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Brandstand: The price we pay for luxury

In decades, luxury has moved from being a privilege-of-the-few to being the reward-for-the-meritorious. To make this journey possible, pricing must play its due role as a rational milestone and not just an emotional accomplice

It is commonly believed the price of luxury goods and services should not be discussed in marketing communications as that may deflate the exclusiveness of the brand and offend the discerning consumer. Instead, it should be muttered in hushed tones during private interactions closer to the transaction. In the modern age of experience and a constantly evolving customer profile, this thinking is no longer valid. To the contrary, the traditional practice of not using price as a provocative marketing tool is working against the growth of this industry, which is why the luxury category in India must take pricing out of the closet to attract a clientele that can contribute the most.

Till the effective impact of liberalisation, the luxury customer was usually of second or third generation wealth. She considered the acquisition of such brands to be an extension of privileges by heredity or marriage. Possession was thus an outcome of divine right and not the clinical ability to pay. Those with the money but not heritage were discarded as ‘nouveau riche’ or more direly as ‘ill-gotten’. Their relative unsophistication exaggerated anecdotally and in popular culture. A major reason why the overt declaration of price became such a ‘no-no’ was that it reminded the core customer of the new entrants who did not deserve access to this exclusive club simply because they had the money. Over time becoming a quiet code in branding, pampering to an uncool but vital sentiment.

As the decades passed, the dynamics of India changed dramatically as did the volume of first-generation affluence. Educated professionals, entrepreneurs and corporate executives became the new class of privilege by dint of merit and not entitlement. From being an elitist detail, pricing suddenly became a great leveller -- the only necessary route to acquisition which no longer depended on certain irrational and unfair advantages. Also, the new luxury consumer was globally competitive in education and exposure, thus schooled in finer appreciation. Unlikely to offend the shrinking ‘original’ elite on softer parameters that was the case earlier. The Government’s recent clampdown on black money further reduced the clout of the buyer with dubious income and dodgy taste.

The new breed of luxury customer is known to demonstrate a consistent set of evaluation criteria across most categories, which is rooted in the need for defensible value and a rational sense of justification. Attractive and provocative pricing thus helps him tip the needle from desire to action while the need for high-class emotional gratification is fulfilled by the reputed or familiar experience of the brand. Inspired by parents, their next generations are also certain to demonstrate a similar behavioural pattern. In sum, there are five specific ways how the dynamic usage of pricing as a marketing tool can help grow the luxury sector.

The first classical and permanently valid role of pricing is to be a gatekeeper or simply a barrier or invitation for entry depending on your perspective. The earlier generation of customer for reasons explained earlier was knowledgeable about this aspect. For the new generation with little previous exposure, this is very valuable information. If it is amply clear that a room night at ITC Grand Bharat is worth Rs 25,000 then he can decide very quickly whether he wishes to go for it, instead of wasting time trying to find out the same from a further degree of search. The same is true for an Audi A3, a Nirav Modi necklace and a luxury home anywhere. It is clear that an upfront announcement and inducement of the MRP will help create a fundamental degree of filtration. Thus, allowing the premium one-on-one engagement to occur with only those customers who are comfortable on the most critical parameter.

The second purpose of pricing is for evaluation of alternatives and that we know by now is an essential element for this customer. Once the basic decision of category acquisition is undertaken he emulates his habitual behaviour of comparison among equals. Even where the iconicity of a brand is the source of entry like a Triumph, Jaguar or Vertu, his fundamental affection for value compelling him to ensure that his rate is indeed the best at the moment. This can be a comparison also for the point of acquisition, a manufacturer’s portal as opposed to an aggregator. In recent days, Oberoi Hotels just concluded a campaign giving customers a hearty discount when booked through the home channel. Luxury car manufacturers are no longer shy in presenting an evaluative framework when seeking custom. A transparent evaluative framework can actually assist the customer in justifying his choice both rationally and emotionally.

The third aspect to consider is connected to the core psyche of the new luxury consumer for whom the societal knowledge of price is a crucial source of justification and satisfaction. If a luxury purchase has been made then his peer group needs to know how much he has paid as a proof-of-concept of his current stature, which is different from that of others. This is different from the erstwhile culture of in-your-face bragging which one associated with new money. Instead it is a subtle form of self-esteem enhancement where acquisition is not the proof but instead the reward for success. In this environment, the public knowledge of price is a valuable emotional prop and not a deterrent.

The fourth aspect is actually to do with the changing role of media in the experience economy. Peer and expert referral as well as interactive digital engagement becoming the primary sources of imagery and credibility. However, using such intense forms of engagement for primary information sharing can be very wasteful. Which is where paid communication, especially print, can perform the task of a basic eliminator or identifier. If Tiffany and Co. were to launch in India then a press advertisement with the price points and promotions will be a very efficient intermediary, educating the customer for the next level of engagement through personal encounters and other appropriate devices. The best role that can be performed by paid media is to be a carrier of facts, especially the cost of access.

The fifth reason why pricing must be aggressive is the first-timer profile of many in this segment. As mentioned below they are people who have acquired wealth recently and are not accustomed to spending big. Thus, an aggressive reinforcement of value can actually help them make a considered decision. So instead of being invisible or coy, an attractive pricing strategy borrowing cues from other categories will be very useful. Early Bird Offers, bundling pricing, add-ons, festival discounts are equally applicable for this segment. Of course, communicated in the appropriate tonal quality of the brand that cannot be compromised. We need to look no farther than BMW’s EMI advertising as a great example of how this can be achieved.

In terms of shaping experiences, the luxury segment must behave in an ever more discerning and exclusive fashion as this customer will be very critical of performance and not just blindly appreciative of reputation. The engagement levels must be enhanced for acquisition, retention and consumption. However, in terms of driving acquisitions pricing must be completely up-front as a tool and not barrier for entry. The growth of the category depending squarely on being genuinely greedy and not consciously choosy about the customer. As explained earlier, an active conversation on this subject is no longer a logical deterrent given the changing dynamics.

Apart from everything else, luxury goods and services act as a valuable source of motivation for people to work hard and succeed. The very existence of these exquisite possessions inspires us to stretch beyond our possible limits, especially when we see our friends and peers availing of such experiences. In a matter of decades, luxury has moved from being a privilege-of-the-few to being the reward-for-the-meritorious. To make this journey possible, pricing must play its due role as a rational milestone and not just an emotional accomplice. Else, luxury will pay a heavier price than the price we pay for luxury.

(Shivaji Dasgupta is the Founder of INEXGRO Brand Advisory and can be reached at: shivajidasgupta@inexgro.com)

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