Luxury brand success is much more than just sales and profit. A luxury brand is like a fine wine. It’s an investment for future returns, often in market share.
Luxury brands can keep their pricing ranga high, maintain market share and increase profits over time mainly if they are well managed during economic changes. The following shows what makes a luxury brand successful.
1. Luxury Brand Innovation
This is a critical and most important element of luxury brand success. The luxury branding specialists at ikon say a brand must develop new products and services that continuously innovate, create excitement about the brand, and offer something superior to other brands in the same category. Luxury brands are always in a race to find new ideas, which is why they must be innovative.
2. Network Effects
The increasing value of a product or service increases for adjacent users who also use the service. This is called network effects (the more
people use it, the more valuable it is). Network effects are a significant reason why price and quality have such an impact on consumer choices
Because of network effects, the benefits of being first to market with a product or service may not be as great as the benefits of staying in the game later.
Luxury brands can use their status to create high-demand products with limited supply and broad markets that are hard to replicate. This is one reason why luxury brands can maintain high prices; you buy a $100 million investment in an economy with $1 million produced.
3. The Brand Premium
The brand premium is what consumers pay for having a brand name or being associated with a prestige brand. Consumers believe that being associated with a luxury brand gives them a social advantage, even if they do not buy the products. The brand premium also helps explain why luxury brands are successful in a recession or recession-like economy.
Luxury brands risk low-profit margins to charge high prices and retain customers; this is the downside of having a high-quality product that consumers want but may not be able to afford in a recession-like economy. The upside is that this strategy will increase profits because consumers will pay the premium price.
Recommended reading: Discover everything you need to know to build a brand.
4 Dress Distribution
Consumers must not only be able to allow a luxury brand’s price but must also be able to find and afford them. A luxury brand increases distribution channels to increase its availability. Although distribution can lower the price of a product as it provides more competition and economies of scale, having a vast distribution network is one reason why luxury brands are so successful.
5. Customer Loyalty
Loyal consumers are often willing to pay more for a luxury brand. Adopting the above strategies will help a luxury brand achieve customer loyalty and an increased customer base to its competitors, which can help maintain high profits in the long run. For example, f other brands are of lower quality; consumers may not choose them because of the higher quality associated with a luxury brand.
6. Brand Equity
Luxury brands create brand equity over time through good management innovation and a strong reputation. High-quality products that loyal customers buy increase the brand’s value over time. Consumers believe in brands they trust and are willing to pay a premium price to purchase a luxury product when they believe that they will get more than what their competitors receive for their money. Consumers pay more for something because of reputation and quality, pushing prices.
7. Strong Management
Luxury brands almost always require strong management that controls supply, quality, and reputation to keep the premium price up. A luxury brand that becomes limited or decreases in demand usually results from good management that handles the situation quickly and effectively.
For example, when Louis Vuitton lost its supply chain in China, it lost $1 billion in profits, but it was able to re-establish control over its supply chain and increase profit again within two years. A luxury brand must control any supply or demand problems quickly because once consumers perceive a drop in quality or competition is better than a luxury brand, the brand’s reputation also falls.
8. Brand Population
Luxury brands must have an excellent reputation to compete successfully. Consumers may be unable to afford luxury brands but are willing to pay a premium price because of the perceived quality and attention to detail. A brand’s relationship with its customers can be as important as the product it sells or the propel charges for those products. Good customer service will create word-of-mouth marketing and loyalty, leading to more distribution channels and increasing profits in the long run.
9. Competition
Competition can help or hurt a luxury brand depending on how well managed it is by its management. When a luxury brand is the only or first market leader, it will get all the customers and be able to drive up profits by increasing prices. Father brands are vying for sales in the same niche of the market. A luxury brand must step up its game to increase its profits over time.
10. Advertising
Advertising can help a brand develop recognition and awareness in consumers’ minds; however, it can also hurt the brand if it does not work effectively and embarrasses the company name or product. Luxury brands often spend 60% more on advertising than their competitors this means that advertising budgets are one way to compete against other luxury brands.
In conclusion
The 10 strategies listed above will help luxury brands succeed in the long run by increasing profits, building and protecting customer loyalty, and creating an image among consumers as something special a luxury brand’s management team is effective at implementing these strategies, the company will help promote a quality product that is recognized for its quality. Attention to detail and strong brand development should increase profits over me as consumers are willing to pay a premium for a product that has a luxury label.