Luxury Pricing

To sum up, the "social value of a brand" emerges as the major factor influencing the purchase of luxury items. Subsequently, a brand with strong social value will remain in demand for longer. Also, having suitable ties to celebrities and leveraging their reputation will afford brands the freedom to create an alternate and desirable lifestyle, which may even justify the high price point in consumers’ minds. Therefore, brand managers must consider the power that social value holds while pricing the products or services offered. Finally, the pricing policy must appropriately reflect the value of the intangibles that not only drive the social value for the consumers but also generate a sizeable profit for the brand.

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C.Maintaining exclusivity without price increments

C.1 The rapid growth of the luxury industry 

The global luxury industry is flourishing and has witnessed a greater demand for luxurious goods with an average annual increase of 3-4% since 2009 (Wang et al., 2021). To meet the ever-increasing demand, many luxury brands have undertaken rapid line extensions as well as large-scale productions (Wang et al., 2021). Even though this step had proven to be financially promising, the emergence of “mass luxury” is a serious concern (Wang et al., 2021). It is typically referred to as the massification of luxury. It threatens the very status of exclusivity and rarity, that has long been enjoyed by luxury brands. Exclusivity and rarity are the two factors that reside at the very core of luxury brands. To offer a product so exclusive, it’s almost like it’s specially made for each individual, is the true essence of luxury. Additionally, these two factors combined are also the key drivers of luxury purchases (Kapferer and Valette-Florence, 2016). The accessibility of luxury goods is also due to prosperity in society. There is an increase in wealth, making luxury accessible to the masses (Yeoman & McMahon-Beattie, 2013). Earlier, luxury was only associated with the status of an individual. Now, consumers are in pursuit of luxury to improve their lives (Yeoman & McMahon-Beattie, 2013). This shift is known as the “feminisation of luxury”, wherein it has switched from male status symbols and trophies to indulgence and experience (Yeoman & McMahon-Beattie, 2013). This shift is a result of the increase in women’s buying power (Yeoman & McMahon-Beattie, 2013). Given the increase in purchasing power along with the ever-increasing demand for luxurious goods, naturally, there is a rise in distribution and sales. This hike in demand could potentially dilute the desirability of luxury and exclusivity of brands, subsequently, eroding its luxury status and even the brand equity (Yeoman & McMahon-Beattie, 2013). Furthermore, the term “luxury” is used almost too liberally. “If everything is “luxury” ”, then the word itself lacks meaning (Kapferer and Bastien, 2009). Overuse and misuse of the term has led to a dilution of the meaning it carries. 

Brands are known to increase the price of products as a result of increasing demand. Instead of hiking the prices to meet the global demand (Sotheby’s, 2023 a) a more discreet way of marketing is required (Hennings et al., 2015). An increase in pricing due to rising demand is a short-term solution for brands and can even hamper the brand’s social value wherein consumers can call into question the higher price instead of overlooking the premium price tag.

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C.2 Alternative strategy to meet rising demands

Understatement, as opposed to opulence, is required across all consumer contact points (Hennings et al., 2015). For instance, consumers must be offered private shopping events and even individualised products (Hennings et al., 2015). Also, a paradigm shift towards “conscientious consumption” from “conspicuous consumption” (Hennings et al., 2015) is required to maintain the exclusive status of luxury. A change in the way luxury is consumed will create a class of limited consumers while maintaining the long-standing status of luxury being rare and exclusive. Additionally, restricting accessibility will elevate consumers’ desire for a luxury experience (Wang et al., 2021). A “golden segregation” (Wang et al., 2021), wherein only products are offered only to a selected few. Limiting the access itself will drive up curiosity and consequently the desire for luxury products itself. The motivation behind this is to create a product that is desired by all but available only to a few. A brand that has consistently maintained its status of exclusivity is Hérmes and the globally acclaimed Birkin Bag. The heritage leather goods brand designed the Birkin Bag in 1984. The Birkin Bag is considered the ultimate symbol of luxury. To buy a Birkin Bag one must have a purchase history with the brand (Sotheby’s, 2023 b). A brand-new bag is not available to buy off the shelves and is available in selected boutiques across the globe (Sotheby’s, 2023 b). Only consumers with an established purchase history have the option to buy a Birkin bag. By implementing this strategy, Hérmes is also encouraging the sales of its other products. This can be termed a kind of “reward scheme” wherein loyal consumers receive the prize of purchasing a bag that represents the ultimate form of exclusivity.