Catering to the New Affluent Consumer

In the last blog, Spending Patterns of Affluent Consumers, we discussed how spending patterns of affluent consumers have changed as well as why they have remained lower than they were before the recession. Mostly, the reasons pointed to the tendency for affluent consumers to enjoy the thriftiness that they developed as a necessity during the recession. Although most seem more optimistic about the general economic condition of the country, their spending habits remain conservative.

Some of the observations surrounding these tendencies could be viewed negatively for the restaurant industry, but with some careful planning and understanding of the ramifications of affluent frugality, many restaurants can retain their popularity with affluent customers and their families.

Popular Promotions

One surprising fact that we discovered in the preceding blog was that 64% of affluent households regularly use coupons. This supports the idea that these consumers are looking for the best possible deals that they can find. Thankfully, restaurants that are already catering to consumers at lower income levels by offering budget-friendly bargains will find that more affluent consumers are drawn to the same types of deals.

Promotions thought to only attract those on the tightest budgets will likely draw in business from unexpected sources at the highest income levels. During the recession, the affluent who learned to look for deals found that they enjoyed the feeling of being more frugal and, therefore, have continued their bargain hunting habits even in the midst of post-recession optimism.

Dwindling Desire for Sophistication

In the first installment of this blog, we also discovered that affluent consumers are reevaluating their priorities, especially when it comes to spending. They are seeing less value in doing things to impress others and are really focusing more on the things that are more important to them like family and friends.

For many, this means that instead of eating in more sophisticated restaurants, many are opting for more comfortable establishments. This affords the opportunity to enjoy a pleasant dinner with family or friends without all the pressure that comes with frequenting fine dining establishments.

True Value

Because affluent consumers are looking for better value, restaurants should be looking for ways to give their customers the best bang for their buck. The easiest way to accomplish this is probably to simply reduce prices, but that is not the wisest choice. For one thing, a drop in price indicates a drop in quality for most consumers. Generally, people believe that you get what you pay for, so they do not trust when prices are reduced. Because of this perceived diminishment of quality, the brand image will likely suffer.

A moderately priced, respected brand that suddenly drops their prices will possibly be viewed as substandard. Consumers may actually assume that an overhaul of the brand has occurred in which previously satisfactory products were exchanged for substandard substitutes. Also, lowering prices will make it incredibly difficult to raise prices later. The best way to appeal to smart affluent consumers is to serve higher quality products for a comparable price and, therefore, simply increase the value of the purchase.

Spending Patterns of Affluent Consumers

In the wake of the recent recession, consumer spending patterns are being watched very closely by analysts from every industry. One thing that has been observed consistently is that expenditures by affluent consumers have taken over an even larger segment of overall consumer spending (an “affluent” household is generally defined as one with at least $100,000 of disposable income per year).

As opposed to controlling about 25% of all consumer spending before the recession, individuals in the top 5% in regards to net worth now account for about 37% of all consumer spending. Restaurants should be aware of consumer thinking in order to gain the largest possible portion of this spending group.

Changing Attitudes

During the recession, affluent consumers were hit with financial difficulties just like everyone else. They had to reign in their spending and find ways to do without some of the luxuries to which they were accustomed. Spending had decreased across the board and it was no different for those who historically spent more, even in difficult economic times.

Thankfully, in recent months, consumers have become somewhat more optimistic about the economy and relaxed, in part, when it comes to spending. This includes affluent consumers who are gradually loosening their grip on their outgoing cash flow, but still maintaining a sense of frugality that is somewhat novel to that demographic segment.

Affluent Frugality

Although consumers on the higher end of the income spectrum have begun to show more optimism toward the economy, they have not returned to the rate of spending that they exhibited before the recession. One reason for this is that affluent consumers have come to view their newfound thriftiness as something to be proud of rather than something depriving them of luxuries. They have come to enjoy their ability to find the best deals and seek out the highest quality products at the lowest prices. A surprising 64% of affluent households are reported as regularly using coupons, which is an exponentially higher percentage than before the recession.

Also, another reason that affluent consumers may be maintaining their more frugal lifestyles is that cutting back has brought them closer to the things in life that matter more to them: family and friends. Therefore, they feel empowered to make decisions based on their families rather than how they appear when compared to other outside influences. This causes much less importance to be placed on appearing sophisticated which, in turn, causes them to make decisions based on needs rather than wants.

Adapting to Changing Attitudes

For those in the restaurant industry, some of these developments could be discouraging, but there is still good news to be found. Even in the midst of spending patterns that have yet to reach pre-recession levels, there are still ways to profit from the changing attitudes of the new frugal affluent consumer. To find some tips and tricks for gaining a share of the slowly increasing spending of top earners in the country, see the next installment of this blog series: Catering to the New Affluent Consumer.