In economics, luxury brands are those brands whose demand increases proportionally as incomes rise. They can also be defined as being the contrast to "necessity goods": demand increases less in proportion to income. Luxury brands constitute the majority of luxury products. The term 'luxury brand' is synonymous with high prices, luxury, and high quality. They are often referred to as Veblen or Superior goods. The expenditure towards advertisement for the average luxury brand is about 5-15 percent of sales revenue. This rises to about 25 percent with the inclusion of other communication expenses for efforts such as public relations, sponsorships and promotional events.
Market Characteristics
Luxury brands in India are said to have high income elasticity of demand. This is because as people become wealthier, they purchase more luxury goods. A decrease in incomes will also see a proportionate drop in demand. The elasticity is not constant at all levels, and some changes may occur at different levels of income. With time, a luxury good may become an inferior good or a normal good, depending on income levels. Luxury products are Veblen goods, with negative price elasticity of demand, for example; making an expensive perfume can increase its perceived value to such an extent that, as a luxury good, sales can go high enough, rather than down.
Market Trends
The three common trends in the global luxury goods market are consolidation, globalization and diversification. Consolidation is used to define the involvement of the ownership of brands and growth of big companies across multiple segments of luxury products. Globalization is a result of an increase in availability of these goods, tourism and additional luxury brands. Some examples include Armani, Burberry and L’Oreal, which dominate the market in areas ranging from luxury fashion to cosmetics. Leading global consumer companies also attract industry, to avail profits in the consumer goods market.
Certain brands are considered to be premium brands in India, as people believe they are of a high quality and worth every Rupee. The big question is why people are willing to pay a high price for a product when there are cheaper alternatives? There are specific tangible and intangible attributes that give this class of products such a status:
Sensual: They arouse the senses and make people feel indulgent.
Rare: They represent an uncommon choice and draw attention.
Confident: They boost the customer's confidence level.
Quality: They are consistent and attract obsessive attention.
Market Characteristics
Luxury brands in India are said to have high income elasticity of demand. This is because as people become wealthier, they purchase more luxury goods. A decrease in incomes will also see a proportionate drop in demand. The elasticity is not constant at all levels, and some changes may occur at different levels of income. With time, a luxury good may become an inferior good or a normal good, depending on income levels. Luxury products are Veblen goods, with negative price elasticity of demand, for example; making an expensive perfume can increase its perceived value to such an extent that, as a luxury good, sales can go high enough, rather than down.
Market Trends
The three common trends in the global luxury goods market are consolidation, globalization and diversification. Consolidation is used to define the involvement of the ownership of brands and growth of big companies across multiple segments of luxury products. Globalization is a result of an increase in availability of these goods, tourism and additional luxury brands. Some examples include Armani, Burberry and L’Oreal, which dominate the market in areas ranging from luxury fashion to cosmetics. Leading global consumer companies also attract industry, to avail profits in the consumer goods market.
Certain brands are considered to be premium brands in India, as people believe they are of a high quality and worth every Rupee. The big question is why people are willing to pay a high price for a product when there are cheaper alternatives? There are specific tangible and intangible attributes that give this class of products such a status:
Sensual: They arouse the senses and make people feel indulgent.
Rare: They represent an uncommon choice and draw attention.
Confident: They boost the customer's confidence level.
Quality: They are consistent and attract obsessive attention.
Conclusion
Managing a brand is the most difficult challenge in the field of marketing. Like any other business, brands must also pursue and seek growth strategies. Unlike many businesses, brands must present themselves in such a way that their images don't dilute customers' sense of pride and exclusivity. Some strategies are off-limits in this pursuit. Brand managers must know when it is best for the brand to ignore short-term opportunities and how to brush-up the brand's long-term health.
