Fractional ownership programs are allowing more consumers to enjoy expensive items like private jets, luxury cars, boats, and vacation homes. These programs allow individuals to purchase a share of ownership in an item while the company retains responsibility for maintenance and upkeep. For example, Exotic Car Share allows individuals to purchase a one-fifth share of luxury cars like Ferraris and Lamborghinis for an upfront investment of $7,500 to $60,000 plus annual fees, in exchange for seven weeks of drive time per year. While challenges exist in setting up these programs, fractional ownership could make luxury items attainable to more affluent consumers by broadening the customer base.

1. Mass Affluence:
7 New Rules of Marketing to Today’s Consumer
by Paul Nunes and Brian Johnson
Excerpt from page 118
Sharing the Rights (and Responsibilities) of Ownership
In India, elephants were once the preferred form of transportation for royalty, and
few people would ever dare to dream of owning such an animal. The hurdle was
not simply the price of the elephant; it was the enormous cost of its care and
feeding. The ruinous effect of elephant ownership were so well know to Thai
kings that they would use the gift of a white elephant (sacred and therefore
unable to work for its keep) as a punishment to those out of favor, an experience
so financially painful we retain the expression for many such goods today.
Fortunately, marketers are realizing that by selling portions of the rights to such
an item, while retaining responsibility for its general upkeep, they can lighten the
burden of ownership and significantly broaden demand. Such fractional
ownership programs are finding increasing success among the money masses.
While any significantly expensive item can be sold fractionally, from jet airplanes
to jewelry (not a bad idea), four particular product categories - cars, boats,
entertainment offerings, and vacation homes - demonstrate how this approach is
managing to bring even the most extravagant of possessions into the hands of
those who are merely well off.
Planes, Yachts, and (Exotic) Automobiles
Fractional jet ownership, begun in the early 1960's, had become so popular by
the mid-1990's that Warren Buffet's Berkshire Hathaway bought NetJets (now
Executive Jet) in 1998 for nearly a billion dollars. Chicago based Exotic Car
Share has recently begun applying the same concept to the most elite models of
rare, antique, and luxury automobiles. Through a new equity ownership program,

2. individuals can buy a one-fifth share in cars such as a Ferrari 360 Modena
Spider, a Lamborghini Murcielago, or a Bentley Arnage T.
As founder and CEO George Kiebala told us, the extension of fractional
ownership to cars was a logical step: "Until recently, you could fly on a
fractionally owned jet to your fractionally owned beachfront timeshare, where you
sailed on a fractionally owned yacht. What was the missing piece in this picture?
The car."
Indeed, elite cars fall squarely into the category of desirable possessions that are
highly burdensome to own. For every day spent cruising down sun-splashed
roads, the typical Ferrari (particularly one owned by a Chicagoan) spends many
more days sitting in a garage, where it racks up insurance, storage, and
maintenance costs. Yet, although the car remains out of sight, it cannot remain
out of mind. Like a fine thoroughbred, the garaged Ferrari needs constant
exercise and care to stay in top condition. And to retain a sleek, shiny exterior
(who daydreams about driving a dirty Ferrari?), the vehicle requires constant
cleaning and buffing - more meticulous care than can be trusted to the local car
wash. It is easy to see that few among the not-filthy-rich could have the time,
money or patience to devote to such a possession.
That's where Exotic Car Share comes in. Each share owner receives seven
weeks of drive time per year by making an up-front investment of $7,500 to
$60,000, depending on the car model, and paying an annual maintenance fee of
between $7,500 and $15,000. While this figure is certainly expensive, the fee is
not much more than many affluent enthusiasts spend annually on their hobbies.
Kiebala notes, in fact, that his customers come from every walk of life,
occupation, and income range. What they all share, however, is a passion for
cars.
What can make participation even more affordable in the long run is the residual
value of the car. After three years, the owners can choose to keep the same car,
upgrade it to a new model, or cash out and be reimbursed for the resale value.
The ability to sell the vehicle means customers can recoup much, all, or even
more than their initial investments. Kiebala notes that a Lamborghini purchased
for $300,000 might be sold for $250,000 three years later - representing a
drastically reduced depreciation cost of just $10,000 per owner, or roughly
$3,300 per year - no worse than the family sedan. And should the car appreciate
in value, as exotic ones often do, the owners stand to make money for the
privilege of driving one.
Kiebala's experiences as a marketer offering fractional ownership deals have not
always been easy. For example, Kiebala recounts that although the company
was able to take advantage of the precedents set in other categories with regard
to setting up enforceable terms and conditions of shared-ownership contracts,
Exotic Car Share had a difficult time finding insurers that were comfortable with

3. the concept: "We negotiated with insurance companies for a year and a half
before finalizing their participation. It took a while because they had no precedent
for insuring what we wanted to do."
He also noted that it was difficult initially to demonstrate to manufacturers and
dealers that the benefits of broadening the customer base through his program
would outweigh the potential downside of brand dilution caused be the increase
in accessibility. (Dilution will be a concern for any marketers attempting this
approach with a product or an offering that is not their own.) Dealers, for
example, are not often the initial suppliers to such programs and must be
convinced that the immediate sales opportunity (coupled with having a far greater
pool of consumers who appreciate the benefits of their products from real
firsthand experience) outweighs the risk of cannibalizing sales from customers
who would have bought a whole one outright.
Exotic Car Share's program is far too new for us to declare a certain success. But
Kiebala is optimistic: "Fifteen years ago, if someone were flying in a corporate jet,
you thought that they must own it. Today, you assume instead that it is
fractionally owned. There is an opportunity to achieve the same paradigm shift at
the highest end of the automobile industry. I think that ten years from now, when
people see a Lamborghini on the road, they will also assume that the driver has
an equity share."
Despite the obvious challenges of the approach, fractional ownership programs
in general continue to catch on. Today they exist in a variety of arenas, including
even one of the most time-honored bastions of elite luxury: yachting. Yachts are
so notoriously expensive that even avid owners refer to them as "a hole in the
water I pour money into." But companies like World Yacht Federation in San
Diego are making it possible for aspiring boaters to purchase a portion of a
million-dollar yacht. For between $70,000 and $85,000 (plus $6,000 for
maintenance and insurance annually), fifteen buyers get the use of the boat for
three weeks each year - or twenty-one days of unencumbered smooth sailing.