Who here is leaving money on the table?

NYT Dealbook: The Spending Habits of Hedgies

A new survey of hedge fund professionals, who are a generally secretive group, suggests they are juicing not just the art market, but those for other goods as well. For his book Fortune’s Fortress: A Primer on Wealth Preservation for Hedge Fund Professionals, Russ Alan Prince of the consulting firm Prince & Associates, working in conjunction with trade publisher MARHedge, polled the buying habits of 294 managers with a median net worth of $61.7 million.

Given the reputation of many hedge-fund professionals as big technology fans, it may be suprising that electronics were so low on the hedgie shopping list. In fact, facials seem to have outranked plasma TV’s, as average spending on “traditional spa services” was higher than the “electronics” category.

The survey’s findings for their 2005 personal average spending:
Fine art: $3.99 million
Yacht charters: $429,700
Jewelry: $376,400
Hotels & resorts: $304,900
Watches: $271,300
Fashion and accessories: $204,200
Traditional spa services: $124,000
Electronics: $99,300
Entertaining friends: $76,700
Wine & spirits for the home: $48,900

If I had to make an educated guess why a sample of affluent, technologically savy, testosterone fuelled men spent less than $100K each in "electronics" in a year, I would lay the blame at the feet of our own industry's failure to promote value, performance, and quality, choosing instead to go for the easy sale, and the cheap, commoditized, disposable product.

Really, you can spend $271,300 on a single wrist watch. In comparison, the $99,300 number can easily encapsulate a large quantity of individual low-ticket items: a Motorola RAZR, and iPod, a laptop, a Plasma TV, etc. Sure, the potential is there for more high roller luxury electronics in that figure, but it seems less likely.

Ask yourself, what kind of car does a man with a $61.7 million net worth drive? Is it nice? If he spends $48K a year on booze, do you think he's buying a thousand flats of Molson Canadian and two thousand forties of Medallion Rye, or does he drink the good stuff?

Now that we've determined in Socratic fashion that we have a consumer who values quality, why would you show him a $499 surround-sound-in-a-box or a $1000 42-inch plasma that was made in China by some brand you've never heard of?

Dealers are the first to start moaning about low margins, eroding price points, and competitive pressure, but all these woes are self inflicted. By trumpeting low, low prices in advertising, consumers are programmed to believe that's all that matters, even the ones who, if shown a more upscale, higher quality option, would choose it. Honestly, if your store's staff present the same big-screen tv and sound system to the kid with his first job as well as the guy in the two thousand dollar suit, then there's your problem. If you treat every customer the same, and present the same options every time, then you're throwing money out the window.

Believe me, there are firms out there that get it. Dealers who take the time to get to know their consumers, and who work to turn customers into clients. Those dealers know how to determine if they really do have an easy XM Radio sale on their hands, or if they have a greater opportunity in front of them.

If you need a reminder that opportunity is always there waiting for you, go read Russell Conwell's classic Acres of Diamonds, one of the greatest motivational lectures of all time.

Now go take care of business!

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