HENRYs—high earners not rich yet—are the backbone of consumer spending. For example, they are the engine that drives the majority of nonessential retail sales, vehicle sales, real-state transactions, and financial-product and -service use. They are the most likely to spend for travel and tourism, luxury goods, technology, and services such as maintenance and personal care. Specifically, HENRYs are adults between the ages of 20 and 70 who are not retired and have a total household income between $100,000 and $249,999. In 2000, 18 million households qualified as Henrys; by 2010, their number had grown to 21.5 million—18% of all US households. (For more information about their finances, see Much Ado about HENRY.)
Although HENRYs are middle-class households, the majority fall into the highest quintile of household incomes—the top 20%. US Census Bureau trends show the disproportionate rise in the mean income of this quintile in the past half century; the trends also show that as a percent of total, the top 20% have lost the most in real household income since the 2008 recession.
Even though most HENRYs have recouped investment losses, many now realize how quickly financial circumstances can change. In response, they may postpone retirement because they have lost several years of potential investment gains; discretionary spending may be constrained because the household now includes responsibility for parents or children who have returned home because they can't find a job; or they may give more thought to which purchases they can make comfortably. Regardless of the reason, opening HENRYs' wallets is more difficult than it used to be.
Marketplace changes are evident as the economy slogs along. Discretionary spending that supported economic growth by households in quintiles from the lowest through quintile four now mostly goes for food and fuel. For example, the average price for regular gas was $1.86 per gallon in 2005; gasbuddy.com says it is $3.85 in 2012. In 2011, the average amount that households spent at food stores in a typical week was $117. Food costs have risen in 2012 and are likely to continue to do so because of droughts, higher transportation costs, and the mandate for ethanol as a fuel additive, reducing corn available for animal feed.
HENRYs are critical to an economic recovery because consumer spending by the wealthiest 2% of households cannot compensate for spending by 18% of HENRYs. Confusing retailers in every business category, HENRYs are not all the same, even though their behaviors are similar. Almost 80% of HENRYs fall into three distinct consumer groups. Each group is motivated differently and requires its own unique set of appeals.
Big Spenders are 26% of HENRYs. Although many are more thoughtful about expenditures than previously, they continue—relatively—to outspend all other consumer groups. Regardless of the state of the economy, they are curious, require variety in all aspects, and are the first to try and buy—consistent personality traits. Postrecession, their spending behaviors include three major changes:
- They are frequently in stores but shop online with increasing regularity as a method to save time and to find the lowest price.
- Because many have already furnished their home and have full closets, the recession has recalibrated their idea of what's necessary to live comfortable, civilized lives—they are more selective about purchases than they were prerecession.
- Many realize that a reversal of fortune may result in the loss of possessions. Experiences, by contrast, endure. As a result, more big spenders are looking to buy experiences that will fulfill their near-term desire for the unique and create lasting memories.
Reward Seekers are roughly 31% of HENRYs. Because they seek peer approval and rewards for hard work, many Rewards Seekers engaged in unbridled consumption and were caught unawares by the fall 2008 crash and threat of job loss. Their lifestyle is dependent on two incomes. Many are committed to expenses such as private-school tuition, country-club dues, vacation-home properties, and high mortgages. As a result, an immediate reduction in spending is often difficult to effect. Postrecession, their spending behaviors have seen changes.
- They are focused on reducing debt such as high credit-card balances.
- Nervous about a less than robust economy, many Reward Seekers are more concerned about maintaining their status quo than about moving ahead; they are reluctant to incur additional debt or to make major purchases.
- Many are trading down on the types of stores they shop at and the brands they buy—except some signature aspirational items such as vehicles and business clothing: items they purchase less frequently than previously.
Shoppers are 20% of HENRYs. Always thoughtful, cautious spenders, these consumers have never been conspicuous. Because members of this group consider themselves to be intelligent and responsible, even in the best of times they shop for the lowest possible price for items they desire. Not concerned about dressing in the latest fashions or looking for immediate gratification, the majority are willing to wait for an item to go on sale before making the purchase. Since the recession, their spending behaviors have somewhat altered.
- The oldest of the HENRYs, they are more focused than ever on saving for retirement than spending on acquisitions.
- Purchased items are of good quality but are not necessarily luxury brands— except vehicles (that hold their value) or jewelry that may be more of an investment than decorative. Overall, the majority of discretionary expenditures are for replacement items such as those for a major appliances or home repair.
- Similar to Big Spenders, Shoppers are also looking to buy experiences but experiences that are less grand and have an educational component.
To learn more about your organization's mix of HENRYs and how to communicate effectively with your most profitable customers, contact us.