EMOTIONS AND PRICING OF LUXURY GOODS — READ & DIGEST

According to many, emotion is often regarded as an intangible asset and it’s also known to be the driver of sales growth in the luxury goods market. If this is true, why put a high price tag on luxury goods? Does everyone just love spending a lot of dollars on goods? Should we assume that every emotion expressed has a definite price and how do you calculate a fair price? Also, is it safe to assume that the emotion expressed for a Hermes 2002–20 Bag (Price: $9,250) should always be more than the one expressed for a Trim Duo 24 Bag (Price: $5,450)? As humans, don’t we all have different opinions again?

1/2. Product Name: Hermes 2002–20 Bag

Image Source: Hermes (Hermes 2002–20, Price: $9,250)

2/2. Product Name: Trim Duo 24 Bag

Image Source: Hermes (Trim Duo 24, Price: $5,450)

The pricing of luxury items raises more questions than solutions, and the more I try to wrap my head around it, the more I wish I never started trying to find a deeper meaning to why people are so attracted to luxury items. If you decide to buy your spouse a Bentayga V8 Design Series (Bentley: Price — $200,000+) or whatever he likes; would that be enough to make him turn up the ‘volume’ of the love song already playing in his heart or is it possible for him to still cheat? Can emotions be bought?

When you think back to how you fell in love with your partner or ex, can you describe the feelings in detail? How have you been able to keep the fire burning or when did the law of diminishing return set in? Can we ever get true satisfaction from loyalty? Why does some luxury brand keep having negative growth despite maintaining the high price of items? Where are their loyal customers?

As for me, emotion is a reaction to an action, although not visible, it can be felt, and it can be both good and bad. If we keep saying that luxury brands are sold mainly due to the emotions triggered when a higher price tag is put on an item, we need to consider how some people in sub-Saharan Africa idolise ceramic plates and silver rings handed down to them by grandparents and parents. This has a lot to do with the intrinsic value of the items despite not being a luxury good.

Also, there’s this school of thought that says scarcity or difficulty in the accessibility of luxury brand plays a major role in why people love them. But, has anyone ever considered that someone’s definition of luxury is another person’s definition of necessity? The same way you love the Ferrari F8 Tributo (Price: $276,550) is the same way someone else will never trade their Toyota Camry 2020 (Price: $24,425 — $35,130) for any other car. So, is it really about the price, experience, aesthetic or the quality — that’s for you to decide?

Image Source: Ferrari (F8 Tributo, Price: $276,550)

The fake goods market is booming and the dealers are making a huge profit on the hard work of luxury brands. Desperation is surely one of the reasons why a person would be so determined to produce a counterfeit item and either sell for the price of the original item or below the market price. Anyone who buys at a lower price can’t use ignorance as an excuse, and it shows they are more than determined to be part of an exclusive club. Have you heard of people that have both fake and original bags in their collections, and this makes it harder for people to know their net worth because we just assume that they have many authentic Hermes bags, therefore, they are rich and powerful. So, can we also say that some people purchase luxury items just to show off?

Fate continues to cast the likes of LVMH and Kering Group in d role of saviours in the luxury brand category. We just simply don’t want to accept the fact that these brands are good at what they do, and that’s why we keep debating about the effects of pricing on luxury goods. What do you think is the percentage markup on a Pigalle Follies Plume which cost $845? Do you think it could be as much as 300% to 1000%? Would you buy it if it’s sold for between $100 to $300? In terms of quality and design, would you be able to easily differentiate between the original and fake version of this shoe if you hold them? Look at the shoe carefully below, and let your conscience honestly be the judge of the price.

Image Source: Christian Louboutin (Pigalle Follies Plume, Price: $845)

The luxury brands focus on selling at higher prices while the more affordable brands that we all patronise like Primark depend more on volume sold. In essence, one of the companies put in more time than the other. But more work doesn’t always equate to higher revenue than the luxury brand and vice-versa.

I think one of the best ways to value luxury items would be to conduct a social experiment based on 4 different scenarios where 4 different shops are opened for 1 year (January — December), and they all sell their branded wristwatches that were made in China. Also, all the wristwatches should have the inscription ‘Swiss made’ without any of its parts sourced from Switzerland, neither was it manufactured nor inspected in Switzerland. The actual cost of production of each wristwatch in all the 4 shops should be $120.

Although it would be a capital intensive project, if we can achieve our objective, it would have been money well spent. It’s almost impossible to test this idea because it would simply make some people have a rethink about luxury brands. Also, it might be easier to repay back the unknowing participants of the experiment that paid for the product in cash since none would be spent, but how do you compensate them emotionally for betraying their trust and wasting their time.

However, if the rarest gemstones or materials are added to luxury wristwatches, that could count as a plus for some buyers.

SHOP 1, (Opens: 8 am — 7 pm, Monday to Sunday): Modest shop with an abundance of Shop 1 branded wristwatches sold at a very low price ($150 — $180). This shop should offer 5% to 16% discount on all items twice a year. The second-hand value is currently unknown since it’s a new shop.

SHOP 2, (Opens: 8 am — 7 pm, Monday to Saturday): Beautiful shop with an abundance of Shop 2 branded wristwatches sold at a low price ($200 — $300), and it has three helpful retail assistants. It’s possible to get a custom-built wristwatch from this shop. The second-hand value is currently unknown since it’s a new shop. This shop should offer 5% to 25% discount on all items twice a year. The second-hand value is currently unknown since it’s a new shop.

SHOP 3, (Opens: 8 am — 6 pm, Monday to Saturday): Create a buzz on the opening day of business (e.g. spectacular business launch party with plenty to drink and eat including a celebrity musician to sing, shop 3 should have a catchy and memorable slogan, interview of CEO on CNN and Bloomberg, etc.). It should have an extremely beautiful and well-organised shop with amazing visual effects both outside and inside the shop, you get a complimentary glass of any drink (champagne, whiskey, coffee, tea, water, etc.), croissant, muffins, candy, bars of chocolate, and a brochure. For those with kids, there’s a play section and nanny to take care of them.

However, it only displays a few of its beautifully crafted Shop 3 branded wristwatches and sells them at a high price ($1,500 — $5,000). It has three helpful retail assistants and you can shop online or in-store via the self-service machines powered by Artificial Intelligence. The return policy is excellent and free. Also, the after-sales service (broken crystal or falling hand due to unintentional smash against a wall) isn’t expensive and the warranty is for 5 years, regular updates on the latest collections are sent to your email.

It’s possible to rent a wristwatch from the shop and you can also get a custom-built wristwatch from this shop. For some of their main brands from this shop, you need to book three months prior to the expected delivery date. This shop should offer 2% to 5% discount on all items once a year, it should also promote its brand aggressively on all available marketing platforms (social media, TV, radio, billboards, roadshow, etc.). The use of known influencers should be part of its marketing strategy, and also the sponsorship of a major event (e.g. sport, academic, music festival, etc.). The shop should release its limited-edition by the ninth month in business.

Based on customers spending habit and cost of the transaction within a period of six months in business, shop 3 should categories its customers into 3 groups (platinum, gold and silver). Those that spend more should get exclusive rights to early access on all newly released wristwatches or on limited editions.

Customers should be able to sell any purchased shop 3 branded wristwatches at the shop in order to study the re-sale market and to determine the second-hand value of the wristwatches including the love people have for the brand.

Shop 3 should know so much about their customers and send them greetings on their birthday and during holiday seasons (Note: This could backfire if you send a Merry Xmas greetings to someone that doesn’t celebrate it, or if you send Eid Al-Adha Mubarak to someone that also doesn’t celebrate it).

In December (the twelfth month in business), shop 3 should organise a party to mark the close for the year. This could be done in the second week of the month on a weekend.

SHOP 4, (Opens: 8 am — 4 pm, Monday to Friday): Beautiful shop, you get a complimentary glass of water and a brochure. However, it only displays a few of its beautifully crafted Shop 4 branded wristwatches and sells them at a very high price ($24,000 — $50,000). It has three helpful retail assistants. The return policy is excellent and free.

Also, the after-sales service (broken crystal or falling hand due to unintentional smash against a wall) isn’t expensive and the warranty is for 5 years, regular updates on the latest collections are sent to your email. This shop offers no discount but promotes its brand aggressively on all social media platforms and through the traditional methods of marketing. The second-hand value is currently unknown since it’s a new shop.

Based on customers spending habit and cost of the transaction within a period of six months in business, shop 4 should categories its customers into 3 groups (platinum, gold and silver). Those that spend more should get exclusive rights to early access on all newly released wristwatches or on limited editions.

In December (the twelfth month in business), shop 4 should organise a party to mark the close for the year. This could be done in the second week of the month on a weekend.

The second-hand value is currently unknown since it’s a new shop.

QUESTION: If you were completely oblivious to the fact that the actual manufacturing cost of the wristwatches is $120, where would you likely shop for your next wristwatch?

All the 4 Shops addresses the known facts (price, scarcity, exclusivity, experience, and beauty) about luxury apart from quality, so whichever one you decide to patronise determines what you consider to be relevant and how your positive emotion is triggered.

At Dartemuv, we provide you with insightful and thought-provoking articles. The products in this article reflect the availability and price at the time this article was published. Dartemuv does not earn a commission if you purchase any item by clicking on the links on this article. The links take you directly to the retailers’ website where you can buy the item.

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