Dan Kennedy explains why affluent buyers behave differently in booms versus recessions. They have money and usually willingness to spend, but downturns can kill the willingness for psychological reasons. Price matters less to them, but categories shift: some high-income households shop dollar stores when confidence drops.
Now affluent people feel the weight of a impending recession. They're smarter about money than people that don't have any. So they pay attention to and they can like stitch together some facts and they have a sense of that, that we may be getting ourselves into real trouble here.
Hello and welcome to this month's masterclass with Dan Kennedy. Today we are talking about the no BS Guide to the Affluent to Marketing to the affluent the third edition. And Dan, in this third edition of the book, it was written in 2019, but it was originally written back in 2008 as a survival manual of sorts for an economic crash or recession. How is it that it presents a winning business strategy for tough economies but also for booms?
Well, so in booms, the affluent customer, either high income or high net worth, they kind of behave the same, although they shouldn't, or both. They literally live anxiety free for the most part. So they're pretty free with their spending. And so it booms. It's a great advantage to be selling to people for whom price is not a determinant factor of virtually anything they buy. Okay, now to show you how radically it can change, there is a, a trend right now of high income individuals, 6 mid 6 figure income households who have never done it before, shopping in dollar stores. They're going to Dollar General and the other dollar store chains to buy stuff where it doesn't seem that there's much of a quality difference between whether they buy it there or they buy it, you know, at Nordstrom there. And there's a reality TV star, one of the housewives of whatever city it is, who's now making herself kind of a rich person, prudent, buying expert YouTube channel and so forth. And she's like making a case, why would you buy party supplies for a themed party for your kid's birthday anywhere but a dollar store? Because you're going to use them once, you're going to throw it all out, it doesn't matter how well it's made, why pay five times more? Right? But see now affluent people feel the weight of a impending recession. They're smarter about money than people that don't have any. So they pay attention to and they can like stitch together some facts and they have a sense of that, that we may be getting ourselves into real trouble here. And so in some categories now they will pull back. So during a boom, they're kind of category free. It's best place for everything. Now the reason they're an opportunity in a tough economy is that they're an essential opportunity we need, we always need for whatever it is we're selling, we need two things. We need ability to buy. So that means the financial ability to buy. They can pay for it or they can credit qualify for it whatever whatever. In B2B, they need to be the decision maker who can afford it. Right. So they have to have the ability to buy or they're dead to us. They're useless to us and nice people, but get out of here. They also need to have the willingness to buy, which is always in part psycho emotional, not necessarily related to their actual ability to buy. During the big crash in affluent neighborhoods, new car sales dropped because even though this family could afford one and they were due to get one, they felt bad about getting it when their neighbors were getting laid off from their executive positions. Yeah, so they had the ability to buy, they just didn't have the willingness to buy. So we need both of those things in order to be successful. So by and large, when you climb up the money ladder, you get more ability to buy. And more often than not, you have more willingness to buy. And you have a willingness to buy. Disconnect, disconnected from price, price elastic over a more diverse category of goods and services. So you don't have to be selling something that is actually essential. You can make it feel essential and price will not necessarily get in your way. So in difficult economic times, the higher ground, when the flood of sewage comes, the higher ground is with more affluent customers. In booms, the boom is with the affluent cost.
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