The Millionaire Next Door

According to different reports, the number of U.S. millionaires ranges from a low of 11.5 million to a high of 16 million.  Credit Suisse found that the number of millionaires grew nearly 8% from 2016 to 2017 and the bank  predicts that number will climb another 16% by 2022.  Another study claims that 7 percent of all Americans live a millionaire's lifestyle.  

With their number increasing, the traditional millionaire demographic is changing, making it more difficult for decorative plumbing and hardware showrooms to market to this key demographic. There are a number of wealthy Millennials who can afford a Lexus or Mercedes, but instead opt for ZIP car when they need an auto because many Millennials have no interest in owning a car or the type of car that they drive does not matter.  The Federal Reserve Board's 2017 Survey of Consumer Finance found that 18% of millionaires are under the age of 45.  With a broad range of ages and interests, it has become increasingly important to craft customized messages targeting consumers based on data.

 

However, big data is no longer the exclusive province of large companies. There are services that compile data based on wealth, age, spending habits, interests, causes, work history, number of children, homeownership and other factors for companies with marketing budgets as small as $5,000.  

 

The good news for decorative plumbing and hardware showrooms is that almost every millionaire owns a home and 46% of those have other real estate assets, according to the Federal Reserve survey.  Mobility also is changing traditional homeowners, with many millionaires moving their primary residence or second or third homes to out-of-the-mainstream venues. There is a strong possibility, in light of recent tax laws changes that cap local and state tax deductions at $10,000, that many millionaires will be looking for alternative properties in more tax friendly locals.  

 

Decorative plumbing and hardware can reach more millionaires by using big data to craft individual messages to targets that are considering improvements to their home and by better understanding how they have accumulated their wealth.  Most millionaires fit the profile in the book, The Millionaire Next Door.  These consumers, according to authors Thomas Stanley and William Danco, have common denominators that they have used to successfully build wealth:

 

1. They live well below their means
2. They purchase carefully, looking for quality and value
3. Financial independence is more important than social status
4. They have limited experience with luxury products and brands
5. They save aggressively
6. The target the right opportunities

What Is Your Unique Selling Proposition?

If you met a high end builder who asked what makes your showroom different, how would you respond? If you said, "We have great customer service", do you think the builder would believe you?  If the builder asked, "what makes your service so much different from the service I currently receive from the showroom down the street", how would you respond?   Is your service really that much different from anyone else's that is serving premium and luxury consumers? 

 

Great service is not a differentiator, it's an expectation.   Some showrooms believe that their product selection sets them apart.  If you fall into that category, what is different from what you offer than what someone could find at competing showrooms or on the Internet and what value does that differentiation provide to the builder or other clients?

 

Many DPHA members were first to market in their region, pioneering products and lines that set them apart 20, 30 or even 40 years ago.  Times have changed.  To deliver a unique selling proposition?  Answer the following questions:

• What do you do differently from your competitors that surprises and delights your customers?
• What do your customers think about when they interact with your sales staff and showroom?
• Make a list of every feature of your services and products.
• Identify why and how each feature is important to your customer.
• How do the products/services/staff create deep emotional connections with your customers and why should they care.

Lack of Accountability May Not Be Forgivable

One of the attributes that makes golf special and different is the commitment to the rules of the game. Players at all levels appreciate golf's gentile nature.  Professional golfers will call themselves out for rules violations that in some cases have cost them hundreds of thousands of dollars or tournament victories.  How many offensive linemen in the NFL would go to the referee and say please give me a 15-yard penalty, I held on the last play? 

 

At the recent 2018 US Open, iconic golfer Phil Mickelson blew a fuse. Frustrated by the conditions of the course and his performance, Mickelson hit a putt and charged after it as the ball passed the hole.  When Phil caught up to the ball, he hit it back towards the hole while the ball was still moving.  For those of you who are unfamiliar with the rules of golf, what Mickelson did was comparable to breaking one of the 10 commandments. What makes his action even more horrific is that it was Mickelson who behaved as about as unprofessional as one can on a golf course.  Phil Mickelson is arguably among the top three most popular golfers in the world playing today and is one of the most accomplished professionals of his generation. He has won 43 tournaments, including five majors and currently ranks number 9 on the all-time list of professional golf winners.

 

Given Mickelson's stature and popularity it seemed totally inconceivable that he would hit a moving ball at any event, let alone his country's national championship.  The act itself to golf fans was unimaginable. What was worse was his initial explanation.  Mickelson said the reason he hit a moving ball was that it was better to take a two-stroke penalty than to try and hit the wayward putt back into the hole when the ball came to a complete stop.  In other words, Mickelson believed that it would have taken him more than two strokes to get the ball into the hole, so it was better for him to violate rules that to almost every golfer at his level (and many of us below that level as well) are sacrosanct.  Several days after the US Open ended, Phil issued a formal apology, but that occurred after the damage had been done and the back tracking seemed more to stem additional harm to his reputation than it was to show contrition.  

 

Mickelson's initial explanation was shocking and lowered Phil's reputation and esteem in the minds of not only his millions of fans, but also anyone who follows golf.  And therein lies the lesson.  We all make mistakes. We all lose our temper. Anyone who has ever attempted to play the game of golf, can understand Mickelson's frustration.  Most people are forgiving of errors.  What's not forgiving is a lack of accountability. If Mickelson would have initially stated "What I did today is inexcusable.  I lost my temper and let my frustration get the better of me. I want to apologize to my fellow professionals, to the United States Golf Association and to my many fans around the world who have supported me in my professional efforts.  I am truly sorry for what I did."  How would that have resonated as opposed to I cheated because it was less costly than playing by the rules? Instead, several days later he issued a formal apology and said,"It was not one of my finest moments."  

 

When you or your team makes a mistake, it's how you respond that is more telling than what you did.

Supreme Court Helps to Level the Playing Field

This week the U.S. Supreme Court, in a 5-4 decision, voted that states can force online etailers to charge sales tax irrespective if that retailer has a physical presence in their jurisdiction.  This decision spells good news for every brick-and-mortar retailer that has been placed at an unfair competitive advantage compared to online sellers of products who previously were not required to charge or collect sales taxes.

 

Last year, Amazon reported $32 billion in third-party sales, up from $23 billion in 2016.  The company stated that in the first quarter of 2018, 52 percent of all sales were made by third-parties, many of which, up until the time of this week's Supreme Court decision, did not pay state sales tax to jurisdictions where the etailer did not have a physical location.   

 

The Supreme Court decision stemmed from a suit brought by the state of South Dakota that claimed it was denied millions of dollars in sales tax by etailers that were shipping products to its citizens.  As a result of the decision, every online etailer is going to fax sales tax requirements in all 50 states and the District of Columbia.  For many smaller businesses, the cost of compliance could be enormous, helping to further level competitive playing fields with brick-and-mortar stores.

Regular Exercise Improves Work Quality and Home Life

We all know that we should exercise regularly, but then life gets in the way. We just don't have time. That excuse may not hold muster based on research by Dr. Russell Clayton, author of two books on work-life balance. Dr. Clayton's research revealed those who exercise regularly are less likely to experience conflict between their work and home roles. This may appear, on the surface, to be counter intuitive because taking time out of your day for exercise reduces the amount of time that someone can dedicate to their job or home life. 

 

Exercise helps reduce stress, which makes people more productive both at home and in the office. Regular exercise also increases one's self-efficacy that gives people the confidence that they can accomplish more in less time. This confidence boost makes those who exercise regularly believe they can take on any challenge or difficult task. 

There's no right time for exercise. Some people start their day at the gym, in the pool or with a run. When you exercise first thing in the morning, you can't find excuses not to exercise later in the day. Others will take a break in the middle of the day to exercise. It serves to clear their heads and recharge batteries. Still others find the best time is to hit the gym, pool or trail after the workday ends. 

The bottom line from Dr. Clayton's research is that regular exercise not only improves your health, it also helps to achieve superior work-life balance.

 

Become the Influencers of Choice

A number of brands seek to place their products and services in front of recognized influencers with lots of followers - Beyoncé, Miley Cyrus, Rihanna and Kanye West come to mind. Influencer marketing is a huge business with more than 73 percent of luxury fashion and beauty brands actively participating, according to a report from Fashion and Beauty Monitor entitled, The New Face of Luxury.

Macy's is taking a different approach to its influencer marketing efforts. Instead of relying on celebrities, Macy's is turning inward, recruiting its team members and personal stylists as brand ambassadors. Team members from across the continent can apply to become a member of Macy's Style Crew program. If accepted, they are expected to share promotional posts on their personal social media platforms. Currently more than 300 team members produce and post, with Macy's assistance, video clips of products on the video platform Tongal. One video, reports Glossy, features an employee conducting a bar-tending tutorial that contains links to glassware and cocktail accessories available at Macys.com. Another video shows a Macy's associate hiking with links to the athletic apparel that the hiker is wearing.

Macy's is not alone in leveraging its employees to become influencers and drive more consumer traffic to their ecommerce and brick-and-mortar offerings. Kate Spade and Everlane also are relying on employees to be brand ambassadors on social media sites. Macy's rewards members of its Style Crew program based on sales volume as opposed to the number of posts. Macy's is leveraging the people who know the brand the best, who can speak with Macy's authority and voice. Tongal reports that one associate sold $15,000 worth of handbags in a week.

Lessons for kitchen and bath showrooms: Why not leverage your team members to become your social media brand ambassadors? Work with manufacturers to produce video content that illustrates how their social media peers will benefit from renovating their kitchens and baths, or replacing dated and lower quality fixtures.

 

Refining the Approach to Design, by Phil Hotarek (Lutz Bath & Kitchen), an Education Committee Member

One of the major benefits of attending conferences is inspiration from interactions with industry colleagues.  Most recently at ICFF in New York, I was very fortunate to have interacted with many of our industry leaders and learned so much from the design community.  Returning from the show, I was struck with a familiar feeling that I had during my days of coaching ice hockey - as the game evolves, coaches must evolve with it.  Approach to design is no different.  Trends and design appeal evolve, therefore a refined approach to design is required to better service our clients.  Here are the takeaways from my interactions:

Budget and Timeline
This is a staple in the process and I'm doubtful that this will ever change.  The first question anyone is asked when visiting a showroom, "what is the timeline of your project?" will pretty much dictate the flow of the process.  If the client has lots of time and a limitless budget, the sky's the limit.  On the other hand, a low budget and a constricted timeline will limit their options pretty quickly.  Reinforcing the importance of asking about the budget and timeline is really just a reminder to stay sharp.

Create a Lifestyle
Creating a lifestyle was the big takeaway for me after the ICFF show.  What defines our bathrooms and kitchens have changed drastically over the years.  From my observation, the lifestyle of a room includes:

• Layout
• Function
• Mood
• Focal point

Furthermore, by developing the mindset of creating a lifestyle, you steer away from simply selling products.  The products are not the design - the products are simply components that fit the lifestyle of the room.  Layout and function are discussion points of sizing and storage solutions that fit the needs of your everyday life.  When selecting bath furniture, cabinetry, hardware and accessories, steer the conversation toward functional purpose.  Walk the client through their everyday uses and the little things that are important to them, and become the problem solver by making their life more functional.   

 

Mood can be affected by the colors and finishes.  Manufacturers have adapted by offering an array of finishes for their products which can open the discussion regarding the mood setting.  It is amazing what you can learn about a person by finding out what colors they gravitate toward.  Be observant in what colors strike the client's eye and make a connection by creating a mood in a space.

 

The focal point is where you can get creative with the design and make a statement.  One unique observation I had attending the San Francisco Decorators Showcase was the use of lighting in the bathroom and kitchen.  Almost every bathroom in the house had a unique lighting fixture that made the room "pop" while being more inviting.  With furniture and faucetry moving more toward minimal design function, it has created a void for a creative focal point.  Tap into what appeals most to the client and learn what the best focal point may be.

Luxury Spending Expected to Drop in Most Categories

A survey by YouGov found that luxury spending is on the decline among affluents in 2018.  The survey shows that the percentage of affluent customers who expect to purchase luxury goods and services has dropped from 40% in 2016 to 31% in 2018.  YouGov attributes this decline to a general lack of confidence in the economy despite the fact there is an increase in the number of affluents.  

 

Autos, cruises, jewelry, fashion and hotels are expected to be adversely affected by the pull back in luxury spending.  While luxury product purchases are expected to fall, luxury experience expenditures are not. Nearly two thirds of survey respondents reported that they would rather take a luxury vacation than purchase a luxury product.

 

The motivations for purchasing luxury products also appear to continue to change. Conspicuous consumption is not a driving factor for most luxury purchases. Instead, luxury consumers are looking beyond quality, craftsmanship and service, which are basic expectations of luxury consumers. They also want to partner with companies whose purpose mirrors their own.  Forty percent of luxury consumers believe that luxury brands have comparable quality and craftsmanship.  Simply look around your showroom for proof.  How many products compare equally in terms of quality and craftsmanship? Most likely more than 40%.  What percentage of your customers can tell the difference?

 

Luxury consumers want to purchase products that help them achieve their personal goals.  According to the survey, these goals include a healthier lifestyle, spending more time with family, exploring new places and having new experiences, learning something new, becoming a better person and simplifying their lives.  

 

Opportunities for decorative plumbing and hardware showrooms:  

• Ask the right questions to determine what your customers value the most and the goals they want to achieve with their project.
• Emphasize how your solutions and the products you recommend can reduce stress and enhance health and lifestyle.
• Identify brands with sustainable practices and promote them when telling their brand stories.
• Explain how your solutions will simplify their lives and make them better.

Make Your Offers More Appealing

At some point when engaging with a client or customer, you need to ask for the sale. And when you do, look through the lens of your customer. What can you say or do that makes your offer a no-brainer? Here are four ideas to help close more sales.

1. Describe how your proposal will benefit the customer. There's few products in a showroom that aren't available with a few clicks of a mouse. Customers come to showrooms for guidance on how the products you recommend will make them feel. Describe the benefits of owning a brand-new kitchen where customers can entertain family and friends, improve the quality of their life and enhance the value of their home.
2. Focus on the health benefits, stress reducing attributes and other factors that will improve your customers' lives.
3. Cater to your customer's wants and desires. Understand what they are looking for and relate why your solution meets those needs.
4. Create a sense of urgency by describing why a decision should be made now instead of later. Describe timetables for different specialty finishes or customs solutions that have eight to 10-week timetables.

The two major reasons why a prospect will walk away without making a decision or deciding to buy are that the offer was not sufficiently attractive (and that has little to do with price) or the timing was off.