A friend of mine asked me a while ago: how to turn my service into a luxury product? So I can raise the price, have more profit, attract high end customer, and the best part, even be rude to my customers, I’m just kidding.
Good value for money is one of the toughest business models to be in. Competing for prices, cutting costs in every corner, the harder you work lower your profit margin. Whether you’re an entrepreneur or a corporate employee, how to identify a competitive edge like luxury goods?
I have worked in the luxury industry for a decade. The luxury industry understands the magic to attract high end customers to pay $5 million for a pure carbon, aka diamonds. Here are five strategies that luxury goods can teach us:
1. Achieve celebrity status
Celebrity status helps create a desire that attracts high end customers. Luxury brands love working with celebrities sponsoring art exhibitions or museums. Luxury brands’ first priority is to make themself a celebrity spending over 50% of the budget in marketing.
This money comes out in everything you see from Vogue magazine ads to lavish packaging. Big marketing expense is the most important feature of the luxury business model.
As a personal brand, some options to achieve celebrity status are get professional awards, speak at important venues, appear on influential media or work with people who have these credentials.
2. Create scarcity
You can see it but you can’t have it. Luxury brands invented the game of creating desire. I was having lunch with a Harry Winston client at New York Peninsula Hotel. He told me: you should have an exhibition in China, but you should not sell any of the pieces.
“Not for sale? Why?”
A healthy dose of scarcity increases desirability
This is human nature and the reason why luxury brands love launching limited collections, available only in selected boutiques. If you are in online education, limit the enrolling window.
Luxury brands mastered the art of keeping clients in waiting: put them on the waitlist. So you can create scarcity while as well as building a future high end client pipeline. It’s very much the same in daily life.
Imagine you are trying to decide your dinner restaurant. You called and the first restaurant said:
“No need for reservation, you can come anytime.”
And the second one said, “Let me check our booking tonight… we only have one table left at 7:30 PM, do you want to take it?”
I bet you will take the second one.
There are many pretentious restaurants in New York, whenever I ask them, the front desk always says:
“Do you have a reservation?”
When I said no, the person would pause and say:” Let me check our reservation tonight” and start flipping through her reservation book.
At that point you start to feel the butterfly in your stomach, you feel like you really wanna eat there! After flipping through a few pages, she would happily bring you inside.
Well, you realize that there is only one lonely table of customers in the entire restaurant.
I just can’t help applauding for her Oscar performance.
3. Provide value that no others have
The most pricey value is usually emotional. Part of the important value for private schools is to guarantee a percentage of the kids will go to Ivy League.
The most important value provided by luxury brands is not material or design, but something that really matters to a certain type of people: Social status and recognition. This is why the luxury goods market is huge in Asia where social recognition is an important part of life.
One of my friends is a wedding photographer. His clients always choose the more expensive option on his website. Because wedding pictures stand for meaningful moments in life and it is priceless.
Would any groom dare to ask for a discount?
4. Use premium material
A Häagen-Dazs ice cream commercial says: Our vanilla is imported from France, chocolate from Switzerland, hazelnut from Italy… It’s quite elaborate to make ice cream this way, but the point is to justify why Häagen-Dazs cost twice of regular ice cream.
This is the same reason why top universities emphasize that are professors are Nobel prize winners and real-world corporate CEOs. Because you’re getting the best so you need to pay for the best.
5. Raise prize
This is the last yet most important step. The luxury goods industry raise the price every half year. Who says expensive products mean better quality? According to their financial statements, obviously- the whole world. My wedding photographer took my advice and raised his price after did my wedding photographer took my advice, he did an editorial in a magazine and raised his price. His clients increased by 30%.
6. No brand, no pricing power
Even as a corporate employee you are a product to sum has a stronger brand than the others. When you do what everybody else seems to be doing you risk being replaceable.
Hey, I’m Tess, an entrepreneur, and owner of Delicate Revolt. I share 1. Lessons learned by an entrepreneur; 2. How to achieve energy, efficiency, and style on business travels. Welcome to the Revolt!