Updated: Aug 25
Whenever I talk to brand owners or consumers about Luxury and how they define it they invariably say that ‘it’s expensive’.
Certainly the moves made by a number of Luxury brands post-pandemic to significantly increase their pricing has only reinforced that perception, and some were more successful than others. More worryingly, for certain brands, their inability to raise (and maintain) this pricing highlighted a more fundamental loss of status as a ‘True Luxury’ brand.
With this in mind, I’ve outlined below the five issues and opportunities that I believe highlight where this focus on price, as the defining feature of Luxury brands, can cause real problems.
1. Brand Value First:
Pricing is a ‘one-way’ benefit in favour of the brand rather than the consumer. Luxury brands go beyond functionality so Value has to be created in other ways. Simply having a high price is not going to work.
2. Earn the Right: Luxury is about emotion and desirability. The right to ask for higher pricing needs to be earned over a long period of time, by consistently delivering excellence in product, design, and consumer experience.
3. Consumer Confusion: Consumers who focus primarily on the price as the signifier of Luxury, especially for those in rapidly evolving markets such as India, often fail to understand which brands are Luxury and those that are not. That’s because higher import duties can artificially distort the price paid, and as a result I often hear examples of Indian consumers believing that M&S, Zara and even H&M are ‘luxury’ brands simply because they are higher priced than local brands.
4. Under-pricing exists too: Under-pricing is also an issue in some luxury product categories, as identified in Daniel Langer’s brilliant Luxury Index. This might be because the drive in many larger brands for higher revenue growth has focused on volumes rather than Brand Value. Langer identified a number of iconic Luxury product areas that are under-priced versus the value that could be created, including champagne, leaving revenue and profit ‘on the table’. By elevating their Value creation and building more compelling brand stories, they could increase their prices and consumers will follow them.
5. Price is Relative: Price is also relative to the sector that the brand is operating in. For example, whilst a price tag of US$250 seems affordable, it could be the most expensive single chocolate available. Similarly in a sector such as fine wines, US$1000 for a single bottle of vintage wine – whether for drinking or investing – would not even cover the cost of a Louis Vuitton ‘Neverfull’ tote bag which weighs in at US$1850.
So, in summary, it’s clear that if a brand wishes to position itself as ‘Luxury’ it must look far beyond the price point that it wishes to achieve and think more about how it is going to earn the right to charge that by adding significant value for the consumer.
A Luxury price tag is a consequence of doing everything else right, so it needs to come at the end of the creation process, not the beginning.
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