How does a brand become a luxury brand? The answer to this question eludes many marketing and creative agencies, and most campaigns designed to help brands make this transition fail.
It takes a deep understanding of the psychology of luxury to understand why people are drawn to luxury goods and services, and the experience they need from a luxury brand, for a brand to achieve and maintain a luxurious reputation.
In this article, we will explain the fundamental principles of luxury branding and what brands should consider.
Redefining Value
One of the first things you need to comprehend to get into the luxury brand mindset is an understanding that humans do not make rational purchasing decisions.
Many of us expect that most people want to get the maximum value for the minimum cost, and seek to maximize economic value in their purchases.
As a result, when it comes to branding and brainstorming the value proposition of a brand, it is easy to be drawn into considerations of value for money, and other economic factors.
When dealing with luxury brands, you need to break any preconceived notions of value. Working with a luxury goods consultant is a great way to get assistance getting into the right mindset.
Luxury brands are offering their customers something other than economic value, they are offering them a state of mind, and a feeling. This is explained more in the following sections.
Rethinking Pricing
Many contemporary brands and companies try to attract more customers and boost profits by lowering prices. The conventional logic is that lower prices will attract more customers, so you will sell more products or services and therefore make more profit.
But luxury brands take the opposite approach.
Luxury brands see price as an opportunity to indicate the high quality and value of their products.
So rather than trying to attract customers with low prices, they do the opposite. They place a high price tag on their products and find that customers do not question the high price.
They in fact embrace the high price as they see the high price as a symbol of how valuable the good (or service) is.
Pricing Example
A perfect example of luxury brand pricing is the Prada Paperclip.
It is a clip designed to hold your money. That is all it does.
The cost to make this item would be a few dollars at most. But, because Prada has been so successful in establishing itself as a luxury brand, they are able to sell this paperclip for over $500.
There is no conceivable way Prada could explain this as being value for money in an economic sense. It is only the strength of their brand than enables them to charge this price for this item.
Creating Exclusivity
As human beings, we are evolutionarily drawn toward community and groups, because groups were safer than braving the wilderness alone.
So when there is a group that we want to join that we are excluded from, we naturally want to do what we can to gain access to the group, and become a member.
Luxury brands tap into this evolutionary desire by creating groups (people that own their products) that people will spend a lot of money to try and join (by buying their products).
Many of the people that purchase luxury goods are not people who should ordinarily spend a large amount of money on a luxury item. Often people are extending themselves financially, even accessing credit, in order to purchase these luxury goods.
But for these people, they are still compelled to make these expensive purchases for the emotional experience, the dopamine rush they get from the purchase, and the feeling of connection and inclusion they then have with other customers of that brand.
These group dynamics are a key reason that brands often infuse values and philosophies in their brand that are already prominent in the community, and that their preferred customer might already be connected to.
Values that luxury brands are currently drawn to include themes of sustainability and equality.
Product and Design
High prices and exclusivity are not enough to create and sustain a luxury brand on their own.
Luxury brands are built on a foundation of high-quality products, with incredible design, and an amazing purchase and support experience.
This product experience is then supported and amplified by premium pricing and exclusivity.
Design
Luxury products need to have a luxury feel. From the texture to the color, to the shape, and the fixtures, the products need to feel and seem as expensive as they are.
Though luxury products may cost more than standard products to manufacture due to different materials used, the difference in manufacturing cost will be a lot less than the difference in the retail price for the final product.
Quality
Luxury brands do need to have some underlying perception of quality in order to become successful.
Customers will be happy to pay the very high price for the feeling of exclusivity and belonging, but if the products are clearly low quality, then the brand will struggle to maintain its luxury status.
Experience
People buying luxury goods are doing so to feel important, and feel special. So as much as the design and quality of the goods needs to convey that, so does the experience the people have with the brand.
From the store they are in, to the interactions with staff, and the response they get for post-purchase support (if required), this experience is critical to luxury brand success.
Final Thoughts
People are drawn to luxury brands for the feeling they get from the products, not the value for money.
So for your brand to be successful as a luxury brand make sure your pricing and products are optimized to give your potential customers the desired feeling when engaging with your brand to ensure ongoing success.