In a previous article, we briefly talked about how desire for a product plays a huge role in creating value for the customer… The following article digs deeper into the psychology behind high end products which follow the same formula.
If you’ve ever been on a large street in a big city, a duty-free zone in an airport, or a nice hotel with a plaza, then you’ve certainly seen a row of high-end stores that sell “quite expensive” products…
But these high-end boutiques aren’t just for show. They were not built there to entertain you, and were not built to raise property value (although they certainly do…). They were built there to make profit, and sell to consumers.
But what is the psychology behind luxury goods that make overly-expensive products irresistible? And how can we implement the same techniques into our business to generate more profit while building up the value of products?
Creating Fires Inside Customers
What is it about high-end brands that creates such an irresistible fire inside of a consumer to buy? You can use lots of synonyms like: prestige, luxury, classy, etc… But at the base of all of the superficial feelings, is something much deeper.
It is a certain state of emotion. A certain feeling you get when wearing, driving, having the item. You suddenly feel like you have been put into a higher class. And that feels good.
This might sound like a lot of hippy magic woo-woo (yes I just coined that phrase), but this truly exists inside all of us at the base.
Part of this is influenced by images we see in the media, whether it’s on TV or in magazines. But I believe that an even more powerful, core emotion, is to see it being used in real life.
It may be unexplainable, but there is a certain aura that comes across you when you see an extremely expensive car, or a girl who is walking down the street dressed like a supermodel. It is that aura that creates and builds desire to want nice things.
Let’s be honest, most luxury brands don’t advertise on TV… Lamborghini and Ferrari do not have commercials… Why? Because those companies know that when you see it in person, even the most expensive airtime slot on TV won’t create a tenth of the desire that the real world experience will.
The advertising is done for them. And it’s free. (Yes, of course many brands do advertise in high-end magazines, but this is due to a certain image they need to uphold against other high-end brands.)
Consumers have a built desire for prestige, luxury, and class. Positioning yourself as prestigious, luxurious, and classy will create the same effect.
Who Does it Right?
In the following video, I discuss two brands who I believe are at the top of their game. They are able to create such an intense desire that people are willing to wait years in order to get one for themselves.
Let’s consider your high school economics class: Supply and Demand.
The two brands discussed in the video are Hermès and Ferrari. They have a very powerful grip on the market with their closed off business model ecosystem.
See, here’s the thing… You can’t walk into a Ferrari dealership and order yourself a brand new 458 Italia… Then expect to drive off the lot with it that very same day. Even if it’s available, it just won’t happen.
Supply and demand. It’s a fascinating ecosystem created by Ferrari.
You will be put on a waiting list. That time can last anywhere from a year to two years. But here’s the kicker, if you’ve owned a Ferrari before, you will automatically be bumped up the list past those people who have never owned one.
And if you’re a loyal Ferrari customer who has owned numerous Ferrari vehicles in his or her lifetime? Then you get put at the top of the list, and you are going to be the first person offered to grab yourself a new one when they come out.
This company does it right.
Using supply and demand, they are able to create an aura around their business that creates an extremely loyal following. Ferrari owners know that a random person can’t just walk in and buy one that same day. There is a certain initiation process they must go through. The company makes its customers feel elite.
Now that’s a powerful feeling.
Another brand which was discussed in the video is Hermès.
They apply the same exact tactic as Ferrari.
Supply and demand… In the Forbes September 2014 issue, they featured Axel Dumas, the Hermès CEO. The writer of the article, Susan Adams, talks about going into a flagship Hermès store and attempting to buy a Birkin bag.
She quickly gets denied. The thing is, it’s not easy to buy an Hermès bag if you don’t own one already. You have to go through special auctions in order to acquire your first used one. But as you climb up the ladder, you will get noticed.
What does Hermès do with its business model? It makes its customers feel elite.
Not only do they charge huge prices, but they deny people who want to buy. Now that is utilizing human psychology at its highest level.
Implementing the High-End Formula
Now that we’ve been able to dig deeper into the business models behind some of the highest-end brands in the world, how can we implement the same models into our business?
You don’t have to be a luxury brand to implement the same tactics… Let me explain.
Regardless of what you sell, do you have competition out there that sells an inferior product compared to yours, at a higher price? If you do have competition like that, I’m certain that their product sells pretty well.
They were able to create a perception of value. And it worked.
What are some things you can do to follow the same formula?
First off, it would be a mistake to raise the price of your existing product. People are not stupid, and they will not rush out to buy your product just because you raised the price.
You should take a smarter route.
First, before anything else, you need to make sure that you are providing the highest value and quality that you can. Luxury brands are not known for their cheap manufacturing, because they don’t use cheap manufacturing.
Second, instead of raising the price, you should re-release the product. This can be done in a myriad of ways, and is different for every business, product, and service.
For some, something as simple as renaming will work. For others, you’ll need to create additional features. Others will need to find new benefits. And for some, you’ll have to start your product from scratch.
A desire can exist in anything. Find it… Utilize it to justify the price tag you put on your product or service.
It is your job to tell consumers how much your product is worth.
Here’s to your success,