One of latest marketing trends in Korea is in catering to the “top 1 percent” customers. It comes upon a deepening polarization in consumer spending. It is not unusual for the richest 1 percent of customers to dominate a company’s overall sales. Firms in various sectors are rushing to launch marketing drives to woo what they call very, very important persons, or VVIPs, who usually make up 0.5 percent to 1 percent of their customer base.

Consumer spending has become polarized as the nation’s economic growth has slowed. Middle-class consumers have tightened their belts as the value of their key assets like real estate and stocks has fallen over the past few years. Consumer spending on dining and clothing has been shrinking, but demand for luxury goods continues to rise.

Another reason for polarization in consumer spending is a rising number of rich consumers whose spending habits are less affected by economic conditions. According to the Asia-Pacific Wealth Report 2012, published by Capgemini, the number of Korean high net worth individuals, or HNWI, which refers to people with $1 million (1.09 billon won) or more at their disposal for investing in stocks or bonds, reached 144,000 in 2011. When it comes to the number of HNWIs, Korea was ranked fourth in the Asia Pacific region, following Japan, China and Australia last year.

“The total assets of Korean HNWIs go beyond 3 billion won ($2.75 million) in that Korean rich people tend to have more than one billion won worth in property and to put more money in their bank account rather than in their investment account to buy stocks or bonds,” Korean Academy of Affluent Studies chairman Han Dong-chul said.

“Considering the preferred assets type of Koreans, the number of Korean super-rich is estimated at more than 300,000,” he added.

VVIP marketing is no longer exclusive to luxury goods. VVIP marketing has been a phenomenon in almost every consumer business for the past few years. It has spread into different sectors from finance to hospitals to match-making. Key features of VVIP marketing are private membership and customized services.

VVIP financial services

The Black, a credit card brand for VVIPs by Hyundai Card, is often quoted as a success story in local VVIP marketing. The Black card is famous for its exclusive membership services. The card, which costs 2 million won ($1,830) for annual membership, runs a committee to approve membership. The committee allegedly only gives the OK to CEO-level executives from listed companies whose revenue exceeds 50 billion won, or from professional service firms like law firms and hospitals.

“Besides money, the committee also screens the reputation of applicants to keep the prestigious image of the card holders,” a company official said. Hyundai Card limited card issuance to 9,999 when it launched in 2005. Membership lingers around 2,000 as of now due to the strict rules.

Daemyung Resort, the nation’s leading resort chain, opened a high-end vacation villa chain named SonoFelice in Hongcheon, Gangwon Province, in 2009 and has sold around 10 luxury villas, each priced at 2 billion won.

“We targeted the super-rich having demand for their luxury second home out of Seoul,” Hwang Yong-hoon, a company official said.

Quintessentially, a U.K.-based world-leading luxury concierge service, which entered the Korean market in 2007, targets VVIPs seeking a luxurious lifestyle.

Quintessentially has high profile global celebrities like Paris Hilton and Jennifer Lopez as its VVIP members. Based on a member’s request, the company plans a party or an event and finds requested items using its global network in hotels, shops, restaurants and theaters.

“We position ourselves as a lifestyle service provider in Korea. In Korea, demand for travel-related concierge is higher than other lifestyle items. We find dining places or book performances in a country where members have lack of information using our global network,” said Kang Kyung-gu, a manager from Quintessentially Korea, adding that the company has grown 10 to 15 percent per year since its foundation in 2007.

A branch of Woori Investment & Securities, located in the Gangman Financial Center in Yeoksam-dong, launched a membership service for the branch’s VVIPs who have more than 1 billion won in their bank accounts last year to offer them a one-stop advisory service. The membership ― only consulting service ranges from money movement to tax reduction to art collection for wealth accumulation. The branch, in particular, focuses on advisory service for the arts and it decorates its walls with world renowned paintings. The branch added advisory on art in consideration of the need of VVIPs to find an alternative investment item beyond stocks or bonds. Art is one of the less developed investment items in Korea.

Spending habits of super-rich

The VVIP market is tempting, especially during a prolonged economic downturn, but not all VVIP marketing activities end up a success.

“The market for the Korean super-rich is very segmented and is yet to be full blown,” Kang said, adding that it is easy to fail if you focus on VVIPs’ wealth as there are varying types of affluence.

Chung Yeon-a, general manager from Woori Investment & Securities, said the Korean super rich, most of whom are in their 50s and 60s, keep their distance from extravagant spending habits and led simple lifestyles.

“One of reason for that is because the period of asset accumulation is relatively short. Many of them laid the foundation for their fortune based on money from their ancestors, but they saw their assets hiked for the past ten years since the IMF crisis,” Chung said. The financial crisis, which hit the nation between late 1997 and 1998, ironically, provided a variety of investment opportunities to rich people.

“Most of Korean VVIPs using private banking are in their 50s and 60s and their main interest is to find a way to increase their wealth further rather than seeking a certain lifestyle,” Chung said.

“In general, there are three types of affluence in Korea ― affluence built on parents’ money, self-made affluence and affluence generated from professional work,” the Korean Academy of Affluent Studies chairman Han Dong-chul said, adding that the self-employed type of affluence is most common in Korea.

He also pointed out that the number of super-rich with assets exceeding 1 trillion won, most of whom are chaebol owners, is also relatively low compared to more advanced countries like U.S.

“The VVIP market can mature when rich people seek a variety of lifestyles. A positive sign is an increase in numbers of high-income young professionals in their 40s who are willing to open their wallet for their taste, but seeking lifestyle is also a matter of culture and so it will takes a while to take root in Korea,” Kang said.

By Seo Jee-yeon (jyseo@heraldcorp.com)