Once upon a time, luxury products were reserved exclusively for the rich.
If you wanted to buy something premium, you'd have to shell out big bucks - and the only option was to either settle for what 99% of everyone else was buying, or find a way to significantly increase your purchasing power.
There really was no middle ground.
But all that changed in the last few decades, and things that were once considered luxury are now easily available for nearly everyone in the market for those things, at an affordable markup.
Sure, technological advancements and the internet helped democratize products and services, but exactly why did this happen?
And most importantly, what can we learn from this that will also help YOU grow your business?
Let me explain.
Rise of the 'Wants' Economy
Before we dive into the tips & tricks of turning your product into a more expensive (yet more desirable!) version of itself, first we must understand an important Psychological phenomenon.
One that fuels the emotional purchasing decisions behind many premium products today.
People always want more.
And this fundamentally drives their behavior.
It's one thing to satisfy their desire for what they need... but it's a completely another story to give them what they want.
You see, after World War II, there was a huge demand for new stuff, so the need for manufactured goods skyrocketed.
Commodities were produced relentlessly to meet the ever-growing demand of markets - and people finally got to wear new clothes, eat better food, and quench their (often psychological) thirst with all kinds of drinks.
At last, people got what they needed.
But not so surprisingly, after their basic needs had been fulfilled, they wanted more.
They wanted cars, refrigerators, vacuum cleaners, and all sorts of household goods.
The famous Maslow's Hierarchy of Needs explains this beautifully: In a nutshell, when the basic foundations of our needs get fulfilled - we wanted more.
And this is exactly why after fulfilling basic needs, people will still be in a state of heightened emotionalism.
Because they want to be unique. Valued. Respected. Having status.
The image below explains the concept perfectly:
Not only that but as things got cheaper over time & wages kept increasing, consumers were able to re-inject their 'savings' from an increasingly efficient economy into even more consumption.
And they wanted more.
So naturally, the luxury market also grew significantly, but it still had that 'unattainable' element for 90% of the population.
What this meant was that most people bought regular products and services, and only the 'rich' bought luxury goods.
But let's not forget that WANTS were still there inside every single person. At their current situation, they couldn't really fulfill them, yet these desires served as the perfect breeding ground for a new, enormous, untapped market.
So the main challenge was this: How can we give people almost the same level of quality and prestige at a dramatically lower price?
And that's how masstige products started a revolution.
The word masstige is actually a combination of two words: mass and prestige. Or in other words: prestige for the masses.
These products are defined as premium, but attainable. Luxury, but within reach.
And they have price points that fill the gap between mid-market and super premium.
Yes, they command a price premium over conventional offerings - but are still priced well below super-premium or old luxury products. Plus, these mass prestige products are pretty resilient in a downturn economy.
Authors Michael J. Silverstein & Neil Fiske, in their groundbreaking book, Trading Up: Why Consumers Want Luxury Goods -- And How Companies Create Them call these products 'New Luxury'.
Being veteran consultants at the Boston Consulting Group, Silverstein & Fiske gathered firsthand data into the rise of mass-luxury brands like BMW, Starbucks, & Victoria's Secret.
Not only that but they also managed to gather some amazing insights into why consumers polarize their spending habits towards certain luxury goods - and why they prefer New Luxury today.
Why 'New Luxury' Products Crush Everything Else
Unlike 'old luxury' products, New Luxury goods cater not only to a select few but to a much larger aspiring market.
The main audience for old luxury tends to consist of older people who would be classified as rich.
When they want to spend money, they tend to buy luxury goods, which the authors define as expensive, exclusive, hand-made, and elitist.
However, New Luxury audiences tend to consist of younger people who would certainly not be classified as belonging to the "rich" class.
Instead, they usually focus on cost as the primary purchasing factor... BUT - only so long as the products they're buying are relatively ordinary or unimportant in their minds.
IF, however, a product connects with them on an emotional level... if it satisfies a few key wants & desires... people will easily pay a pretty hefty markup for it.
That's right, despite not being loaded with cash, there are some things they are willing to spend disproportionately more on things that are engaging, that make them feel better about themselves, or help them to function better in some way.
For these things, people ARE willing to pay a premium price. Yet for other things, they go with the simplest, cheapest option possible.
This, in turn, leaves even more discretionary spending on other categories of New Luxury Goods in their life, and that's how the phenomena of 'Trading Up' happens.
To quote a recent report:
"A rapidly developing socio-economic trend as America's middle-market consumers are trading up to "products and services which possess higher levels of quality, taste, and aspiration than other goods in the same category, but are not so expensive as to be out of reach.
They are trading up to products and services which sell at much higher prices than conventional goods and in much higher volumes than traditional luxury goods and, as a result, have soared into previously uncharted territory high above the familiar price-volume demand curve."
Trading Up leverages emotional engagement as an essential factor in creating and advertising a product. The product must instill a sense of burning desire within the consumer, which results in them paying a nice premium.
What do Kendall Jackson, American Girl, Viking ranges, BMW, Sam Adams Beer, Panera Bread, Crate & Barrel, Victoria's Secret, and Callaway golf clubs have in common?...
Well, each is a wildly successful example of a New Luxury good emotionally embraced by middle-market American consumers.
Remember, people always buy based on emotion - and only then do they justify their purchase with logic.
So what are the key emotions driving this trend?
There are 4 of them:
THE 4 KEY EMOTIONS BEHIND TRADING UP
Taking Care of Me - products that satisfy this emotion make us feel as if we are taking care of ourselves: they stimulate nurturing, well-being, beauty, youthfulness, and which give us a sense of making time for ourselves. Think spas, nice restaurants, housewares.
Connecting with Friends, Mates, and Family - we are social animals and products that help us connect to others - romantically, with our families, and with the social class to which we aspire - will always be desirable. Think lingerie, American Girl dolls, or Callaway golf clubs.
Questing - since we're also striving for self-fulfillment, products that cater to this emotion are able to enrich our existence, deliver new experiences, satisfy our curiosity, and even add novelty and exoticism to our lives. Think exotic culinary ingredients, wines, and adventurous travel packages.
Achieving Individual Style - true, we're social animals but we're also unique, so we value products that signal our individual style, our achievement, sophistication, and success. Things like BMW cars, nice shoes, the cocktail we choose in a social setting, watches, and fashion fall into this category.
Here's the thing: the daily grind is exhausting and difficult. Life's stressful.
So people have an ever-increasing desire to 'reward themselves' from time to time.
Think about it: What's wrong with rewarding yourself with a glass of Belvedere vodka or a premium Cabernet at the end of the day? You work hard. You deserve it! (Taking Care of Me).
At the end of a long day's work, you probably don't want average. You want better. You want the best.
And so do others, thus fueling multi-billion dollar industries.
'I haunt Walmart for bargains so I can splurge on the spa and a good glass of wine ...'
Comments like these demonstrate why the "average" consumer is no more.
Because nowadays everyone's a "gourmet" in the categories that matter to them... and a bargain hunter in those that don't - leading to the death in the middle for 'average' products, as they offer no specific reason to buy anymore.
In addition, people are also choosing which goods they want to be identified with - that define their passion and personality. They will spend a great deal more on these few items. Everything else becomes 'unimportant'... the cheaper the cost, the better.
So what does this mean for YOU and for YOUR business?
It's simple: You have an unprecedented opportunity to sell New Luxury products at premium prices to a mass market... and win BIG!
It doesn't matter if you're in ecommerce, services, subscription products, online courses, or even brick & mortar stores ... you must give your customers the opportunity to Trade Up... otherwise you're gonna find yourself traded out!
Simple as that.
It's "Death in the middle." The market is more polarizing than ever before. The biggest successes are either the lowest cost or the highest because people are moving away from mid-range products.
Therefore, to be really successful in 2018 and beyond, your product has to be either a commodity or a specialty item.
There is no middle ground anymore.
Woe be to the businesses that continue to offer conventional goods and services and get "stuck in the middle." Just think about the Big Three of Detroit, traditional airline companies, and some chains of department stores.
And the same trend applies to smaller business and online businesses as well - it's getting harder and harder to differentiate yourself online and if you don't HELP your audience trade up with more premium products, you're going to be left behind.
However, if you introduce your own successful New Luxury product, you reap the rewards.
Below you'll find 7 proven strategies designed to help you develop (or upgrade to) a kick-ass New Luxury product that people will be raving about.
7 Winning Practices to Create your own New Luxury product
Now that you understand the background behind New Luxury products, why not create your own?
These 7 solid strategies will help you increase your prices - while at the same time raising the desirability of your product (thus substantially boosting your profits as well)!
1 - Never Underestimate Your Customer
New Luxury trend-setters assume that their target customers are very smart.
You should do the same and here's why: people have a near unlimited amount of information at their fingertips.
It's never been so easy to compare features, benefits, and prices - and make an informed decision.
Your ideal customers know what they want and instead of looking at them as 'sheeple', simply give them the thing they want.
Having trouble figuring out what this is?
Invest more in customer research, send out surveys, strategize a Customer Desire Map, or hire a marketing strategist with direct-response copywriter experience who can help you with this (like your's truly).
Most business owners ignore this and they think they know better than their customers - but they don't. Period.
Don't neglect good customer research because it's an essential foundation of a successful business, often producing ROI's of 50-100X or more!
2 - Shatter the Traditional Price-Volume Demand Curve
If you've ever been to an Economics 101 class, the first thing you learn is that higher prices lower demand.
Although this holds true in most cases, New Luxury trend-setters were able to disprove this 'sacred' economic truth.
That's right, masstige products can command higher prices with increased volume. Just look at Apple (congrats to them being first to hit $1 TRILLION btw).
If you also want to grow your business, it's quite clear that you pretty much HAVE to have a New Luxury product in your portfolio because it's your shortcut to higher profits.
And that's because New Luxury products are also characterized by the 20/40/60 rule.
They regularly account for up to 20% of your category's volume, 40% of your revenues and 60% of your profits.
3 - Create a Ladder of Genuine Benefits
Remember the difference between features and benefits?
In a nutshell, features are the blocks of what your product can do. These can describe the physical elements, characteristics, observable static aspects, technical descriptions, size, or shape of a product.
On the other hand, benefits “translate” these features into actual benefits that personally affect your reader or make their lives better - and that trigger emotional responses (for a more in-depth look at features and benefits, check out this article).
If you want a successful New Luxury product, you have to create a ladder of real benefits.
It's not enough to have superior technology or a new design that results in a superior functionality... You also have to engage your customers emotionally to spark their desires in this uncertain and fast-paced world.
Remember the 4 powerful emotional triggers that fuel New Luxury Products:
4 - Escalate Innovation, Elevate Quality, Deliver a Flawless Experience
This practice relates to Practice 7 in the sense that innovation and iteration never really stops. If you want to be successful in the long run, you have to adapt to your current environment - there isn't really any way around it.
That's why New Luxury trend-setters never sit on their asses for too long in terms of innovation, ever-increasing quality, and delivering a flawless user experience.
Well, some do, but they get quickly taken over by others. And in today's fierce market, once you've lost your edge... you're in for trouble!
Consumers today demand more, faster, and cheaper. They don't have any tolerance for error.
So don't give them a reason to switch over to your competition.
Instead, implement a culture of relentless innovation, quality and most importantly, a user-friendly experience from top to bottom - from the first time they interact with your company to the post-sale email (you ARE sending a post-sale email, right?)
Sure this might cost money in the short term, but it will definitely pay off over the long run.
5 - Extend Your Price Range and Positioning
Ever heard of Russell Brunson?
In case you haven't he's a hugely popular entrepreneur who's built a following of over a million entrepreneurs, sold hundreds of thousands of copies of his books, popularized the concept of sales funnels, and co-founded a software company called ClickFunnels that helps tens of thousands of entrepreneurs quickly get their message out to the marketplace.
He's a marketing genius.
And one of the things he does extremely well is that he has a range of products & services, ranging from $1 ebooks (that act as a tripwire) to mastermind groups that cost tens-of-thousands of dollars.
And the reason behind this is simple: there's something for everyone's budget and people are constantly 'funneled up' to a more premium offering.
You should do the same, but with a price multiplier of 10X.
What this means is that you should reinvent the price range and positioning of your brand by building an aspiration escalator that leads the consumer from your low-end to your high-end with a clear mix of features and benefits at each step.
This way it's easier for various customer types to find you, interact with you, and receive value from you so that they eventually want more.
Again, always think in long-term strategy.
6 - Use Influence Marketing
Let me put it this way: in the age of social media, you cannot NOT afford to leverage Influence Marketing. This serves a double purpose:
1 - It helps you generate A LOT of buzz and extra advertising at a fraction of the cost compared to traditional advertising. Furthermore, the cultivation of brand apostles and word-of-mouth are critical to developing the desired buzz and viral marketing for maximum leverage in the marketplace.
2 - It gives you a ridiculously effective way to get into the minds of your ideal customers, discovering their actual pains, fears, hopes, and dreams - so that you KNOW exactly what to give them for that sweet 'Shut up and take my money' reaction.
I talked about the importance of customer research on this blog before - and I'll probably do so many more times because it's soooo bloody important (yet soooo many entrepreneurs neglect it).
Influence Marketing gives you the perfect framework to not only use traditional consumer-research methods but also spend more time to understand the wants and needs of your target customers.
So do it.
7 - Continually Attack The Category Like an Outsider
You know why life managed to survive 3.8 billion years on this Pale Blue Dot?
Because it always kept evolving. Constantly changing and adapting to the environment - whatever that meant.
Just as evolution is the secret weapon of life here on Earth, it should also be one of the fundamental forces behind your business.
If you're currently struggling, naturally you have to adapt because otherwise, you'll just disappear.
However, even if you're doing really well, even if business is booming, and EVEN IF all the stars have aligned for you... you still have to relentlessly innovate - always thinking about new strategies, new angles, new optimizations.
There is no stopping. What stops, dies. Plain and simple.
Even if your New Luxury product is da bomb, constantly be on the lookout for ways to improve it - adopting a 'child's mind' so that you're free from already-existing biases.
Interestingly, most true innovations happen when outsider information infiltrates an already thriving niche. And when you have constant innovation, your chances of success increase exponentially.
Follow these 7 practices and you'll be unstoppable:
Remember, New Luxury products are where the real money's at. They're almost as desirable as 'old luxury' products, yet they're affordable to the masses - resulting in real potential for some serious sales volume, even if their prices are higher.
Forget about 'mid-market'. Go New Luxury or super affordable (but in this case, you better have some serious cost optimization strategies!)
So what's my recommendation to you?
Go New Luxury.
Use these 7 practices to find a New Luxury product appealing to the emotions of modern consumers and you will soon have a booming market with valuable brand apostles.
And if you already have a successful 'mid-market' product, try re-packaging it into something more premium and marvel as your profits increase even further - even in an increasingly competitive marketplace.
Prepare for glory!