Why is it that some brands can charge $1,000 for a t-shirt, while others would be laughed at for charging a cent over $20? Despite what people may tell you, the answer to this question is not quality. Take brands like Louis Vuitton and Rolex, do consumers buy from these brands because they are superior in function? Possibly, but it’s actually more likely that consumers are searching for social superiority within their network. High-end brands don’t just sell items; they sell identity. And you could also argue that marketing teams behind these brands aren’t salesmen and women, they’re psychologists, tasked with the challenge of creating perceived value and luxury far beyond the average price tag of a similar item.
The Psychology of Perceived Value
In the minds of many consumers, the higher the price, the higher the quality. If you apply this thinking to items such as a luxury watch, then the quality must be through the roof. Obviously, this could be true, but the point here is that an eye-watering price tag alone signifies quality in the minds of many consumers.
As a result, high-priced products feel luxurious as soon as you see and feel them, even before you actually use them. This may explain the “feeling of luxury” that we talk about. While luxury items tend to be made from higher-quality materials, it’s important to understand that the “luxury feel” is as much psychological as it is physical.
If we go back to the example of a luxury watch, consider a piece with a five-figure price tag. For many of us, things like craftsmanship and durability instantly come to mind. We assume that it will last us a lifetime because of how much it costs, and we assume it must have been handcrafted by one of the world’s finest watchmakers. Again, this may be the case or it may not. But the thought is instantly put in your mind because of the price.
Status Signalling
Luxury brands know that people don’t just buy their products to own the item. It goes far deeper than that, and many consumers who are loyal to certain luxury brands are so because of what the item signifies in terms of social status.
That’s why branding in the world of designer goods isn’t often the most subtle. Brand names and logos are often ultra visible on clothing items. After all, consumers don’t want to spend hundreds of pounds on a T-shirt if they can’t let others know about it.
For this reason, certain logos and colours can be seen as social currency when it comes to luxury goods. Consider Louis Vuitton’s monogram canvas. It’s instantly recognisable the world over, and it immediately signifies class and luxury.
Scarcity and Exclusivity
There’s an old saying that we all want what we can’t have, and high-end goods prove this. Ask yourself to consider an item that you can’t afford. Maybe it’s a pair of Christian Louboutin shoes or a brand new Ferrari. Now ask yourself why you want this item. Is it because it’s the best item on the market of its kind? Is it because the quality of the item is far superior to anything you’ve ever owned before? Or are you just motivated by owning something that’s currently out of reach?
This is the case for many people, and it’s proven by the fact that once we own a product, we instantly want the next best thing. From a psychological standpoint, luxury brands know that the more people they can prevent from owning their products, the more desirable it becomes. Strategies that help to manipulate exclusivity include things like limited edition items, waiting lists to purchase a product and creating exclusive access.
There’s no better example than the Hermès Birkin Bag, famous for its waiting lists, which even the world’s biggest celebrities struggle to get on.
Storytelling
The history of a brand plays an important role in purchasing decisions, even if consumers don’t realise it. This is why luxury brands often come with a powerful backstory around their founder or origins. Burberry stays true to its British values, while Louis Vuitton was founded by a French trunkmaker way back in 1854.
Luxury brands like the ones mentioned above have mastered the art of storytelling, usually opting for subtle nods to the past. Whether consciously or subconsciously, consumers don’t just feel like they’re buying a product but a piece of history or heritage at the same time.
How Does This Apply To Smaller Brands?
It’s all well and good to understand how luxury brands justify a luxury price tag, but what can we learn from this? Here are 4 psychological takeaways you can use to grow your own brand, even if it isn’t considered a luxury brand.
- Price communicates value
We’re taught that price directly influences demand, and as one goes down, the other goes up. While this is true on the whole, it fails to factor in how price impacts perceptions. When a purchase is motivated by quality, we’re often drawn to the most expensive item that’s within our budget. Even for low-value items or everyday purchases, consider pricing your product just above competitors’ rather than just below if your customers are concerned with factors like durability.
- Build a brand story
Whether you’re purchasing a million-dollar watch or topping up your groceries, we care about the story behind the brands that we purchase from. The lesson here is to find what makes your brand unique and broadcast this to the world. A brand doesn’t need to have a 150-year history to build a powerful story either; maybe your brand is more ethical than competitors. So building a brand story could be as simple as partnering with a TikTok marketing agency to promote content around your brand values.
- Create scarcity where possible
Increasing the exclusivity of your product doesn’t mean you have to introduce a Birkin-style waiting list. Simply limiting the number of products that are available or introducing special edition variations can push consumers to purchase more quickly out of fear of missing out.