Customers of luxury have two clear needs from their luxury products:
· Need to satisfy their inner id, their quest for comfort, satisfaction and aesthetic sensibilities. This is represented by need for product "Excellence"
· Need to satisfy their ego, their quest for recognition of their status in society and recognition of their success and represented by need for "Status"
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| The Golden Circle |
These two needs are generally met by product quality in the first instance and price in the second. Let us see the consequences of these strategies:
· Simply increasing the price of a product is one of the most simple and easy strategies to put in place (with some additional branding and marketing effort to justify the cost). However this strategy is also the most easily replicable – a competitor can easily launch a variation of his product with a higher price and roll out the brand and marketing communication to this effect very quickly nullifying the advantage of having a higher price and hence a higher peer recognition of status for a product. The perfume “Joy” is a good example of the price strategy quickly being copied and cutting a products lifecycle short.
· Building an intrinsic quality into a product on the other hand will take time, money and effort. However customers for these products are much more loyal, thus ensuring a longer product life cycle. Just think of Channels No.5 perfume as a quick reference point.
We must note that there will always be consumers who need peer recognition along with product excellence – though these will be in fewer no. they cannot be ignored. Also as human nature suggests, a component of social stratification is desired in any product, even by a customer firmly entrenched on principles of excellence while buying a luxury product. Thus it makes sense to plan a strategy within the charmed golden circle wherein excellence is the focus but the needs of status and social stratification is also considered albeit to a smaller degree
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