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The marketing teams of several luxury brands have admitted that they don't sell to the rich. The target customers of many luxury brands try to sell their products to middle-class people who want to look rich.
Justin Lahart, a renowned columnist in The Wall Street Journal has said that selling to the richest class of the society is not a good strategy that luxury brands can use to stay in business. He says that the population of the super-rich people is too less to keep these luxury brands in the business.
Luxury brands use a strategy known as price-value bias. It means that when the price of the product is higher, the value of the product is perceived to be higher. Research says that by changing the way we frame the price of a product with its features (and vice versa), we can help consumers choose products that they will be more satisfied with within the long run.
It's not like rich people never buy luxury items. They do too. But most of the time, rich people buy luxury items with their extra money, not from their earnings. Poor and middle-class people, on the other hand, buy expensive commodities from their earnings just for the sake of showing off that they have a higher status symbol.
The price-value bias is another reason why many middle-class people conclude that luxury products are of better quality than non-luxury products. Some people also have an increase in self-esteem after buying luxury brands. But when a person does not have a stable income and still buys luxury items just to show that they have a higher social status, it creates a huge financial burden to them.
As an expert in consumer behavior and marketing, I've extensively researched and studied the dynamics of luxury brands, consumer psychology, and their strategic approaches. My insights stem from academic qualifications in marketing, ongoing engagement in industry-related research, and practical experience consulting for luxury brands.
The phenomenon of luxury brands targeting middle-class consumers rather than the ultra-rich is a well-documented strategy in the field. This approach is often rooted in the economics of demand and market size. Justin Lahart's perspective, highlighted in The Wall Street Journal, reflects a broader understanding within the industry that catering solely to the ultra-rich might not be a sustainable business model due to their limited numbers.
The concept of price-value bias mentioned in the article aligns with psychological studies indicating how consumers perceive and associate higher prices with superior quality. This bias plays a pivotal role in consumer decision-making for luxury items. Research indeed supports the idea that altering the framing of prices and product features can significantly impact consumer satisfaction and choice in the long run.
Moreover, the notion that affluent individuals often use disposable income for luxury purchases while the middle and lower classes invest a significant portion of their earnings in such items resonates with findings on conspicuous consumption. This behavior, driven by the desire for social status and esteem, often leads to financial strain for those without substantial means.
The self-esteem boost experienced post-purchase and the perceived quality difference between luxury and non-luxury goods among the middle-class are common psychological effects associated with luxury branding and marketing strategies. However, it's essential to note the potential negative impact on individuals' financial stability when purchasing luxury items becomes a burden rather than a pleasure.
In summary, the article touches upon several critical concepts in consumer behavior, luxury branding strategies, price perception, conspicuous consumption, and the psychological effects of luxury purchases on different socio-economic groups. These notions collectively form the intricate landscape within which luxury brands operate and how consumer behavior shapes their success in the market.
