The definition of the word “luxury” changes very rapidly. What was considered a luxury product yesterday is commonplace the next day. On a certain Tuesday only rich people could be seen wearing a certain brand of clothing. Two days later, everyone is wearing it.
Some experts call this phenomenon “product migration.” Another term used is “product devolution.” Simply put, it is “movement.” Luxury products move down because lots of people want to own them. They do not own them because they cannot afford them. So they work hard to improve themselves and their skills. They may start their own business. The result is they make more money. When they do, the first thing they do is “move up.” They go out and buy the luxury items they always wanted, but could not afford.
People move up as soon as they can. This upward movement toward luxury products and services tends to pull the definition of “luxury” down. As more and more people obtain a luxury product, the product loses its luster. It is not as exclusive as it once was. In fact, it becomes almost commonplace. It becomes “affordable luxury,” which is an oxymoron, because the term “luxury” implies exclusivity. If people who make $50,000 per year are now buying it, technically, it is no longer a luxury product. And the company marketing and selling a luxury product that has become “affordable luxury” is no longer marketing and selling luxury. They are now selling a product that affluent customers perceive as ordinary. When this happens, affluent customers, who are just like everyone else, move up. They begin looking around for luxury products that are exclusive. Affluent customers always move up, never down.
So the rule of thumb is this: luxury products move down as people move up.
This means that any business or individual wishing to market and sell to affluent customers must be flexible and willing to change not only by innovating new products, but by changing its manner of marketing. Inflexibility means failure.
For example, BMW high-performance luxury cars used to carry a certain level of exclusivity. The average customer could not afford to pay $40,000 to $80,000 for a car. However, BMW’s very exclusivity made the cars so desirable that more and more people bought them. Many buyers sacrificed in other areas of their lives so they could obtain the status implied in owning a BMW. In point of fact, BMW’s 7 series is now popular among gangbangers in California. They buy a BMW 745 or 750, tint the windows, add custom bodywork and paint, oversized chrome wheels and tires, and throbbing subwoofers. The drivers of these customized vehicles are teenagers who wear what are called “wife-beater” shirts, which is a white undershirt. Needless to say, this is a luxury product that has moved down as its new customers moved up.
The strict boundaries of “luxury” have changed in the case of BMW cars. This is bad for business. BMW’s core base of affluent customers is being replaced by younger customers, who are not affluent.
In their book, Mass Affluence, Paul Nunes and Brian Johnson cite the example of Grey Poupon Yellow Mustard. Grey Poupon made a premium brand of mustard intended for affluent, refined customers. The company decided to extend its luxury brand and began marketing Grey Poupon as “affordable luxury.” The result? Grey Poupon’s brand image blurred and faded. It is no longer considered an exclusive luxury product. It is ordinary.
Nunes and Johnson give three ways to maintain a brand’s luxury:
~Maintain the luxury image of the brand. This means the company must not acrifice the perception of the product.
~Preserve the quality of the brand. In fact, try to improve the quality if possible.
~Maintain the brand exclusivity. This will prevent the brand from becoming watered-down.
Mercedes Benz took these three suggestions to heart and found a way to maintain their luxury image, which was slowly being eroded like BMW’s. The company decided to offer “affordable luxury” cars, which they designated a C-class cars. These C-class cars targeted buyers looking to move up to the next level of luxury. At the same time, Mercedes added a sequence of graduated levels of ever more luxurious cars. This provided continuous opportunities for customers to move up to the next more exclusive level. The top-level of cars offered by Mercedes maintained the exclusivity of their brand. This level targeted affluent customers with incomes of $1 million or more. The cars at this level carry price tags of $300,000 and up.
Mercedes did not allow the perception of their luxury image to fade. They accomplished this feat by creating and adding new lines of quality products. When customers moved up they were assured of getting quality German-engineering, which was the foundation of Mercedes’ reputation. And Mercedes ensured exclusivity by making cars that only a very few affluent customers could afford.
Mercedes Benz was successful because they were aware of how affluent customers approached buying luxury products. There had to be something in the purchase for the customer. The cars had to be outstanding, looking and functioning at an extraordinary level. Simultaneously, the cars had to impart a cachet of privilege, an aura of chic. If an affluent customer paid $300,000 for a car and no one noticed, then the customer would feel betrayed. They had not gotten what they paid for, which was a feeling of enhancement. Mercedes Benz made sure the cachet of privilege was present by means of positioning, which was the “I want it” factor, and by inventive marketing, which appealed to the psychology of the affluent customer.