BT MAGAZINE 2024 VF no marks 8 oct - Flipbook - Page 51
ISSUE 17
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THE BUSINESS OF LUXURY BRANDS
PRICING STRATEGY
Behind the glittering storefronts and glamorous fashion
shows lies a meticulously crafted business model that
drives the success of luxury fashion brands. These
brands leverage their heritage, exclusivity, and superior
craftsmanship to create immense brand value and
prestige. Their financial strategies maintain their iconic
status and ensure robust market performance and
significant capitalisation. Let’s delve into the elements
that make these brands economically formidable.
One of the ineffable charms of luxury brands stems
from their pricing strategies. These brands create a
sense of exclusivity and desirability essential to their
identity by employing premium pricing. High prices,
limited editions, and high demand contribute to luxury
fashion brands’ mystique and financial strength.
EXCLUSIVITY AND CRAFTSMANSHIP
Luxury fashion brands like Louis Vuitton, Chanel,
and Hermès maintain their status through a powerful
combination of exclusivity, superior craftsmanship,
and rich heritage. Each product is a testament to
meticulous attention to detail and artisanal skill, often
produced in limited quantities to preserve uniqueness.
This exclusivity creates scarcity, driving demand and
allowing these brands to command premium prices.
The superior craftsmanship ensures that each piece
not only meets but exceeds the expectations of their
discerning clientele, further cementing the brand’s
reputation for quality and excellence.
PREMIUM PRICING
Luxury brands utilise premium pricing to reinforce
their exclusive status. High prices signal quality,
craftsmanship, and scarcity, which drives consumers’
desirability. This strategy ensures that luxury goods
remain out of reach for the average consumer,
maintaining their allure and prestigious reputation.
For example, the high price tags of Louis Vuitton
handbags or Chanel suits reflect not just their
production costs but are carefully set to enhance their
perceived value. By keeping prices high, these brands
cater to a clientele that values exclusivity and is willing
to pay a premium for products that confer status and
distinction.
CHANEL’S LIMITED EDITION RELEASES
BRAND EQUITY
The economic principle of brand equity is central to
the financial strength of luxury fashion brands. Brand
equity refers to the added value that a brand name gives
to a product beyond its functional benefits. It is built
and sustained through strategic marketing, consistent
quality, and a compelling brand narrative. For instance,
Chanel’s timeless appeal is reinforced through its
iconic designs, such as the Chanel No. 5 perfume and
the classic 2.55 handbag, symbolising elegance and
sophistication.
Strategic marketing campaigns, often featuring highprofile celebrities and exclusive events, bolster the
brand’s image and keep it relevant in the public eye.
Consistent quality across all product lines ensures
customer loyalty and satisfaction. At the same time,
a strong brand narrative, often rooted in the brand’s
history and legacy, provides a compelling story that
resonates with consumers. This combination of factors
significantly impacts the financial performance and
market capitalisation of luxury brands, making them
fashion icons and powerful economic entities.
By maintaining high perceived value through these
elements, luxury brands continue to thrive in a
competitive market, ensuring their status and financial
robustness for years to come.
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Chanel often releases limited-edition products, such
as the Chanel No. 5 perfume in collectible bottles or
exclusive versions of its classic handbags. These limited
editions are highly sought after and often sell out
quickly, driving up their market value and reinforcing
Chanel’s image of exclusivity. The scarcity of these
items ensures they remain desirable long after their
release, often appreciating over time.
