The Federal numbers released last week paint a juggernaut economy—surging into 2024 with a 3.3% GDP rise in Q4, hot on the heels of an even more impressive 4.9% in Q3 in real terms. Inflation is coming down; real wages and employment are still up.

Personal consumption makes up 70% of the economy. Retail sales continue to rise, with a 0.6% increase in December. Consumers, who seemingly never stopped spending, have been vocal in their economic pessimism. But numbers don't lie, and their wallets tell a different story. The University of Michigan's consumer sentiment index, leaping by 9.1 points in January – the largest monthly surge since 2005 – signals a shift. Consumers are finally saying what their spending habits signal, acknowledging the economic uptrend.

But many brands are struggling with new customer acquisition. Is the economy genuinely thriving for all, or is this a tale of two economic realities, where spending is strong for a few but meh for many?

$100K+ HHI is the line to unlock spending growth

Marketers know not all wallets weigh the same. Around 58% of American households earn below $100K a year -- this is the group who felt the windfall from pandemic savings. The remaining 42% -- the over-$100K earners -- are becoming the heavy lifters of consumer spending. Visa's data paints a stark picture: In 2023, these $100K+ households accounted for a whopping 97% of consumer credit sales volume growth. Contrast this with the previous three years, when those earning between $50K and $99K drove at least 20% of the spending growth (shrinking in 2023 to just 5%).

When customer bases shrink, fight like hell for every order or take Lifetime Value (LTV) to the next level?

The past years have seen a surge in growth driven by less-affluent households, who shopped like they were in the next higher income bracket. While savings shrank, inflation piled on and disproportionately impacted this demographic. Aspirational brands are seeing a contraction in their customer base.

It’s getting more expensive to get new customers each day, especially online. International ecommerce products competing on price, and cookies going away, mean costs will continue to climb.  Advertisers are paying more for first-party data and tracking, and have less ad pricing power over walled gardens as these platforms grade their own homework. If D2Cs were the canary in the online acquisition coal mine, how should other brands think about customer growth?

The Wall Street Journal investigated some luxury brands pivoting to treating the highest LTV customers as a casino would treat a high rolling “whale.”  These brands report that 2% of customers delivered 40% of sales at Neiman Marcus, and the brand is spending on retention and deepening relationships for any customer spending over $25,0000.  If curating exclusive trips and experiences can yield returns, how else can other marketers invest in personalization for their best customers?

The marketing science is clear that new customers drive growth exponentially, through referrals, distribution, and other multiplying factors.  But whew, it’s getting expensive! Focusing on your customers with more substantial spending power has always been a safer bet, but the best customers looks even more attractive as customer acquisition costs rise.