Luxury is a delicacy for some and a necessity for others. Think ‘luxury’ and thoughts immediately gravitate to the rich and famous, and the mind conjures up images of a fancy private jet and a glamorous Bentley. Luxury, however, permeates every sphere of life from sumptuous meals and designer clothes to extravagant houses, and beyond that to a world of experiences.
Luxury Products: Why
Luxury products perform varied roles. Some are merely functional, others are ornamental and a third category belongs to the conspicuous. Exclusivity is the common thread that underlies all that is luxurious as anything that becomes too accessible loses its appeal among the super rich.
Some goods are primarily known for their functionality, but are luxurious due to their high craftsmanship, advanced design features and better quality. A Porsche runs on the principles of automobile engineering just like any other car, but differentiates itself by offering greater comfort and enhanced performance.
Some luxury goods are intended merely as decorative pieces. Designer clothing gains immense value from the reputation of the fashion designers rather than actual components and use. Fashion accessories such as bracelets, chains, necklaces, nose rings and engagement rings serve a similar ornamental purpose.
Some luxury goods act as status symbols. Yachts, mansions and a Lamborghini are an advertisement for the owner’s wealth and social standing.
From Products to Brands
Brands outlive products and convey a uniform quality and experience. Brands are so valuable that many companies mention a brand value on their balance sheets. Kraft spent $143 billion for the takeover of Heinz as it was buying the brand and not merely the beans, ketchup, factories and people. Similarly, Disney paid $52 billion to purchase Murdoch’s Fox, a brand that transcends actors and studios. The iconic Tiffany Experience is much more than jewellery per se. It is about our self- identity, aspirations and connectedness with the brand.
The basic philosophy of a brand is exclusion of the masses through a system of prohibitive pricing. The object thus transforms into an aspirational product and leads the users to an elevated feeling of exclusiveness.
Price and value are intertwined in any decision that involves luxury purchases. The price of a product affects perception of its value to such an extent that pricey things are often rated as superior to the less-expensive options.
A study by Caltech and Stanford University demonstrated that people rated the same wine more highly when told that it was more expensive. According to Michael Norton, a professor of business administration at Harvard Business School, a product that is doubly expensive is experienced as being more than twice as good.
Another factor that influences luxury purchases is the sense of belongingness to a special community, as the buyers of Ferraris would attest to. The modern-day urge to experience the diverse and exotic also accounts for a rising interest in the luxurious. Staying at an ice hotel and dining at a 7-star hotel exemplify such behavior.
The desire for mood enhancement determines luxury purchases as well. Sadness is associated with a lack of control. The closure of a favorite restaurant could trigger sadness and a feeling of helplessness in many people. A 2014 paper in the Journal of Consumer Psychology showed that shopping alleviates sadness and helplessness by restoring a sense of control.
We humans love to think of ourselves as rational beings, but countless studies confirm the crucial role of emotions in purchase decisions. Gerald Zaltman, the author of ‘How Consumers Think, states that 95% of buying decisions are a result of a cognitive bias, which is the tendency of human mind to commit fallacies and make inaccurate judgments.
‘Brand’ New Future
The future of luxury products does not lie in products, but in experiences. A study by Harris Poll and Eventbright points out that 78% of millennials prefer to spend money on experiences rather than purchases. Technology would also play a pivotal role in exerting an influence on buying decisions in the future.
The 3D imaging is becoming ubiquitous due to the spread of high-resolution smartphone cameras. Online retailers can create 3D renderings that allow the customers to try new garments on their interactive avatars. In virtual fittings, the users are led through a process of brand comparisons, body typing and aggregated customer feedback.
Combining the personal touch of a stylist and the algorithmic capacity of artificial intelligence, the AI-powered personal stylists can provide personalized recommendations based on purchase history, browsing habits and behavior of a customer.
Brandship stores will be an evolution of the flagship store. They will focus on building brand identity by providing an in-store experience, powered by the digital. The Nike Studio in Beijing is already providing a large workout space and futuristic LED lighting to the customers and Bentley has opened a brandship store in Dubai.
Fusion of 2 worlds
Online interactions influence 70% of luxury purchases, and shoppers engage in at least one digital interaction with a brand prior to the actual buying, according to Bain & Company. But stores will continue to play an important role in the luxury retail market and account for 75% of purchases by 2025. Brands and retailers are therefore providing an intimate and immersive experience to prospective customers. Dior provides a behind-the-scenes look at its runway show through its virtual reality headset and Harvey Nichols’ Project 109 hosts immersive installations and pop-ups for the benefit of the customers.
Jack Ma, Chairman and Founder of Alibaba, aptly sums up the current-day understanding of luxury. According to him, the priority of customers today is health and happiness. Consumers are displaying an increasing preference for experiences that promote personal well-being, rather than buying luxurious goods.
The world is changing at a breakneck speed. The attributes that made luxury brands great in the past may not make them great any longer. The challenge is to combine luxury products with experiences. Brand re-imaging and reinvention is the key to the future.