Cover Pedestrians walk past huge billboards of luxury brands on the street in Nanjing, China (Photo: Getty Images)
Pedestrians walk past huge billboards of luxury brands on the street in Nanjing, China (Photo: Getty Images)
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Luxury expert Daniel Langer looks at how narratives can become a luxury brand’s best ally and superpower
Every business, fundamentally, struggles with the question: “how to price higher?” Chanel, as an example, managed to increase the price of their small iconic bag from about US$5,000 to US$10,000 in just under two years, while still increasing its desirability. Most brands are afraid of increasing prices and often don’t manage to get even a two per cent price increase implemented. And if they do, it’s often at the expense of significant volumes.
The author of this column developed a luxury pricing tool he named the Luxury Index (LI), which helps brands assess the pricing potential of a category and the brand in a powerful way. The LI helped luxury car brands to increase prices from US$500,000 to US$5 million and fashion brands to increase prices from US$500 to US$3,000. So what is the secret of pricing?
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It all starts with understanding how much value a category of goods generate today, and what is the role, position, and potential of a brand within a category. Managers and brands often take the status quo as the potential and don’t believe that they could increase prices by five, ten, or even 100 times without significantly affecting volume.
Familiarity can also lead to fatal decisions. There are countless examples of brands that could be dramatically more successful in terms of revenue and profit but constrain themselves because they’ve pulled the wrong strings. In luxury, the brand story is everything. Sadly, most brands simply operate in a way to allows its price tags be the signal for their luxury status. This is fundamentally wrong, because the price is the result of extreme value created through the brand story and the products that express the story.
The story is what carries value and the price is the translation of that value. Any brand that creates—due to significant shortcomings in brand storytelling—a value below its price will never reach its potential and will underperform dramatically.
Let’s take a closer look at a great brand storyteller: Louis Vuitton, which managed to sell sneakers for US$358,000—no, they were not made of gold and diamonds, but exclusively of leather and canvas. What sets them apart was the story. The sneakers Louis Vuitton’s were based on—Nike’s Air Force One—retails at around US$150 and comes in leather. However, add the craftsmanship and quality associated with the luxury brand, and compare these leather and canvas sneakers to others from Louis Vuitton, and one could have expected a price point of around US$1,000.
So why is it valued at US$357,000? Answer: the story. In fact, it is the unique story of Louis Vuitton combined with these sneakers being the last project of the late Virgil Abloh, and the fact that it was the brand’s first collaboration with Nike. These elements together formed a desirable narrative that became incredibly valuable: a unique moment in time that cannot be replicated ever again, and a moment in culture that’s manifested in a sneaker. This is an impressive example of how valuable the story is versus the product itself. Most brands underestimate this power or don’t know how to tap into it.
This is why simply increasing prices won’t work—and this is the catch for most brands with weak or undifferentiated brand stories, which then creates a positioning that often lacks clarity, and results in a value creation model that is not clear. Internal teams also often interpret the brand story in their own way and create inconsistencies, which opens the door for a messaging mess. All of which suppresses a unique brand experience and destroys value. Unfortunately, as countless category analyses show, this is the reality for the majority of luxury brands and it explains why so many tend to underperform.
Read more: Louis Vuitton x Kusama: A masterpiece of collaboration inspiring Asia’s luxury landscape
The potential of luxury is in the story. It is counterintuitive but conclusively backed by extensive research at Équité and Pepperdine University. Brand storytelling is the single most critical way for companies to unlock the potential for growth and profitability, yet many brands focus too much on product development. While product is critical, the story and the brand experience based on the story are the true value drivers. Products are part of the story, but they are not the whole story.
Don’t let category conventions hold you back. Just because everyone else has similar issues does not mean that your brand should make the same mistake. Don’t let preconceived notions fool you. Tell your story distinctively, boldly, and consistently. And, importantly, the story needs to be told from the lens of your clients. That’s the real art. And the secret for luxury brands to unlock their pricing power.
Named one of the “Global Top Five Luxury Key Opinion Leaders to Watch”, Daniel Langer is the CEO of the luxury, lifestyle and consumer brand strategy firm Équité, and the executive professor of luxury strategy and pricing at Pepperdine University in Malibu, California. He consults many of the leading luxury brands in the world, is the author of several best-selling luxury management books, a global keynote speaker, and holds luxury masterclasses on the future of luxury, disruption, and the luxury metaverse in Europe, the USA, and Asia.
Named one of the “Global Top Five Luxury Key Opinion Leaders to Watch”, Daniel Langer is the CEO of the luxury, lifestyle and consumer brand strategy firm Équité, and the executive professor of luxury strategy and pricing at Pepperdine University in Malibu, California. He consults many of the leading luxury brands in the world, is the author of several best-selling luxury management books, a global keynote speaker, and holds luxury masterclasses on the future of luxury, disruption, and the luxury metaverse in Europe, the USA, and Asia.
