LifeStyle Marketing™

The First Major Advance in Targeted Marketing

to the Affluent in 25 years.

December 2008
Version 1.2

LifeStyle Marketing Copyright ©2008 Premium Knowledge Group. Page 1

Introduction

Premium Knowledge Group (PKG) has just launched a new, unique resource for marketers focused on
the affluent consumer: A data base of 4.3 Million households in the most affluent 660 ZIP codes in the
U.S. What makes this data base new and unique is

(a) The exclusive focus on the affluent

(b) The proprietary method PKG has developed for indentifying the life style desires of individual
members of these households

(c) The LifeStyle-based tools for marketing to them.

The following pages describe why this database is a major advance in marketing to the affluent and why
it has proven so effective in its initial applications.

Background

Traditional targeted marketing is based on a premise that “birds of a feather flock together.” The
assumption is that people living within a neighborhood are as similar in their consumption as they are in
their ZIP code-plus-four. Systems of this type were first created in the 1980’s and their foundations
reflect the marketing philosophy and economic realities of the time. This was the era in which mass
communications thrived and the number of affluent people, and the choices available to them, was
relatively limited.1

According to this traditional outlook, the basic drivers of consumption at any level of affluence are based
on “needs.” The restraints on consumption are based on a household’s capacity to spend and its
location.

Key Variables in Traditional Targeted Marketing

Life stage and age

Income and assets

“Urbanicity”

In the traditional view, for example, there is great similarity among people of similar age, with similar
incomes and assets who also live in similar if not the same neighborhoods.

1
See Mass Affluence by Paul Nunes.

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In fact, however, our experience (“good fences make good neighbors”) tells us this is not necessarily
true. 2 Residents of the same neighborhood, even if similar in demographics, are not necessarily similar
in their consumer behavior.

A Contemporary Alternative

LifeStyle Marketing is based on a radically different perspective than traditional targeted marketing. It is
grounded in the realities of today’s affluent market. Based on extensive research and analysis3, LifeStyle
Marketing begins with the foundation that the consumer behavior of affluent people is first and
foremost discretionary. It is driven by values, choice and specific desire rather than by need. Likewise,
the decision not to spend is discretionary. Spending is restrained by values, choice and the absence of
specific desire rather than by any lack of capacity to spend.

The premise of LifeStyle Marketing is that the value choices regarding acquisition by affluent consumers
are made with two major objectives in mind.

 Communications
 Consistency

Communications: For affluent people discretionary acquisition is as much about communication as it is

about function. The economist Max Weber noted this phenomenon and used the term “social capital”
to describe the purpose of spending beyond the needs of basic comfort.4 He recognized that above a
certain level spending was an investment designed to signal the achievement of social status and, at the
same time, often to differentiate the spender from others at that same level. Weber was also the first
to use the term “life style” to denote the pattern of consumption.

This “signaling” (called “semiotics”) plays an internal communications function as well as an external
communications function. The final choice about what to buy (or do) often comes after internal debate.
(“ Is this “me”?” “Will this go well with the other things I have?”) LifeStyle is the accumulation of choices
that results in the environment the affluent has chosen to create for themselves. Like an evolving
mirror, LifeStyle reinforces a self-concept.

Consistency: The effectiveness of communications is enhanced by consistency. This pervasive desire for
coherence among possessions was first noticed and described by Diderot, the 18th century French
philosopher.5 In contemporary terms we call this “Diderot Effect, ” “having a style.” This preference for
a meaningful pattern influences not only our choice within one category (say, wardrobe) but also the

2
As one example (see my blog) is a story about Lamar Hunt. He lived in the most affluent neighborhood in Dallas.
While most neighbors used landscape services Lamar personally cut his own lawn every week and while many
neighbors had private jets or flew first class, he always flew coach class. For additional examples read the lives of
the Forbes 400.
3
Details of the research methodology are available in the Premium Knowledge Technical Manual.
4
Max Weber:____
5
Diderot: Reflections on My Smoking Jacket.

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across categories (we seek an appropriate match between our wardrobe and our car, our vacations, the
school we send our children to, etc. ) This consistency symbolizes our continuity as a person6.

LifeStyle.

So, the new paradigm, specifically attuned to the affluent population, is based on recognition that
relative consumption of this segment is driven by relative desires for communication and consistency.
Marketing to the affluent, to be effective, must be based on a similar platform.

LifeStyle Marketing adds several significant measureable dimensions to the targeting and marketing
process. It adds:

 Understanding the basic motive for (or restraint on) consumption and the ability of the
consumer to discriminate among motives. There are 22 primary motives (e.g., “make me
happy”) for consumption and seven levels of ability to discriminate among the motives. All these
factors are statistically significant.
 Knowing the preferred attributes (signals) in the chosen goods, services (and the channels in
which the acquisition occurs). There are 100 different attributes (e.g., “sophisticated” , the
importance of service versus selection, etc.) included.
 Anticipating the energy (e.g., money and time) and its distribution across categories and
channels invested in consumption (and signaling).

By definition, LifeStyle includes many of the dimensions that are usually dealt with separately (such as
tendency to be an early adopter, tendency to save versus spend, price sensitivity, media influences, etc.)

Implications

Based on this new, research-based perspective, LifeStyle becomes the pivotal or primary dimension in
the segmentation of affluent consumers. Around this dimension the additional factors such as gender,
age, family status, economic capacity, geography, etc. can be applied.

There are seven7 basic LifeStyles or patterns of (a) motive for (b) preferences regarding and (c)
investment in consumption.

The resulting segmentation results in 175 potential segments each for males and females (plus
refinements of family status, education, etc.):

Category Quantity

LifeStyle 7

Age 5 (<30; 31-40;41-50;51-60; >61)

6
We use the expression “he/she are not themselves” when we observe behavior, including appearance, that is
“out of pattern>”
7
The seven basic LifeStyles can be further subdivided into 12 sub segments.

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 Economic Capacity 5 (see histogram)

__________________________

Total 175 (for each gender)

Applications.

It is possible to identify the LifeStyle(s) within each household on each block in the most affluent
neighborhoods. We use the plural (LifeStyle(s)) because sometimes the residents of the same household
are pursuing different LifeStyles8.

As a result, LifeStyle Marketing has two levels of applications. (In this paper we focus on the primary
Tactical Applications. In other papers we will discuss the primary Strategic Applications.)

 Tactical
o Prospecting
o CRM (Customer Relationship Management)

 Strategic
o Marketing strategy
o Brand strategy

Tactical Applications: Up to 200% improvement

Prospecting. Most data-based prospecting is driven by a “look alike” orientation. That is, the
demographics and economic profiles of current customers are used to identify “similar” households or
individuals who are not yet customers. These “look alikes” then become the target for direct marketing
efforts. The response rates for this type of direct marketing run in the ½ -2% range at best.

From the perspective of LifeStyle Marketing, there are two basic flaws in this approach. First, as already
indicated, demographic and economic profiles provide little insight into the desire or motives of a
household. Secondly, different consumers can and do buy the very same item for very different
reasons.9 “Look alikes” might not be “think alikes.”

In recent tests, when LifeStyle segmentation was used as the basis for selecting prospects, response
rates increased by up to 200% compared to a control group which was subjected to traditional “look
alike”segmentation . In addition, LifeStyle segmentation forecast by specific LifeStyle category which

8
As described in the Technical Manual, some combinations of LifeStyles can be complimentary. Other
combinations are more likely to result in significant differences of opinion regarding the expenditure of time and
money..
9
A classic example is Lexus. According to Premium Knowledge Group research this most popular luxury brand is
bought by people in one LifeStyle as a statement of success and bought by others in another LifeStyle as an
understatement.

LifeStyle Marketing Copyright ©2008 Premium Knowledge Group. Page 5

respondents would have the highest individual ticket sales and which would respond to “price-off”
incentives versus “value-add” incentives.

CRM. Premium Knowledge Group is currently applying LifeStyle segmentation to two sets of client data
bases. One client is a luxury automotive dealer the other is a premium department store. In both cases
the objective is similar: How to increase “share of wallet.” How to influence the behavior of “good
customers” to add additional purchases to their traditional “basket?” For example, how to motivate the
customer who buys handbags and shoes at the store to also buy jewelry? Or how to influence the
consumer who buys one out of three cars at the dealership to buy two out of three? Or get the vehicles
serviced at the dealership rather than at a competing location.

Traditional this “share of wallet” challenge has been addressed using the same “look alike” approach
applied in prospecting. However, since there is already a relationship with the customer, there is more
data available about what has been purchased. Theoretically, this added data should make it easier to
find “look alikes” and to offer the prospect products and services purchased by the “look alikes.”

However, we run into the same problem. People at the same age and similar level of affluence can buy
the same item for different reasons. The key to CRM is understanding the motives underlying the “best
customer’s” overall pattern of purchasing. Again, since LifeStyle segmentation provides the bridge
between the differing motives and behavior of affluent people, it provides the path to additional share
of wallet10.

Summary:

Traditional approaches to targeted marketing are based on indentifying patterns of behavior rather than
patterns of desire. Since the same object can be purchased by different people for different reasons,
traditional targeted marketing applications are inherently imprecise and result in low levels of response.

LifeStyle Marketing, by contrast, is based on

 Identifying patterns of value, preferred attributes and desire

 Recognition that affluent people consume for purposes of communications even more than
functionality (need)
 Knowledge that affluent people seek consistency in these messages to others as well as to
themselves.

Initial tests of this new approach have resulted in significantly increased results and greater precision in
predicting customer value and customer responsiveness to different forms of incentive.

10
Results of these tests will be made available as soon as they are available..

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