For The Affluent, A Lease Model Is No Longer Off Limits

An uncertain economy might scare some marketers, but for others, it presents an interesting opportunity to adopt a new perspective. In the past, the affluent were often regarded as spenders — those who had money on hand and were willing to spend it on a major purchase. Yet, consumers today, especially the younger ones, are much less inclined to tie their money up in a big purchase.

High housing costs mean that even those consumers who have high assets and income can’t always afford to put down 25% on a $1 million home, and those who can don’t necessarily want to be anchored by a home for a long-term mortgage. As a result, they may rent, sometimes spending as much or more than they would on a monthly mortgage payment. The same goes for auto, where leasing is on the rise, which may precede an eventual downswing in buying.

In the past, these trends would lead many marketers to pull their hair out. The thought was, if they can’t grow revenue through sales, they might as well give up. Today, they should not see this as a failure, but rather as a huge opportunity to experiment and find new revenue streams. Rather than think “sales” all the time, marketers who are pursuing the affluent should consider adjusting their business models and their marketing messages to appeal to a broader audience with new priorities. In many cases, this means adopting leasing or subscription models.

This is already taking hold in the luxury sector, where companies like Rent the Runway operate on a rental model for high-end dresses and accessories. The jewelry industry spends significantly on advertising across TV, digital and direct mail, but it seems they’ve paid no mind to this kind of disruption. What if, rather than try to entice the affluent into purchasing a $7,500 necklace, jewelers offered a subscription service, whereby consumers who paid a monthly (or one-time) rental fee could borrow jewelry for set periods of time. Theoretically, that leasing model could yield more revenue from customers than a one-time necklace purchase.

Then there’s auto, still the sector most commonly associated with leasing. While a majority of consumers will see their three-year lease through to the end, there are others who want to change what they drive more frequently. While there has been upheaval in the auto sector through car-sharing services like Zipcar, we still haven’t seen much evolution of the lease model. There is a segment of consumers who wish to drive a new car every year, possibly even every six months. Some are likely willing to pay more than a normal lease if they know they’ll have options, which again, opens up a new revenue stream for both dealer and manufacturer.

Going forward, it’s important for marketers to identify which prospective customers are good candidates for lease models, and which are more likely to make a traditional purchase, and then tailor the ad messages appropriately. Experimenting with different offers to different customer groups will require marketers to use data that allows them to monitor audience segments that are defined by affluence, income, and spending. The more a marketer can drill down into a segment’s anticipated behaviors and spending habits, the more insights they’ll have into which offers to send the consumers in that segment.

This consumer behavioral shift, paired with a data-driven approach, can work to marketers’ benefit. Leasing is almost always more expensive than buying in the end, but consumers widely recognize its flexibility as a feature they are willing to pay for. Marketers can identify new, creative ways they can capitalize on this mindset, adjusting their business models to directly address the affluent who may not want their money tied up. Marketers who experiment in these early stages are likely to create new inroads with younger generations who are even more likely to press for options and new business models when they reach affluence.

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Previously published in Mediapost’s blog. Since 1996, Mediapost.com has been the largest and most influential media, marketing and advertising site on the net, providing news, blogs & directories to help a community of more than 100,000 members better plan and buy both traditional and online advertising.