The Concept of Luxury Brands

The Concept of
Luxury Brands
Dr. Klaus Heine
Definition, Characterization & Categorization of Luxury Products & Brands

Introduction
The Concept of Luxury Brands
What are luxury brands not?
What are luxury brands?

www.conceptofluxury.brands.com
www.upmarkit.com The Concept of Luxury Brands K. Heine 2

Introduction
What means Luxury? Luxury is a relative Term that could refer to almost
Anything or Nothing depending on whom you ask.
The only luxury good I own is my car. Its a Volkswagen Polo. This is also
Luxury means to me something not everyone can afford. (Constantin)
to have the freedom
to set off against the
mass in every way
to maintain a lifestyle
that fits me and that is
not geared to the
mainstream and to
social norms. The real
luxury for me is to
have time and fun
with my friends.
(Jasper)
Luxury stands for exclusivity, excellent quality, rarity, differentiation. I am fascinated by

luxury watches, since they are a symbol for the love for the detail. Preferably I also would like
to say: "I dont look for the time, I look for my watch." Typical for a woman, I have already
an eye on the shoes of Manolo Blahnik. There are women in New York who take the risk of a
surgery in order to fit into these shoes. I wouldn't go that far, because I already have perfect
feet. (Chun-Lan)
Luxury Product Marketing Class, long time ago: Winter Semester 2006/2007
Source: Statements of the participants of the seminar Luxury Product Marketing at the department of marketing at TU Berlin, winter semester 2006/2007.

Introduction
Overview about the Approach to Definition
Identification of a basic definition of luxury

Color TV Differentiation by type of relativity Clean air
Step 1:
Conceptual Framework
Luxuries Differentiation by area of research Luxury goods

Semantic
Analysis Luxury services Differentiation by market segment Luxury arts
Result: Broad definition of luxury products and brands
Selection of types of dimensions / approach to definition

Step 2:
Dimensional Analysis of existing definitions
Analysis
Result: Set of requirements for luxury product characteristics
Step 3:
Operationalisation Identification of dimensions by literature analysis and empirical study
Step 4:
Result: Definition of Luxury Products and Brands
Definition
Step 5:
Constantly updating the categorization
Review
Source: Heine, K., (2017) The Concept of Luxury Brands. Upmarkit, www.conceptofluxurybrands.com.

Basic Definition of Luxury
Bad (vs. Good) Desirable
Necessity Luxury
Necessity Ordinary Luxury
Luxury is anything that is desirable and more than necessary and ordinary.

From 1900 to Today to Future How Definitions of Luxuries change
1900 1910 1920 1930 1940 1950

Model T cars Fur hats Fur coats Baseball tickets Televisions Color televisions
Pianos Electric clocks Movie talkies Canned foods Air travel Credit cards
Radios Fountain pens Gin Indoor plumbing College degrees Visits to
Hand-cranked Cadillac's Vacuum Refrigerators Disneyland
Victorians Kodak cameras cleaners Convertibles
Transatlantic Washing
travel machines
1960 1970 1980 1990 2000 2050

Stereo sound Designer jeans Vacation homes Internet stocks Flat-screen Space tourism?
systems VCRs BMWs Palm Pilots monitors Transatlantic
35-millimeter Solar homes Microwave Cell phones Maybach travel?
cameras exemplars ovens Yachts Eternal youth?
SUVs
Warhol Junk-bond
lithographs portfolios
PCs
Champagne
Source: According to Sacharidou, The Evolution of Luxury Market, LVMH 2006, p.4.

The Types of Relativity: The Relativity of Luxury splits into a Regional, Temporal, Economic,
Cultural and Situational Relativity.
Situational Regional
Relativity Relativity
Hierarchic
Cultural Relativity Temporal
Economic
Relativity

These Types of Relativity can be used to determine a General Perspective from which Luxury
should be defined within the Field of Luxury Brand Management.
Perspective: Perspective:
Normal conditions Global
Situational Regional
Hierarchic
Cultural Relativity Temporal
Perspective:
Relativity Relativity Perspective:
Upper class Present time
Economic
Relativity
Perspective: Representative for the entire society in developed regions

Luxury is anything that is desirable and more than necessary and ordinary. As a general rule, this is defined from a
global perspective, for the present and for normal conditions. While the exclusivity of resources is evaluated by the
entire society, the desirability of resources and the appearance of luxury are determined by the upper class.

Based on the Extended Basic Definition, there are many Resources

that can be differentiated from Luxury:
Example of Non-Luxury Type of Relativity Explanation
A luxury in Jakarta, but not from the
Clean air Regional relativity
perspective of most people
A luxury in the 1950s, but not from

Color TV Temporal relativity
todays perspective
A luxury for a student, but not from

VW Polo Economic relativity
a gross-societal perspective
A luxury in the hip-hop scene, but

Gold teeth grill Cultural relativity not from the perspective of the
upper class
Might be a luxury after a strict diet,

McDonalds Hamburger Situational relativity
but not under normal circumstances
Accordingly, the extended basic definition limits the scope of luxury from almost anything to a more
reasonable level and therefore already helps to dissolve a large part of the controversies about the
definition of luxury.

Major Understandings of Luxury
The Understanding of Luxury by Area of Research: Luxury products constitute a Subset of Luxury
Goods, which, in turn, form a Subset of Luxuries.
Philosophic-sociological Understanding: Luxuries

Resources that are desirable and more than necessary and ordinary,
e.g. musical talent, time, and true love
Microeconomic Understanding: Luxury Goods
Goods (product categories) that are more than necessary and ordinary
and suitable for the exchange on the market,
e.g. air conditioning systems and golf equipment
Managerial Understanding: Luxury Products

Products that are more than necessary and ordinary compared
to the other products of their category,
e.g. Louis Vuitton bags and Rolls-Royce automobiles

Luxuries correspond to the Philosophical-Sociological Understanding and the

broadest Scope of Luxury.
Everything we can think

of Luxuries comprise all
resources which are desirable
and exceed what is necessary
and ordinary.
Luxuries are not necessarily marketable, which means that we cant necessarily buy/sell them.




Microeconomic Understanding: In Microeconomics the Term Luxury Goods is

established and mainly refers to entire Product Categories.
Luxury goods are distinguished from necessary or ordinary goods by consequence-related measures; thus
the luxuriousness of any good is not determined by its characteristics, but by peoples reaction (changes in
demand) to exogenous stimuli:
1 = High price elasticity (> =1)

The demand of (dispensable) luxury goods
decreases relatively strongly when prices are rising.
= High income elasticity (> 1)
2
The demand of (dispensable) luxury goods (also superior goods)
increases relatively stronger than the income.
Luxury goods correspond to the micro-economic understanding and the middle scope of
luxury, comprising all goods which exceed what is necessary and ordinary, and are suitable
for exchange on the market.




The Managerial Understanding of Luxury usually refers only to the best

Products of a Category: Luxury Products.
Examples of Non-Luxury Products Criteria No Luxury Products, but. . .

Philosophical-sociological
Luxury level
Musical talent, time and true love Luxury resources

understanding
Micro-economic
Air conditioning and golf equipment Luxury goods
understanding
The broad definitions of luxury products and brands can be summarized as follows:
Luxury products correspond to the managerial understanding and the smallest scope of
luxury, comprising all products which exceed what is necessary and ordinary compared
to the other products of their category.
Luxury brands are associated with products which exceed what is necessary and ordinary
compared to the other products of their category.




Limiting the Scope of Luxury Products
Limiting the Scope of Luxury Products
Despite its small scope in comparison to luxuries, the definition of luxury products still
covers a wide variety of different products. Therefore, and according to the basic idea of
definition by reduction sentences, the scope of luxury products is further limited by
differentiating the major luxury market segments.
Luxury Products Luxury Services Luxury Real Estate

Private Luxury Products Public Luxury Products
Branded Luxury Products Unbranded Luxury Products
B2C Luxury Products B2B Luxury Products
Founder-independent Luxury Products Founder-dependent Luxury Products
Uni-regional Luxury Products Multi-regional Luxury Products
Contemporary Luxury Products Luxury Antiquities

Agenda

Characteristics of Luxury Products & Brands: The Code of Luxury
Major Types of Luxury Products and Brands
Masstige Strategy

Luxury Characteristics: The Code of Luxury
The Essential Functional Characteristics of Luxury Products
Symbolism
(Meaningful)
Extraordinariness Price
(Creative) (Expensive)
Characteristics of
Luxury Products
Rarity
Quality
(Exclusive)
(Superior)
Aesthetics
(Beautiful)

What do we have to do with that Chair to create a Luxury Product?
Heine, K., Phan, M. (2010) Trading-Up Mass-Market Goods to Luxury Products. Australasian Marketing Journal. 19(2): pp. 108-114.

The Essential Characteristics of Luxury Products
High-priced in an inter-categorial
Symbolism comparison, which excludes
affordable indulgences such as
Extra- Hagen-Dazs icecream
ordinariness Price
Constitutive
Characteristics of
Luxury Products
Rarity
Quality
Aesthetics
Most expensive products in an intra-
categorial comparison
Porsche is certainly not for me this No luxury product
car is just for people who cannot afford
something else
Kisabaka (2001, p. 121) proposes that the five percent of the

most expensive products belong to the luxury segment.

Price Paradox
Mass products are facing a strong price competition: If the

price for a product is increasing, fewer people will buy it
For luxury products this must not be the case: The high
price demonstrates quality and exclusiveness
Price If the price for a luxury product decreases, it will have a
Paradox negative influence on the perceived quality and the image
Therefore, for many luxury products a price decrease leads
to a declining demand in the long run and a price increase
to a rising demand of the product because of higher
exclusivity
Sources: Trommsdorff, V., Heine, K. (2008) Das Marketing von Luxusprodukten. In: WISU Das Wirtschaftsstudium, Vol. 37, Issue 12, pp. 1669-1674. Dubios, B. (1992) Comment surmonter les
paradoxes du marketing du luxe, p. 36.

The Constitutive Characteristics of Luxury Products
Value & Durability:

Symbolism Durability covers the aspiration of luxury
product manufactures to create
Extra- everlasting products, which wont be
Price
ordinariness disposed even after long utilization or
Constitutive
Characteristics of defect, but rather repaired and which
Luxury Products even gain in value over time so that you
can even leave them to your
Rarity grandchildren
Quality
Aesthetics Manufacturing complexity:

Manufacturing one of the excellent
Lange & Soehne wristwatches often
Functionality & Performance: takes one and a half years
Im floating over the streets in this car
with a huge power, which I dont need, Service:
but the feeling to have it is very You get a lifelong guarantee for a Herms
relaxing belt. If you need a new hole, you just send it to
them and they do that for free

Major Manufacturing Concrete Abstract

Characteristics Characteristics Product Characteristics Product Characteristics
Expertise of
Quality Material & Components Durability & Value
manufacturer
Manufacturing Construction &
Comfortability & Usability
complexity Function principle
Functionality &
Workmanship
Performance
Features Safety
Product size
Service

Product Paradox
For mass products marketers study consumer expectations

and create products accordingly
For luxury products it is often the other way round:
Marketers propose products to the demanding target group
Luxury consumers want to be surprised by the designers
Product with something creative and above their expectations (the
Paradox expected unexpected)
Often there is a designer or artist who is setting new trends
and standards, i.e. initiatives come from the luxury brand
Product development is based on designer inspirations and
not (only) on consumer necessities

Compared to the other

Symbolism characteristics, aesthetics was
mentioned most often (229 codings)
Extra- The aesthetics of luxury products
Price
ordinariness comply with the taste of the elite
Constitutive
Characteristics of And represent the cultural relativity
Luxury Products of luxury
Rarity Symbolic meaning can arise from
Quality product design, specific product
information, and the brand image.
Aesthetics The Gucci boutique in Miami is
sex for the eyes
The eyes are consuming
The well-designed object is essential in
life to feel well I have to differentiate from others
mainly with my appearance as I dont
for people who are aesthetes have an occupation

The Essential Characteristics of Luxury Products
I was the only one with this bag

Symbolism and thats a great additional
value
Extra-
Price
ordinariness
Constitutive They have just a very limited
Characteristics of production its not
Luxury Products exchangeable like a mass market
product
Rarity
Quality
There are already too many
Aesthetics BMW drivers in my circle of
friends"
Everything which is very famous is likely

I have this bag already since one year
to be a mass product
and now everyone is walking around
Its nothing special anymore if everyone with such a thing. And I will soon get rid
owns it or if you can buy it on every of it again
corner

The Scarcity Principle: The Rule of the Few Less is Best and Loss is Worst
In our need to control our world, being able to choose is an important freedom. If
Description something becomes scarce, we anticipate possible regret that we did not acquire
it, and so we desire it more. This desire is increased further if we think that
someone else might get it and hence gain social position that we might have had.
Worchel, Lee and Adewole (1975) offered subjects cookies in a jar. One jar had ten
Survey Results
cookies in and the other jar had two. Subjects preferred the cookies from the jar
with two in, even though they were the same cookies.
The scarcity principle is used in sales, with sale ends today (scarcity of time),
Example whilst stock last (scarcity of product) and so on.
Indicate that what you want the other person to

Using it choose is only going to be available for a limited
time and that there may not be many left in any
case. Hint of other people waiting in the wings
for a chance to get it.
In romance and in business, play hard to get.
Make it seem like your time is precious.
Source: Cialdini, R.B. (2009) Influence: Science and Practice 5th ed., Pearson Education: Upper Saddle River, p. 198 et seqq.; Worchel, S., Lee, J., Adewole, A. (1975) Effects of Supply and
Demand on Ratings of Object Value. Journal of Personality and Social Psychology 32(5), 906-914.
.
Rarity
Sources of Rarity
Limitation of Production Output Individualization
Natural Limitations Artificial Limitations Non-industrial Manufacturing
Usage of Natural Materials,

Scarcity of the Ingredients
e.g. marble
Codified Limitations Planned Variation
Limitations of the Personalization according to

Manufacturing Capacity Customer Wishes

From Natural to Virtual Rarity of Luxuries:

Their Compatibility with Volume Ambitions
From Natural Type of Rarity Driver Compatibility with Volume
Natural Rarity: limited ingredients,
components, capacity, human
1 Little: Limited availability
expertise
e.g. diamonds, rings, fur
Techno-rarity: innovations, new

2 products and features Average: Reserved to top of lines
e.g. first fridges, air-bags
Limitation and Individualization:

Limited editions, custom-made
3 Average: Costs of limited series
orders, one-to-one relationships
e.g. Vuitton graffiti bags
Information-based Rarity: marke-

ting / brand secrecy, vocabulary, Good: No physical limit
4
starification of the value chain
To Virtual e.g. trendy artists
Source: In accordance to Catry, B. (2003): The Great Pretenders: the Magic of Luxury Goods, Business Strategy Review, p. 16.

Distribution Paradox
Marketers want a certain level of diffusion for their

brand in order to achieve success in the marketplace;
yet, if their brand is over diffused, it loses its luxury
Distribution characters
Paradox Excessive distribution leads to a loss of exclusiveness
Selective distribution is essential for luxury goods to
keep the exclusive image

Results often only from a different

Symbolism design or construction principle
Consumers expect a kick, which
Extra-
Price could be just a detail such as special
ordinariness
Constitutive buttons or an unusual positioning of
Characteristics of the button border
Luxury Products
Rarity
Quality
The new shirt seems to be army-style
Aesthetics from the distance, but from close-up it
appears that its actually covered from
small trees
Eye catcher at the second view

Results from implicit (product design)

Symbolism and explicit communications (brand
communications)
Extra-
Price
ordinariness
Constitutive
Luxury products have a lot to say
Characteristics of
they talk to you
Luxury Products
Rarity It is very fascinating to open a bottle of
Quality
wine from 1921, which witnessed two
world wars and when you imagine
Aesthetics what all happened since that time
I have a very special relationship to

cars. They have to turn me on. Its very A jacket, which was made of Tibetan
much about feelings, a lot of feelings. quilts from a Russian immigrant in
And the S-Class can come with super Paris
features, but it just doesnt turn me on I use these brands to position myself as
a brand

Communication Paradox
(1): Because of the trend and consumer motive

connoisseurship many luxury consumers look for the
authentic, true brand which is not known by everyone.
Therefore in heavy contrast to the market of mass
Communication products an investment in widespread communication
Paradox can damage the image, the exclusivity of the brand
(2): Communication for mass products is often focused on
the product.
In the luxury business it is essential to focus communication
on service and in particular on the brand and its image.

Overview about the Essential Characteristics of Luxury Products and Brands
The brand offers products which belong to the most expensive products
Price
of their category.
The brand offers everlasting top-of-the-line products, which won't be
Quality
disposed of even after long utilization or defect, but rather repaired and
which often even gain in value over time.
The brand behaves like a chic and vain dandy, who would never leave the
Aesthetics
house in less than perfect style. Whenever and wherever the brand is
seen, it embodies a world of beauty and elegance.
In contrast to mass-market brands, the brand needs to limit its
Rarity
production and tries not to disclose its (high) sales numbers. The brand
plays hard to get and is not available at all times or places.
The brand has a mind and style of its own and its products offer a "kick"
Extraordinariness
and surprise with the "expected unexpected."
The brand stands for "the best from the best for the best"; its charisma
Symbolism
fills the room, and regardless of whether it is of a conspicuous or
understated nature, deep inside, it is swollen with pride.

The Variety of possible Results

Basic Strategic Objectives of Luxury Brand Management

Repetition: Luxury Brand Identity
Brand Identity
Functional Component Emotional Component
Characteristics of Luxury
Products and Brands
Price
Quality
Aesthetics
Rarity
Extraordinariness
Symbolism

Definition of Luxury Products and Brands
The Definition of Luxury Products & Brands
Luxury products have more than necessary and ordinary characteristics

compared to other products of their category, which include their
relatively high level of price, quality, aesthetics, rarity, extraordinariness,
and symbolic meaning.
Luxury brands are regarded as images in the minds of consumers that

comprise associations about a high level of price, quality, aesthetics, rarity
and specialty.

Operationalization of Luxury Products
Luxury Brands are the Great Pretenders

Marketing is used to make People believe that Products have these Luxury Characteristics.
Extra- Symbolism
Price Quality Rarity Aesthetics
ordinariness (brand personality)
Product Price Communication

Distribution policy
policy policy policy
Communication of the
Quality leadership Superlative pricing strategy Selective distribution
luxury brand personality
Iconic products Regular price increases Flagship stores Catwalk shows
Memberships in Super-superlative priced

Waiting lists Celebrity endorsement
recognized associations products

Agenda

Masstige Strategy

The Relationships between Luxury Products and Brands
Luxury Brands
Luxury-branded
Products Non-Luxury
Luxury Products
Products
Luxury Products Non-Luxury Products

Non-Luxury-
branded Products
Non-Luxury Brands, but (at least) Luxury Product Brands

Types of Luxury Brands by Level of Luxury, Business Volume and Awareness
By Level of Luxury By Awareness By Business Volume

+ - -
Con-
Elite- noisseur Micro
level brands
Top-level Small-scale
Luxury brand brands
Star brands
Medium-level Medium-scale brands
+
Luxury brand
Large-scale brands
Entry-level
BIG player
luxury brand
- GIANT player +

Agenda

Masstige Strategy

Masstige Products & Brands
Differentiation to Masstige (New Luxury)
Price setting
Inter- and
Inaccessible
Intra-categorial
Luxury Brand
Intermediary
For the broader population:
Masstige
Brand
Premium
Accessible
Brand
Risk reduction and

information efficiency Dominating Brand Benefit Ideational Benefit
Source: According to Meffert/Backhaus/Becker (2003) Luxusmarkenstrategie, p. 6; Heine, K. (2012) The Concept of Luxury Brands., www.conceptofluxurybrands.com.

Masstige Products & Brands
Luxury Brands vs. Masstige Brands
Product / Brand Characteristics Prestige

Extra-
Price Quality Rarity ordinariness Aesthetics Symbolism
Luxury top
brands
Masstige
brands
Premium
brands
Medium-
level brands
low

The World Luxury Brand Directory
Directory of Luxury Brands:

https://upmarkit.com/high-end-luxury-brand-directory
A good start for market analyses: What are the best manufacturers of suitcases? Bed linen?

More information...
Publisher: Upmarkit O, Tallinn

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manner, including electronic, mechanical,
reprographic, photographic, or other means,
without prior written permission from the
publisher.
2017, Upmarkit O, www.upmarkit.com
www.upmarkit.com
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The Concept of

Definition, Characterization & Categorization of Luxury Products & Brands

What are luxury brands not?

What are luxury brands?

www.upmarkit.com The Concept of Luxury Brands K. Heine 2

Luxury stands for exclusivity, excellent quality, rarity, differentiation. I am fascinated by

www.upmarkit.com The Concept of Luxury Brands K. Heine 3

Overview about the Approach to Definition

Identification of a basic definition of luxury

Luxuries Differentiation by area of research Luxury goods

Result: Broad definition of luxury products and brands

Selection of types of dimensions / approach to definition

www.upmarkit.com The Concept of Luxury Brands K. Heine 4

Basic Definition of Luxury

Bad (vs. Good) Desirable

Necessity Ordinary Luxury

www.upmarkit.com The Concept of Luxury Brands K. Heine 5

From 1900 to Today to Future How Definitions of Luxuries change

1900 1910 1920 1930 1940 1950

1960 1970 1980 1990 2000 2050

www.upmarkit.com The Concept of Luxury Brands K. Heine 6

www.upmarkit.com The Concept of Luxury Brands K. Heine 7

Perspective: Representative for the entire society in developed regions

www.upmarkit.com The Concept of Luxury Brands K. Heine 8

Based on the Extended Basic Definition, there are many Resources

A luxury in the 1950s, but not from

A luxury for a student, but not from

A luxury in the hip-hop scene, but

Might be a luxury after a strict diet,

www.upmarkit.com The Concept of Luxury Brands K. Heine 9

Philosophic-sociological Understanding: Luxuries

Managerial Understanding: Luxury Products

www.upmarkit.com The Concept of Luxury Brands K. Heine 10

Luxuries correspond to the Philosophical-Sociological Understanding and the

Everything we can think

www.upmarkit.com The Concept of Luxury Brands K. Heine 11

Philosophic-sociological Understanding: Luxuries

Managerial Understanding: Luxury Products

www.upmarkit.com The Concept of Luxury Brands K. Heine 12

Microeconomic Understanding: In Microeconomics the Term Luxury Goods is

1 = High price elasticity (> =1)

www.upmarkit.com The Concept of Luxury Brands K. Heine 13

Philosophic-sociological Understanding: Luxuries

Managerial Understanding: Luxury Products

www.upmarkit.com The Concept of Luxury Brands K. Heine 14

The Managerial Understanding of Luxury usually refers only to the best

Examples of Non-Luxury Products Criteria No Luxury Products, but. . .

Musical talent, time and true love Luxury resources

www.upmarkit.com The Concept of Luxury Brands K. Heine 15

Philosophic-sociological Understanding: Luxuries

Managerial Understanding: Luxury Products

www.upmarkit.com The Concept of Luxury Brands K. Heine 16

Limiting the Scope of Luxury Products

Luxury Products Luxury Services Luxury Real Estate

www.upmarkit.com The Concept of Luxury Brands K. Heine 17

Basic Definition of Luxury

www.upmarkit.com The Concept of Luxury Brands K. Heine 18

The Essential Functional Characteristics of Luxury Products

www.upmarkit.com The Concept of Luxury Brands K. Heine 19

What do we have to do with that Chair to create a Luxury Product?

www.upmarkit.com The Concept of Luxury Brands K. Heine 20

The Essential Characteristics of Luxury Products

Kisabaka (2001, p. 121) proposes that the five percent of the