Luxury Items and The Problems of Consumer Preconceptions
  by:  |  May 8, 2008

As we’ve discussed before, a brand can become successful by positioning itself as exclusive. Since it has been shown that people will invariably consider a more expensive brand as being a better product, companies create exclusive brands at higher prices to cater to those who are willing to pay for an “exclusive” experience. However, that exclusivity can be damaged and/or destroyed by a product which spreads itself too far and becomes too accessible. For example, if a product like Dom Perignon becomes available at a lower price and as such, more people are able to drink it, it would no longer be a prestige product and its appeal to consumers looking for a luxury alcohol item.

With that having been said, should one company try to cover all facets of the economic spectrum with a single brand? According to this branding article, the answer is no. The reason for this answer is that the preconceptions that consumers have about certain brands are so strong that they cannot be overcome. The article focuses primarily on automobile companies and the failures that certain companies like Volkswagen and Cadillac have had in challenging the high end companies like Mercedes Benz. The article determines that these failures are due to the fact that people simply will not change their established views on a particular brand just because that brand wants to expand. In other words, if a brand is not exclusive, it cannot become exclusive just by charging more for a product.
The article points to the success of Toyota’s Lexus brand. Unlike certain other of its competitors, Toyota realized that its Toyota brand was not going to attract luxury automobile purchasers. So they created anew brand name which they did not associate with their primary brand. As the article notes:

Unlike Cadillac and Volkswagen, they avoided the perception trap. The new car was called a Lexus. They set up a new breed of fancy dealerships and said at the outset that a Lexus dealer could not be closer than ten miles to a Toyota dealer. Today, the Lexus brand is the leading super-premium car in America, and I suspect that very few know that it is made by Toyota. Now that’s success.

Toyota succeeded because it clearly differentiated between its standard Toyota line and its luxury Lexus line. it got past the preconception of charging so much for a car by a lesser brand. It wasn’t trying to sell people a more expensive Toyota, it was selling a Lexus.

As another illustration, consider the case of fast food giant McDonald’s. McDonald’s is immensely successful as a fast food outlet. Millions of people love the food there. But how many people would pay for a high end burger there if the price was the same at a “real” restaurant? Isn’t it more than likely that the response would be “You want me to pay $8.00 for a burger at McDonald’s?” McDonald’s sells convenience and reasonable pricing. Expansion beyond that goes against the perception of the brand and would have to fail.

What can be taken from all this is that you need to be very careful in establishing a brand for your product. Knowing that consumers have a very difficult time in accepting a brand becoming more exclusive, yet will not hesitate to turn against a brand which becomes less exclusive, you need to determine which end of the spectrum you wish to concentrate on. Once you’ve made that determination, you can then craft your brand to fit that determination.

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