Buying a luxury product is a different experience than buying a normal good. Behind its production there is a great tradition and value, and for this the consumer is willing to buy it at a very high price, compared to a common products. This process is known as “Worldmaking” of the product that accompanies normal business strategies.
Article written by Laura Mura.
Often it happens that in front of a very famous brand of a certain product, you may be inclined to buy it even before understanding its real functionality.
The power of businesses to consumer is very strong, and they are able to influence it completely. Generally, if you think of an enterprise that produces goods at low cost of raw materials, the main consequence is that that product will be sold at a price accessible to all (for example, a pair of trousers produced by a low-cost company).
This mechanism, however, is different in the luxury sectors: in sectors of this type, usually, the final price that is applied to the good is up to ten times higher than the cost incurred to achieve it. In other words, when the customer goes to buy that particular category of product, in a small part will support the payment for the real value of the good, another part for its quality, but for the majority will be paying the brand of the product itself.
This process is now known to all: in fact, in the context of sales strategies you can define this process as product worldmaking, which is currently one of the types of strategies most adopted by companies. It is particularly widespread in the luxury sectors, where you can find companies that for production employ jewelry or gold, silver, diamonds; there are also the largest brands in the clothing industry, such as Gucci, Prada, Luis Vuitton and in fact, The latter type is perhaps the real fulcrum of the process of product worldmaking. These are activities that, in addition to the exploitation of their own brand, have a superior quality compared to the others. This because, in some cases, the high costs of raw materials (think of gold or diamond) reflect on the finished product.
Research conducted by True-Luxury Global Consumer, shows that worldwide in the West the trend of buying luxury goods is more limited than in the East. As a result of the pandemic, there was also a decrease in the luxury sector, with 57% of consumers deciding not to make major purchases in the period of 2020, but data are again expected to grow by 2022 and years to come. When the consumer pays a high price, he or she has access to areas of the market that normally have high barriers to purchase and will feel that he or she has a more exclusive product than the others. Usually in the luxury sector we can find products that are qualitatively superior and uncommon. Compared to the past, today it is easier to access the world of luxury, and for this reason the phenomenon of worldmaking has expanded.
But what we want to understand is why a consumer is willing to support the payment of a product up to ten times higher than another that has similar characteristics, but with a much lower price?
The demand for luxury goods differs from that of ordinary goods. This happens for some reasons: for example, demand is more than proportional to the increase in income; people with high incomes tend to buy luxury goods, and their propensity grows as income increases. This does not happen in the market of basic necessities. If an individual’s income triples or quadruples, this does not necessarily lead to a proportional increase in the expenditure of basic necessities. This is because, beyond a certain level of growth, the demand for these goods becomes stable, and consumers decide to buy another types of goods. The demand for luxury goods is particularly elastic: if the price of luxury goods increases, this difference is not perceived as much as a normal (or lower) good. For luxury consumers, who can enjoy showing their wealth, a high price is more stimulating than a low price.
In the fashion industry, the possession of a product of a well-known brand has always created fascination with the consumer. This depends on the typical consumption of a person, and the benefits he wants to get with the purchase of a luxury good. Products such as bags, glasses and jewelry that are marked by important signatures are able to affect not only the consumer, but also the perception that others have of him.
How does the luxury product affect the consumer and other people?
This type of asset is often multifunctional and encompasses several ways of operating.
These are some of its functions:
• Emotional function;
• Aesthetic function;
• Extraordinariness.
These functions will be explained through the case of Versace. Versace is an Italian high fashion company founded in the late seventies and traditionally located in Milan. It was founded by Gianni Versace, who started his own business producing clothing and accessories that are now considered luxury.
Compared to regular clothing companies, Versace, because of the peculiarity of its clothes creates much more sensation in the eyes of consumers. In fact, if you think of typical Versace clothing, a colour that immediately comes to mind is yellow, or more precisely gold. The colour immediately recalls the brand, and in this sense the aesthetic function is respected. Aesthetics means the ability to readily recognize a brand only in function of an external and objective characteristic, precisely because of its unique and particular details; in this case because of its colour.
Surely it happened to most people, at least once, to see a shirt of this type; not only in everyday reality, but especially on television, where public figures are more likely to dress with high fashion brands. The aesthetics of the Versace garment can be said to be also linked to its extraordinary nature. Hardly in another shirt would we find a style like this, because of the print and the shapes used, which constitute a continuous interweaving of circles and spirals.
No less important is the emotional function, which represents the set of emotions, feelings and perceptions that consumers have about the brand itself.
The exclusivity that can give a product like Versace, and in general a luxury good, will be greater in comparison to any product that is instead affordable by everyone and in a rather simple way.
All of these product differentiation strategies fall largely within the category of Brand Image. The brand image is a typical branding activity that aims to isolate a product in the market and make it unique considering more sensory aspects:
• The view: in particular a unique product in its style will have a more immediately recognizable image than classic products;
•The sense of smell: even the scent diffused inside a store is a marketing strategy that businesses can adopt. Over time a consumer will get used to that particular perfume and will feel more in tune with the store itself, stimulating his purchases. An example in this sense is Stradivarius, a medium-low-cost clothing company that has made perfume a real brand.
• Touch: some sectors characterize their product for a unique fabric and different to the touch from others;
• Hearing: you can think of the soundtracks or certain melodies that are transmitted in the places of purchase;
• Taste: the taste of a food can immediately bring back to a particular brand.
A luxury product contains many of these characteristics; certainly, in the clothing sector among the most used strategies we find the visual and tactile appeal; in luxury food taste and smell, but also the view. Their effectiveness will therefore depend on the sector in which they operate. Compared to the past, a luxury good sends a very precise message to other people. What is sold with an exclusive good is not the material product per se, but rather its style and what it expresses.
That’s why the price gets to be much higher. For example, accessories - like bags - Versace have a price equal, on average, to 1000/1500 euros, compared to normal accessories that cost between 20 and 100 euros. The Versace price, therefore, does not simply include the cost of raw materials, but also what the product wants to tell us, its history and its invention.
The aesthetic-communicative function allows the consumer to highlight his style and part of his reality in front of others. The value that is attributed to an asset, to date, is no longer material, but completely immaterial. Intangibility allows us to communicate more than materiality, because emotions, status and values are expressed.
Some consumers have responded to the question of whether they are willing to buy a luxury good over a normal one: generally, the reasons lie in the fact that the luxury good has a different history than the large-scale production goods. You pay for the past and for the idea behind it, which is the fruit of innovation. Innovation is the main difference of luxury goods from others because they are products that were born at a time when the importance given to the value of a product was not as high as we now have.
For example, in addition to Versace, Gucci is also a very important company in the luxury clothing sector, and most of its success is due to its ability to innovate and create real icons, perfectly represented in its clothes. These companies have laid the foundations of haute couture, as true pioneers. Brands such as Versace have a great style tradition.
Thanks to the fashion shows people see the style of Versace which includes its whole story, and which creates a unique space in fashion. This is less likely in the sectors of low fashion, because behind there is not a high innovation (for example for low prices of clothes), so the fashion shows could have a lower impact.
This distinguishes them from the so-called imitator companies that instead base their production (for example in clothing) starting from schemes and rules that have already been dictated by pioneer companies.
To conclude, for consumers, moreover, it is pleasant to have a luxury good also because it can be fashionable to the last cry and can hardly be found elsewhere. In general, almost all consumers agree that the emotion and perception of such a product is the main reason for their purchase.