Pricing
April 9, 2021
Written by Scott Lancaster
Read Time 4 Minutes

Why are luxury brands so expensive?

Branding articles, how to build a brand, building a brand, starting a brand.

Why are luxury brands so expensive?

We all know brands like Dior, Ferrari and other luxury brands who charge an arm and a leg (or often more) for their products.

But why do their products cost so much?

Is it just down to the cost of materials and the brand name?

Let's dive a little deeper into how luxury brands price their products and how we can potentially raise our prices using samilar approaches.


Materials are a factor

As mentioned previously, luxury brands all tend to use high end materials which naturally impacts the selling price.

So if you're wondering why a plain white T-Shirt by Rick Owens costs $490 in comparison to the $30 one most likely have at home, the materials used to make it comes at a price.

Quality cloth isn't cheap. And the quality of the cloth is a huge factor in how long the product will last.

Think about it this way...

If you buy a $20 T-Shirt and it lasts you 10 washes, the shirt is costing you around $2 every time you've worn it before it's no longer wearable (at least in public).

A better quality T-Shirt may cost more in the beginning, but it could last 500 washes.

Meaning if you think about the cost of the product in the 'amount of times worn' as opposed to 'upfront cost', you're actually going to save money over the long term.

I know very few people think this way, but it's true.

I've only started thinking this way about clothes and have started investing in fewer higher quality pieces as opposed to just getting something to 'get me by'.

Time & labour

Rolls Royce are famous for their cars taking 6 months to build, as opposed to other affordable car manufacturers who's cars can be built in as little as 48 hours (excluding the time taken for the paint to dry, obviously).

So the time and labour needed to create a high-quality product is also a big influence in how much it costs to actually make it.

This rings true for all high end products. The more details and time required, the higher the production costs.

An understandable justification when buying a £700,000 car.

It's not commonly known that some delicate details (coach stripes) on various Rolls Royce cars are often freehand painted by one man only – Mark Court. No robots or machines used at all. An uncompromising focus on quality and craftsmanship.

Marketing Costs

Luxury brands need to market their company and products so that they are positoned as desirable and sought after.

Marketing doesn't come cheap.

Louis Vuitton struck a partnership with FIFA to design a special case to carry the World Cup in 2018.

I'm not sure of the exact figure, but one thing I do know is I bet it cost LV a fair amount to be associated with the footballing finale and having their 'trophy carry case' being seen by over 3.5 billion (yes, billion) viewers.

So the next time you stroll into Louis Vuitton and check out their expensive wallets, just remember you're paying for their advertising too.

The LV World Cup case was seen by over 3 billion people around the world. Great marketing or did they overspend? I personally think it'll have been one of the best marketing investments they made in the history of the company.

Retail Costs

The rent for those big stores and marble floors doesn't come cheap.

Luxury brands need retail spaces and can't simply rely on e-commerce, like more affordable brands.

If you're going to spend 4-figures on a piece of clothing (for example) you're going to want to try it on and see it before hand.

So making sure customers have a high-end experience in store is important for these brands, as it helps position the company effectively as a luxury brand.

I once visited a retail space in Shanghai with a fully functional lake/waterfall in the middle of the store (not kidding).

Giving the impression of being as luxury brand isn't cheap, so the costs of creating an impressionable retail space all add up and need to be factored in when products are priced.

Because they know we'll pay

Lastly, these brands know the value they provide to their customers in terms of social currency.

We naturally perceive someone wearing an expensive watch or driving an expensive car in a more flattering light.

Brands know this, and if you want to be lucky enough to spend your hard earned money on one of their products to show it off, the price tag isn't going to come cheap.

I hope this helped you understand the importance of pricing in the world of luxury brands and how you can perhaps use this article to enhance your own business in a bid to become more profitable.

If you need any help regarding pricing, or you need advice or guidance, feel free to get in touch with me directly. Always happy to help as and when I can.

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