Does luxury have a minimum price? An exploratory study into consumers’ psychology of luxury prices

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DOI: 10.1057/rpm.2013.34
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Consumer studies show that luxury evokes high prices. However, the remarkable growth of this sector is based on its extension to the middle class, with affordable prices. This is a paradox: luxury needs to be expensive, yet grew being accessible. Hence the question: If consumers want to access to luxury, below what price would they consider that it is no more luxury? Is there a minimum price? This research explores how consumers decode luxury prices, how are lower prices compatible with luxury. Strong brands have indeed a larger latitude for accessible pricing than new luxury brands.
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Research Article
Does luxury have a minimum price?
An exploratory study into consumers
psychology of luxury prices
Received (in revised form): 13th October 2013
Jean-Noël Kapferer, Cindy Klippert and Lara Leproux
HEC Paris, Jouy-en-Josas, France
Jean-Noël Kapferer is a world renowned expert on brand management. Professor at HEC Paris, he holds the
Pernod-Ricard Research Chair on the Management of Prestige Brands. Co-author of The Luxury Strategy, he
directs executive seminars on luxury strategies in the United States, China, Japan, Korea and so on.
Cindy Klippert and Lara Leproux are HEC graduates and acted as research assistants on this project.
Correspondence: J N Kapferer, HEC Paris, 1 Rue de la Liberation, Jouy en Josas, 78350, France.
ABSTRACT Consumer studies show that luxury evokes high prices. However, the remarkable growth of
this sector is based on its extension to the middle class, with affordable prices. This is a paradox: luxury needs
to be expensive, yet grew being accessible. Hence the question: If consumers want to access to luxury, below
what price would they consider that it is no more luxury? Is there a minimum price? This research explores how
consumers decode luxury prices, how are lower prices compatible with luxury. Strong brands have indeed a
larger latitude for accessible pricing than new luxury brands.
Journal of Revenue and Pricing Management (2014) 13, 211. doi:10.1057/rpm.2013.34;
published online 22 November 2013
Keywords: luxury; price; conspicuous; dilution; status; masstige
Although luxury shops are everywhere in our
modern cities and online, there is still no con-
sensus about the denition of luxury. In short
luxury refers to rare, hedonic objects and experi-
ences beyond the necessities of life, therefore
affordable mostly to those who have surplus
money. Such denition is subjective: for some
people Ralph Lauren is luxury, for others it is not
rare enough. It is not our purpose to address
this elusive question of denition: looking after
a common one is probably vain for luxury is
arelativeandculturalconcept,uid and changing
(Yeoman, 2011). The word luxus comes from
latin but etymologists disagree as to its root: Is it
excess or standing apart? Luxus has no equivalent
in Japanese nor in Chinese. This is why Japanese
people speak of lugujuri(phonetic adaptation of
lu-xu-ry). They refer not to the concept but to
what they experience in the stores of prestige
brands anywhere in the world.
Another denitional difculty is that people
confuse a concept and aconception.Thus,the
luxury creators the brands emphasize such
facets as exceptional quality, craftsmanship, hand-
made, rarity, noble ingredients, maintaining tra-
dition. The luxury buyers tend to speak of sense
of exclusivity, hedonism,accesstorarequality
and to authenticity and experiences (Yeoman and
©2014MacmillanPublishersLtd.1476-6930 Journal of Revenue and Pricing Management Vol . 13 , 1 , 211
McMahon-Beattie, 2010). Finally the majority,
the non-buyers equate luxury with conspicuous-
ness, excess, waste: they underestimate the pro-
duct, paying no attention to craftsmanship.
A recent research (De Barnier et al, 2012)
factor analyzed three main scales used to mea-
sure luxury (Dubois and Laurent, 1998;
Kapferer, 1998; Vigneron and Johnson, 1999).
They converge but each one measures some
specic factors. Thus, luxury can be identied
by six dimensions:
!a very qualitative hedonistic experience or
product made to last;
!at a price that exceeds what functional values
!tied to heritage, know-how and culture;
!available in restricted and controlled distri-
!offered with highly personalized services;
!acting as a social stratifyer, giving a sense
of privilege.
As shown by Kapferer and Bastien (2012, p. 47),
these criteria are necessary but their weight
differs according to the sector (service versus
product, automobiles versus clothing and so
on). They capture the two facets of luxury: for
oneself (reward) and for the others (appearance,
sign of power).
Despite the elusive nature of luxury, consumers
and professionals converge on one point: price
is part of that denition. Bain, the expert world
consultancy on luxury, denes it as premium
products sold in premium stores at a premium
price. Kapferer and Bastien (2012) have shown
that luxury is not just more of premium.
Premium goods price needs to be justied by
objective facts about quality. In luxury, quality
is assumed, price does not have to be explained
rationally: it is the price of the intangibles
(history, legend, prestige of the brand). In his
blog, Sheth Godin (17 May 2009) echoes this
key distinction by quoting luxury as being
needlessly expensive. US wine professionals
(Cholette and Castaldi, 2007) classify wines
according to price: popular and medium
(US$7$10), mid-premium ($10$14), ultra-
premium ($14$25), luxury ($25$50) and
super luxury ($50$100). Those wines still more
expensive are called icons. As an icon is a xed
religious gure, this implies that such prices
have no rational basis but a spiritual one.
Recent international consumer studies point
out the key role of price in the categorization of
anything as luxurious (Godey, 2013). Being
expensiveis the rst criterion for qualifying
luxury in Japan, the second in France, the third
in China and Germany. These results are not
surprising. Historically luxury has been the life-
style of the Aristocracy, and later the wealthy
bourgeoisie (Veblen, 1899). The modern evo-
cations of luxury retain from this history feelings
of exclusivity, exceptional quality, craftsman-
ship, uniqueness, noble ingredients, rarity,
hedonism, art and prestige today attached to
those who can afford this life style by their own
success. In fact, in the same study exclusivityis
the N°1 criterion for dening luxury in the
United States, Germany, Italy, the N°3 in Japan.
The rate of growth of the luxury sector since
1995 is remarkable. The personal luxury pro-
ducts market (watches, jewelry, leather goods,
clothing, fragrance and skin care) has grown
from 77 billion in 1995 to 210 billion in 2012
(Bain & Co, 2012). This steady growth has been
possible because luxury has become the ordin-
ary of the extraordinary people and the extra-
ordinary of the ordinary people. Once limited
to High Net Worth Individuals, with more than
a million dollar in cash (CapGemini, 2012)
luxury made the dream accessible to the middle
class and excursionists(Dubois and Laurent,
1995), who buy only once a year for a break.
Most of the luxury buyers are not rich. HBR
article Luxury for the masses(Silverstein and
Fiske, 2005) identify how an accessible new
luxury has allowed the masses to trade up. New
luxury refers to luxury brandsdownward
extensions (Chanel make up or skin care),
to premium goods (Grey Goose vodka or
Callaway Golf clubs) and masstige products
Does luxury have a minimum price?
3©2014MacmillanPublishersLtd.1476-6930 Journal of Revenue and Pricing Management Vol . 13 , 1 , 211
(Victorias Secret, Ralph Lauren Polo and so
on). In this article we focus on luxury brands.
At this point we face a contradiction: being
expensive is part of the concept of luxury, yet
the luxury sector has grown partly because it
stopped being out of reach of the many. This
leads to a question: If consumers want to access
to luxury, below what price would they con-
sider that it is no more luxury? This question is
important for managerial purposes: how far
should a brand go in price accessibility if it
wants the product to remain a luxury.
A recent survey (Kapferer and Laurent, 2012)
based on 8370 actual luxury buyers, 21 product
types and 7 countries showed that threshold
prices of luxury had a long tail shape with a
majority of respondents declaring quite low
prices (300 for a pair of shoes, or 450 for a
mens suit). Just as the professional wine classi-
cation where luxurystarts at $25 a bottle!
This above-mentioned survey did not aim at
uncovering what psychological processes did
the interviewees use to determine the price
below which luxury would be absent. This
research aims at it.
Academic literature on luxury rarely talks
about price. When it does, it often refers to
brands not fully perceived as luxury: Yeoman
and Mc-Mahon-Beatties (2006) analysis of
pricing strategies in luxury markets use as
examples Victorias Secret a masstige brand
or of MINI a premium brand. However,
there are exceptions: Amaldoss and Jain (2005)
demonstrated that luxury prices are subject to
externalities effects. People called snobsare
ready to pay more for a product if the effect of
this price increase is to reduce the number of
conformistsalso buying the product. Confor-
mistsare people who buy because they want to
look like aspirational people. If snobs exhibit a
typical Veblen effect (demand grows when
prices increase) conformists follow the classical
law of price elasticity: demand grows when
prices go down. Hence, the success of luxury
trading down. Beckers (1991) analysis of res-
taurantspricing shows that unlike what classical
economy recommends, a successful premium
restaurant should not increase its price to the
point where demand equates supply for there
would be no more waiting list. In luxury
one keeps supply below demand, obstacles to
purchase increase perceived value. Allsopp
(2005) analysis of premium pricing shows how
higher price create desirability: not only as
quality signal, but also as a measure of ones
ability to afford it. Luxury is a way of showing
both to oneself and to others (the two facets of
luxury) that one can pay the price of luxury,
extravagant from a rational standpoint, as a
$1500 Château Latour Bordeaux. For econo-
mists, luxury pricing is discriminatory pricing: it
aims at eliminating consumers who cannot
follow (Groth and McDaniel, 1993).
This literature is mostly focused on the attrac-
tiveness of high prices. Here we address a
symmetrical one. Where does luxury price stops?
Marketing literature on price psychology
(Mazumdar et al, 2005) proposes the concept of
reference price: consumers would estimate that a
product is expensive on the basis of a price
stored in their memory, coming from their last
purchase experiences with the same product
class. However in luxury, unlike FMCG, pur-
chases are infrequent. Also on the Internet,
famous luxury brands restrict the diffusion of
informations about price: one must ask for it.
However, we cannot discard the idea that
through personal inquiry or social media inter-
action, typical prices circulate about the hot
items of the season.
Our research questions are:
!What psychological processes intervene in
dening the minimum price of luxury?
!What is the relative part of tangible and
intangibles in these processes?
!How do price and brands interact in these
processes: can brands trump the price?
!What individual differences play a role in
determining the luxury price threshold?
Kapferer et al
4 © 2014 Macmillan Publishers Ltd. 1476-6930 Journal of Revenue and Pricing Management Vol . 1 3, 1 , 211
These questions have academic and managerial
relevance. To understand a phenomenon one
should analyze it at its frontiers. To get at the
essence of luxury, identifying the parts which can
be played down and those which are quintessen-
tial, should one study Rolls Royce or borderline
cases? From a managerial perspective, the reality is
that to grow luxury brands will have to recruit
new comers. Analysis of consumersreactions to
luxury lowered prices will be insightful.
To address the research questions, an explora-
tory study was set up, semi-quantitative: 150
questionnaires were sent in March 2013 to
parents, friends and relatives of MBA students at
HEC Paris, an elite school; 110 were received:
66 per cent from female buyers, 67 per cent
between 20 and 30 years old, 54 per cent
declaring annual revenues above 27 000, 34 per
cent above 60 000 and 54 per cent saying they
buy luxury goods two or three times a year.
The questionnaire ran as follows:
!Under what price do you estimate that a ring
is not luxury?
!In your mind, what is the typical price of a
Mauboussin ring/Ralph Lauren shirt? Would
you say it is luxury?
!If Dior decided to reduce their prices on an
item by 50 per cent would it be still luxury?
!For you, can a very well done counterfeit be
luxury? For instance, a superb copy of L
Vuitton bag sold at 200 instead of 2500?
!Finally what justies for you the high price of
a luxury product?
The products used with the questions varied
according to gender (for instance, rings for
females, watches for men and so on). We used
Mauboussin jeweler and Ralph Lauren as
brands because their luxury status is debated as
shown by IPSOS (2012) World Luxury Survey.
Mauboussin is a historical prestigious jeweler
who to avoid going out of business engaged
a complete turn around and is now selling at
very accessible prices, advertising on TV to
wider audiences. This strategy is worldwide.
We used Hermès and L Vuitton as typical
luxury brands: according to IPSOS, they are
among the most spontaneously quoted luxury
brands in the world.
We also included a follow-up qualitative
part: eight actual luxury buyers were interviewed
in depth in Paris. After discussing their last
luxury purchases, what luxury was for them,
the interviewer addressed the central question
of the minimum price in a given category. Then
we asked the interviewees whether sales and
supersales or Websites selling luxury goods at a
discount price (like Netaporter) were still lux-
ury? The perception of counterfeits was also
checked. Finally, as many luxury brands buy
some of their products from small craftsmen,
would buying directly to the craftsman of
course then at reduced price be qualied as
luxury experience?
As luxury is a cultural notion, we do not claim
that the results are generalizable worldwide.
This is the case for all studies undertaken in
one single country. However, because peoples
understanding of luxury is shaped by luxury
global brands acting worldwide, these results
have external validity.
Price threshold or no mans land?
To identify a minimum price of luxury we
followed two ways: the rst one says under
what price would you say that a ring is not
luxury?and the second at what price would
you say that a (ring) is luxury?. Surprisingly,
these two questions provide quite different
answers: where luxury stops and where it starts
are not the same notions! There is a gap of 853
between these two ways (Table 1).
The higher the price, the higher is the like-
lihood of luxury. This is why new comers in
any luxury market often buy the expensive
items. As they lack the culture, price acts as
diagnostic cue: it signals luxuriousness.
On the other end, brands have a latitude of
acceptation when they decide to create an
Does luxury have a minimum price?
5©2014MacmillanPublishersLtd.1476-6930 Journal of Revenue and Pricing Management Vol . 13 , 1 , 211
accessible range. Consumers do not have one
threshold price in their mind acting as a guillo-
tine, but two. Below 1983, the luxury status
of a ring is conditional: it will depend on other
factors, one of them being the brand status.
However there is a limit, a lowest point (1130)
where none of these factors can help.
The moderating role of brand status
Tiffany is a famous American jeweler with a
prestigious heritage starting in 1837. In the early
nineties, the brand launched an accessible silver
line at $110. It was a success called Return to
Tiffany, attracting many young people to the
brand. However it hurted the feeling of exclu-
sivity and dream attached to Tiffany. In 2007,
they increased the price from $110 to $175. The
Wall Street Journal wrote Fashion victim: to
refurbish its image, Tiffany risks prots. After
silver took off, jeweler raises prices to discourage
At $110 did these young buyers perceive it as
luxury? Using Mauboussin present trading
down strategy, we asked what is the typical
price of their rings and if it is luxury? (Table 2).
The perceived average price of a Mauboussin
ring (1213) falls just within the no mans land
identied above. The lower quoted price is
150, the higher 7000. Actually, Mauboussin
rings extend from 400 to 24 000.
Results show no systematic link between
the average price quoted by an interviewee and
his/her perception of such a ring as luxury
or not. Some consumers declare 300 as the
average ring price, yet categorize it as luxury.
Others quote 1000 but say it is not a luxury
ring. For the former, if Mauboussin is a luxury
brand, its typical ring is a luxury ring. The
second ones compare Mauboussin with famous
jewelers, such as Cartier, to deny any luxury
status to Mauboussin even if they said 1000.
This illustrates the power of the brand to trump
the price alone. For those consumers with
no clear idea about Mauboussin, price alone
becomes a diagnostic cue to categorize as
luxury: at 3000 or above it is hard to say that
it is not luxury.
Negative effects of price reductions
on the luxury status of the brand
Fashion brands need to discount their unsold
inventory. As a rule, luxury brands do not
(Kapferer and Bastien, 2012, p. 227). We pre-
sented a situation where Dior, a prototype of
luxury, would reduce their price by 50 per cent
on some products without changing anything in
the product nor in the associated services, then
would it still be luxury? (Table 3).
There is a split half in the answers. What are
the reasons invoked by those who say that this is
still luxury?
!First comes the brand strength. Dior has been
a synonym of luxury for decades. It shaped
what luxury means. Whatever it does remains
luxury. A quote from the interviews is
insightful: Dior products are not luxury
because of their price.The fact that it is
luxury has nothing to do with price. How-
ever, they voice a little restriction: in the
short term, despite the price drop, Dior
remains Dior, therefore luxury. If it would
Table 2: Is Mauboussin typical ring luxury?
Perceived typical price of
a Mauboussin ring
1213 (varying from
150 to 7000)
Is it luxury? YES 60%
Is it luxury? NO 40%
Table 3: Would a 50 per cent price reduction hurt
If Dior reduces the price of an item by 50 per
cent it remains luxury
It is no more luxury 55%
Table 1: Luxury minimum price
Below what price would you say
a ring is not luxury?
At what price would you say
a luxury ring starts?
Kapferer et al
6 © 2014 Macmillan Publishers Ltd. 1476-6930 Journal of Revenue and Pricing Management Vol . 1 3, 1 , 211
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    Purpose ‐ The authors' research was carried out with the aim of analyzing perception of luxury and luxury brands among an international sample of young people. Design/methodology/approach ‐ This article was based on an empirical study among 233 respondents. First, a qualitative analysis of content using the respondents' own words was conducted. Then, to show whether there are differences between countries and significant groups of countries, an analysis of variance (one-way ANOVA) was performed and analyzed with Fisher F-test and post-hoc Duncan tests. Findings ‐ Beyond the belief in the existence of two stable groups of developed and developing countries with regard to luxury, this study shows a situation that requires further analysis. The main results show some strong cross-cultural differences in the perception of luxury, which is multi-faceted as demonstrated by previous studies in this field. Research limitations/implications ‐ Results of this exploratory study confirm that the concept of luxury presents multiple facets, and the authors' analysis provides an in-depth survey of the main categories and attributes that can be used to describe this concept. Although this study was only exploratory in nature, a number of comments can be made to highlight the congruence between the concept of luxury for young people and recent academic literature. Practical implications ‐ To maintain their brand equity, companies in the luxury sector seek to improve their image within younger targets. Managerial implications of the authors' research indicate that international luxury companies should take into consideration the multi-faceted concept of luxury in general, but also the main differences between countries in the continuum between the "status" and "emotional" dimensions of luxury. According to the authors' research, luxury companies cannot adopt a global strategy when addressing the six countries analyzed. Some managerial recommendations are developed in this perspective. Originality/value ‐ The additional value of this article stems from its reliance on a cross-cultural in-depth study between six countries (Italy, France, Germany, China, Japan, and USA). The balance between qualitative and quantitative techniques makes this article particularly relevant when drawing both conceptual and managerial conclusions.
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    Why are we seduced by luxury brands? What functions do these brands fulfil? What added values do they convey? What brands deserve the appellation ‘luxury’ and which ones do not? Such were the questions posed by an empirical research study seeking to understand luxury from the consumers' standpoint. The results, summarised in the present article, show that there is no single and homogeneous vision of what a luxury brand is. There are four types of luxury brands, each one characterised by a different value or functions profile, and aiming at different consumer segments. Analysing the functions luxury brands fulfil provides new insights into the reasons why a brand is or is not attractive. Focusing on a young sample, this study also provides clues as to sustaining brand equity long term.
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    The aim of this article is to study the concept of luxury levels and to assess whether they are significant for consumers. Perceptions of five brands were measured: Chanel and Mont Blanc for accessible luxury level, Rolex for intermediary luxury level and Ferrari and Van Cleef & Arpels for inaccessible luxury level. Also three luxury perception scales were compared: Kapferer (1998), Vigneron and Johnson (1999) and Dubois et al (2001). Various statistical analyses are carried out in order to validate the structure of the scales and to show their discriminant validity with regard to the five luxury brands encompassed in this study. This research shows some convergences between the three scales as well as the utility of these scales for differentiating luxury brands. Finally, the predictive validity of these scales is unlighted, validating the distinction of brands among the three aforementioned luxury levels. Results also show that there is a luxury continuum at a theoretical level, reinforcing the notions of accessible, intermediate and prototypical inaccessible luxury.
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    Luxury retail strategy differs from other retail strategies not merely in distinctive formulations of product, price, distribution, and appeals to customer distinction. Instead, it increasingly stands or falls on the legitimacy of a charismatic creative director. The director offers an aesthetic brand ideology. Luxury retail draws on the principles of art and magic to assemble the charismatic persona of the creative director and to diffuse his aesthetic ideology to the brand. Moreover, luxury retail strategy enlists magical and aesthetic principles within and without the store to achieve these ends. Finally, retail luxury is producer rather than consumer oriented and seeks to generate awe rather than community. This strategy appears to be to some extent a response to legitimacy crises provoked by recent strategic extensions of luxury brands into mass marketing. We offer some implications for marketing in which the charisma of a key personage is at stake.
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