The effects of price on brand building
How do brands manipulate price to produce a desired effect
Luxury goods are not subject to typical customer behavior also because they are social status symbols. People who buy luxury goods are buying them for others and showing off their membership in an exclusive club while others are not. Veblen refers to this behavior as "conspicuous consumption". On the other hand, if the price of luxury goods falls, the demand for them will also fall, because status-conscious consumers will perceive them as less exclusive and rare. The higher the cost of the product, the fewer people will be able to afford it, making it more exclusive. The validity of luxury goods as social symbols then increases.
Intangible value is paramount. For example, the intangible value of a Prada bag exceeds the tangible value. Consumers buy these products not only because of their material attributes, but also because of the reputation, fashionability and cultural significance associated with the brand.
One of the strategies used to reflect the value of the brand is through increasing the price of the product year after year. This strategy demonstrates the uniqueness and high quality of the products and attracts consumers who associate high prices with quality products and brand prestige.
The demand for Veblen goods usually exceeds the rate of income growth, so the purchase of such goods is a realization of the value of one's life, which may lead to irrational consumer behavior. In this case, the price of the commodity can be higher than its actual value.
Scarcity is also part of the price game. Especially in the art industry, a work may be expensive not because of its virtuosity but because of its scarcity.
Hermes
Birkin and Kelly handbags are highly sought after due to their scarcity. These handbags usually require a long waiting period before they can be purchased, as Hermès maintains a strict control over their supply. In addition, Hermès often releases limited edition Birkin and Kelly handbags, such as special leather materials, special colorways, or collaborative design styles with artists. These limited edition handbags not only carry a higher price tag, but are also highly coveted for their exclusivity and scarcity.
Although Hermès continues to adjust the prices of its Birkin and Kelly handbags, core customers are still willing to pay higher prices for these bags due to their exceptional quality, unique design and association with the history and heritage of the brand. As a result, even with the price increases, Hermès' Birkin and Kelly handbags still maintain a strong appeal to luxury consumers around the world.
Louis Vuitton
One of Louis Vuitton's classic styles is its Monogram Canvas line of handbags, such as the Speedy and Neverfull, which are highly prized for their high quality materials, craftsmanship, and unique designs. Although Louis Vuitton regularly raises the prices of these bags, they remain highly sought after and have become a must-have item for luxury lovers and fashionistas alike.
Louis Vuitton's Monogram Canvas collection of handbags is often considered a classic in the luxury market. Known for their distinctive patterns, durability and versatility, these handbags appeal to consumers worldwide. Despite price increases, core customers are still willing to pay for these handbags because they believe the quality of the product matches the value of the design.
How does price manipulation affect brand building and/or the introduction of additional products
When a brand raises prices, launching additional product lines at the same time can be a strategic move to maintain consumer interest and appeal to a broader customer base. Launching additional product lines can meet the needs of different consumer segments through differentiated positioning. Brands can develop relatively low-priced product lines that still have brand character to attract price-sensitive consumers, while also launching higher-end product lines to satisfy consumers seeking a luxury experience.
It is possible that price increases may lead to the loss of some customers, but this is not necessarily the case universally. The extent of customer churn depends on a number of factors, including product quality, brand reputation, market competition, consumer loyalty and the reason for the price increase. Customers may be more receptive to price increases if they are based on legitimate reasons such as actual increases in product costs, improved product features or value-added services. However, if the price increase is due to the brand's monopoly position or unreasonable profit-seeking, customers may be dissatisfied and choose to churn.
2024.3.20