How to Build a Luxury Brand

It's hard to talk about luxury without defining it.  However, luxury is a difficult thing to define.  It's similar to what U.S. Supreme Justice Stewart once said: "I know it when I see it".

For example:

Not luxury:



Luxury:



Not Luxury:



Luxury:



Not Luxury:



Luxury:



You get the idea.

But what actually makes one of these products a luxury good and the other something else?

An economist might give you one of several definitions.  For example, a luxury good is:

• anything that isn't necessary;
• a superior (vs. inferior) good;
• anything with high price elasticity; or
• something with negative price elasticity.

Great.  These are about as helpful as Justice Stewart.

What we really want to focus on is how to establish a brand as a luxury brand.  This way, this brand's products will have a high and negative price elasticity.

Looking at existing luxury brands, similar broad strategies are typically applied:

Step 1: History

Establishing a new luxury brand may actually be quite difficult, because most luxury brands are closely associated with their history.  As a result, the first step may be to appropriate an existing long-established brand.  Just make sure you do so in an authentic way, because you're trying to build trust with your customers.

Step 2: Product

When building your product or delivering your service, be sure to focus on absolute quality instead of relative quality.  It's not good enough to be best in class; your product must be the best, period.  For example, if you're building a new sports car, and your differentiating feature is power (vs handling, looks, interior, etc.), it's not enough to have more horsepower than your competitors.  Instead, you want the most horsepower you can possible put in the car.  As a reference, see the Bugatti 1001 horsepower Veyron:

Step 3: Place of Sale

It's not enough to build the best product.  You also need to control its sale to keep it exclusive.  This way, any Joe Shmoe can't just walk to the local department store and pick one up or, worse, go to a hock shop and get a used one for $1.50.  Instead, you should follow Cartier's example and be hard to get (and highly controlled by the manufacturer).  Further, when you do find a store that sells the product, the shopping experience should be just that - an experience.

Step 4: Promotion

If you want your brand to be a luxury brand, shift your focus far away from infomercials and look instead at how you can gain publicity for your product.  Think, for example, of Rolex.  While Rolex does occasionally advertise in mass media, their real promotion activities are centered around celebrities who embody the Rolex lifestyle.  There's a reason that Roger wears a Rolex whenever he wins Wimbleton.

Step 5: Price

Once you've gone through the steps of developing an exclusive luxury brand, you need to decide how exactly to price your product or service.  You expect the price will be high, but how exactly to decide?  For the answer, you'll have to wait for a future installment, which focuses completely on pricing considerations!