are obvious enough, but there is also a chance of broader social change as more and more mass marketing targets millionaires and is careless about the impression it makes on the rest of us. As important as millionaires are to any business that wants to make a profit, remember that submillionaires outnumber millionaires by more than 20 to 1. Millionaires may vote disproportionately, contribute 90 percent of political funds, and hold the most prominent political offices, but 90 percent of voters are submillionaires, and virtually all work depends on submillionaires. If submillionaires start to feel marginalized in areas that they feel are their own territory, you can be sure that the rules of the game will change.