April 16, 2010 / 3:29 PM / 9 years ago

Affluent, untapped and happy to spend

NEW YORK (Reuters) - When Michelle Obama wore a J. Crew outfit on the “Tonight Show” during the presidential campaign, online sales for the clothing retailer went through the roof.

First lady Michelle Obama laughs at her husband's monologue at the White House Correspondents' Association Dinner in Washington May 9, 2009. REUTERS/Jonathan Ernst

J. Crew, known for a polished and relatively pricey look for young professionals, was happy for the boost from the wife of future President Barack Obama. But when it followed up with an advertising campaign it didn’t capitalize on one key segment: affluent African Americans.

That is typical of many marketers and luxury goods companies, who ignore a market segment worth billions of dollars, according to Leonard Burnett and Andrea Hoffman, authors of a new book on the subject.

Although African Americans are less likely to be rich than U.S. Asians and Latinos, they have been disproportionately ignored, say the authors of “Black is the New Green: Marketing to Affluent African Americans” (Palgrave Macmillan, $35).

Part of the problem is that companies and marketers don’t know how to market to black people and the residue of decades of racial tension is hard to erase.

Burnett, a marketing consultant based in the Harlem neighborhood of New York, said he routinely dispels bizarre preconceptions. Once he had to explain to a paint company that despite its impression that black people don’t buy house paint, they too own houses and paint their walls.

“When you advertise, when you speak, when you promote, affluent African Americans will respond with their dollars,” Burnett said. “They’re the most loyal consumer, and they overspend.”

While 32 percent of Asian households and 23 percent of non-Hispanic whites earn $100,000 or more, only 12 percent of 12 percent of Latinos and 10 percent of blacks are affluent, according to market research company Package Facts.

But together, the 1.5 million black households with an income of $100,000 or more generate income of $223 billion, a study by Packaged Facts says.

And there is some evidence that they have come through the recession relatively unscathed. Automotive research firm RL Polk & Co said rich black car buyers were the only group that increased purchases of luxury cars between 2005 and 2009. Where they bought 20 percent more cars, Latinos bought 20 percent fewer.

The authors say Affluent African Americans have escaped advertiser targeting because they have not properly been studied and understood. Other marketers agree.

“The stereotype is that this group of people can’t afford what I’m selling” said Moses Foster, who runs marketing firm the West Cary Group.

For Bob Schullman of market research firm Ipsos Mendelsohn, the U.S. market is “lily white.”

Race awareness is still important to rich black people, although that is much less true than it was for the previous generation.

“It meant a lot to my parents when people that looked like them started appearing in ads where for years before they didn’t,” Burnett said.

Today’s generation is more sophisticated. They want to know exactly how a product is crafted and why it’s special, Burnett said. “We want to be mavens.”

They aren’t a part of hip-hop culture, though they’ve likely grown up in it. They don’t care much if a product is promoted by singer Rihanna or rapper Puff Daddy. But they do care if the product is well made and catered to their needs.

Some notable brands have reached out such as Japanese automaker Lexus, a division of Toyota Motor Corp.

Other companies that have begun to actively market to affluent blacks are Nissan’s Infinity and lingerie retailer Victoria’s Secret.

But for every one that grabs the opportunity, there are a dozen, like J. Crew Group, that let it slip.

Reporting by Basil Katz; Editing by Eddie Evans

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