Fit For a McQueen
burningpants published an article several months ago looking at the concept of economic utility or the fact luxury goods exist in almost every industry except financial services.
The idea went something like this: when this burningpants’ scribe was a kid in 1974 the most expensive bike in Stan Steen’s bike shop was a $310 Speedwell 10 Speed (in Red, Green or Blue) – a mere 87% of an average week’s earnings at the time.
Now the most expensive bike is tailor made from the frames to the wheels and costs in excess of $15,000 or about 17 times the current average net weekly earnings of $867.
The argument here is a $15,000 bike is surely much better than a $310 bike.
This is true to a certain extent – you can go much faster on an expensive bike, as expensive usually means light and light believe it or not means fast, or at least faster - as a side note don’t you think it’s strange an average bicycle is now cheaper than one was more than 30 years ago, you can buy a fully functioning mountain bike from the likes of Kmart for three times less than a 1974 Speedwell.
At the time of writing the previous burningpants article, titled Handbag Economics, we discovered what we considered the most overpriced consumer good in the world – the Birkin Handbag, named after the controversial Jane Birkin and manufactured by the good people at Hermes.
The bags sell for around $30,000 and you have to wait at least nine months to receive one, but more on wealthy women later.
‘Madness’ we all hooted, only a lunatic would pay $30,000 for something that couldn’t actually add real utility – a bag is just a bag afterall isn’t it?
Well not so, Hermes has just released a bag for the male luxury seeker – priced in at $11,135 and interestingly named ‘Steve’, one assumes after Steve McQueen as opposed to Steve the hedgehog from the recent Hollywood blockbuster – Over the Hedge.
The whole point of this is that humans are hard wired to filter information and to try and make decisions quickly, and one of the filters that we apply is that expensive = good.
There are lots of industries that play on this – and use a plethora of tools to make you think they are delivering value to you.
The best example of this is the wristwatch trade, what inspires a human to pay up to $1 million for a Richard Miller time piece?
Financial services, especially financial planning is still struggling to come to terms with how to express the fact that expensive = good, when so much of what the customer describes as good (notably performance, customisation and customer services) is outside the control of the individual planner.
At the moment, when asked, Australia’s wealthy and super wealthy can’t build a case for a single luxury or high service brand in financial planning.
The answers to that question when ask are almost completely disaggregated, which is odd when the same group of people can name a favourite tomato sauce and luxury potato chip.
At brandmanagement we have just completed a detailed look at the financial services habits of wealthy women – and by wealthy we mean those with more than $1 million in disposable investments.
Critically, despite the fact they are buying, or potentially buying $30,000 handbags, they are it seems highly critical when it comes to making financial buying decisions.
But there are a significant number of interesting trends with this group – first of all they are very keen (five times more likely than a male of the same net worth) to outsource their financial planning to a planner or a private banker (yet less than 20% of them have).
It’s interesting they are willing and able to outsource work, but are struggling to find a planner or a private banker who they feel can add luxurious value.
MARK says:
I have only a few customers in this category, however a common complaint is how condescending male planners are towards them.