We love luxury. Right?
Part of us wants that high end item to up our social status or to seem special. And the stats seem to back that up.
Market research demonstrates that in most businesses 20% of the customer base wants the opportunity to buy a luxury product/service. With this is the allure of high revenue potentials that come from offering a luxury product/service. In some cases offering a luxury product/service allows a business to sell less quantity while increasing their profits. Nonetheless, when it comes to offering luxury products/ services there is a whole different set of strategies that must be implemented. As we will see, developing a luxury product/service is more than just increasing prices. In this article we examine some basic principles that any business can implement in developing their luxury offering.
Today more than ever perception equals reality for most of the population. This means that any luxury brand needs to manage and orchestrate how their luxury product or service is perceived in every aspect. The first step towards selling to a luxury buyer is understanding key differences between people who have grown up with money and those who have recently come into wealth. The old money crowd often are brought up having a full understanding of value and how luxury products and services distinguish themselves. By contrast individuals with newly acquired wealth can be more prone to impulsive buys, not understanding the true differences in the value offered by your luxury product/service.
This means you must begin communicating by preparing to delineate why your luxury product or service brand is superior to other products/services in the market place. When discussing your product/service, avoid simply listing a series of features, or describing the product/service using technical jargon or industry references. Do this only if these terms are fully understood by the target market. Demonstrate clearly how the various beneﬁts of your product/service will meet the speciﬁc needs and desires of your market better than anything else available.
Exclusivity and Presentation
A way to increase the perceived value of your luxury brand is through an emphasis on exclusivity and how the product/service is presented. Luxury brand purchasers like knowing they are able to purchase a product/service that is limited in production or accessibility. After all we all want what we can’t have! Being able to create an atmosphere of exclusivity will increase the perceived value of any product/service.
The way that the product/service is presented to the customer also speaks volumes about the perceived value. This can be done by placing a great amount of attention to the smallest details, thereby enriching the perception and experience your customers have with the product/service. A business can start by designing their website in such a way that it conveys quality, which supports the luxury concept. Next, the writing style and descriptions used to describe the product/service needs to support the design. Finally, each touch point with the end user must be congruent and aligned to communicate the perceived value.
It is important to understand that there cannot be any aspect of the business that distracts the customer from the perceived value. Businesses that successfully launched luxury brands take the time to ensure each aspect of their business reinforces quality. For example elements such as: how the phone is answered, how an order is taken and how the the product is packaged and delivered. Their objective is to wow the customer, thereby declaring the quality and value of their offering at every turn. Emphasis on all these communications will bring out the extraordinary benefits and features of your offerings, distinguishing them from all the other commercial varieties.
Doing The Research
Determining what to import to your luxury customers, and how to meet their needs, begins with research. Understand the needs of your target market. For brick and mortar businesses this can simply mean taking advantage of being physically in front of a prospective customer, asking questions or simply noticing how they interact with the product/service. Having the opportunity to interact with customers directly can be a treasure trove of information, which helps you redesign or improve your offering if needed.
For businesses that don’t have walk in traffic, an assortment of online surveys can be utilized to obtain similar information. Always begin with your own customer base. An email sent to your customer list asking for their input, using an online survey service such as Survey Monkey, will provide you with a wealth of information. Plus, customers appreciate being asked for their opinion. In addition, there are other market research platforms that allow you to survey a group that would match your target market. Although there is a cost associated with these services, the information you obtain can save you time and money in developing or testing a new luxury concept.
Pricing your luxury offering properly
The bottom line is that providing a luxury product/service is not inexpensive. The business must price in all the costs associated with the offering in order to make it proﬁtable. Properly priced, a luxury offering should provide a generous gross margin and enhance the profitability of the business. If you feel you can’t set the price your offering is worth, go back to the perceived value of the product and figure out how to increase it. The time invested in creating the offering will pay you back in short order.
Topics like this one often get covered during meetings of the Bay Area Mastermind group. The intention is to provide business owners a chance to meet, collaborate and support each other as they face the day to day challenges of running a business. If you feel called to connect in this way with other entrepreneurs, then check out a “Test Drive” in the coming weeks. Your business will thank you.