The consequences of the wrong price can destroy the authority and credibility of a luxury brand. That’s why the pricing strategy needs to be managed as rigorously as clients and budgets.
When it comes to luxury, price is about perception. When clients think the prices are higher than what they are, pricing power is built. The “luxury extra value” is to be found in the experience and activations luxury companies create.
Annual increases of 5% – 10% on the price list are expected by luxury customers, and this expectation doesn’t change during an economic downturn. But during a recession, many businesses lose their confidence and they are tempted to discount with the hope of keeping up with the forecasts. Discounting luxury products always dilutes the brand’s equity, authority and perception of luxury.
The four most common mistakes in pricing luxury are costly because they are all reasons why companies go out of business.