Luxury Unfiltered is a weekly column by Daniel Langer, an expert in luxury branding, hospitality and activations who was named a “Global Top 5 Luxury Key Opinion Leader” by Netbase Quid.
Whether a luxury brand approaches me to launch a product in a new category that they are not yet familiar with. Whether they want to validate their current pricing strategy.Pricing is a significant lever of revenue and profitability growth. To me, each pricing project is a treat because pricing, in its purest form, is a reflection of value.
And yet, especially when times are tough, many brands reduce prices and promote, just to find themselves in even deeper trouble afterward. However, what really drives the value is the desirability that a brand creates through its storytelling and the client experience. Hence, many brands focus on the wrong area and then pay a high price, so to speak, for their price increases.
However, recently, Gucci made a dramatic strategic mistake. The brand wanted clients to see them as more premium and refocused under creative director Sabato de Sarno on product. The result - Gucci is double digit negative quarter after quarter. People buy into the brand story, not just into the product.The power of a brand is about the message it sends and the value it communicates.
This is a fundamental mistake. I will never forget something that happened to me. For many years, I dreamed of buying one particular watch of what was then for me a luxury watch brand. This is why I called promotions “the easy growth trap.” They sound easy and promising at first glance because selling at a lower price typically increases volumes.
I do not know any example of a luxury brand that is successful in the long run while promoting or discounting. Recently, some luxury brands have gone beyond promotions and corrected their prices downward in response to market pressures. This is, similar to temporary price reductions an almost unforgivable mistake.
This is a near-fatal blow to brand equity. Once a consumer believes that a luxury product can be obtained at a lower price, the aspirational value of the brand is diminished.In today’s hypercompetitive and rapidly changing luxury landscape, brands must resist the temptation to discount, no matter how much pressure it has to boost short-term sales.
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