Luxury As We Do Not Know It

Written By: Prof. Piyush Sinha and Prof. Ashok Som

The Importance of Context

The discussions in our classes during the ESSEC – IIMA Global Management Program on Luxury could sometimes become quite heated. The 2011 programme in luxury management was attended by senior executives in luxury businesses as well as those planning to start their own luxury business.

One such discussion occurred when we were looking into the meaning of a luxury product or service. One of the participants said, “All premium products are luxury products”, and thus began an exciting debate. After nearly a whole hour, we were all confused but happy that many age-old paradigms had been shaken, if not shattered.

The catalyst to this debate was a simple question placed to the participants: “What do you think is luxury?” They were asked to write down five examples of things they consider luxurious. The answers they came up with show a wide variety of products, services and experiences. Here are some of them.

  • Owing a Rolex

  • Buying a Yacht

  • Living in Monaco

  • Dressed in Armani Suits, Jimmy Choo Shoes, Chanel No 5, White Ceramic Watch

  • Evening at a Chateau

  • Vintage Wine

  • Crocodile or Python Skin Bag

  • Tea with the Queen

  • Walking to office in Mumbai

  • Fresh Air

  • Green Pastures

  • Free time with family, without Blackberries

  • More than 24 hours in a day

  • Definitely European

  • Live life king like

  • Freedom to do whatever I like

  • Watching Waves come and go for ever

  • Designer wear

  • Esoteric

  • Exclusive

  • A house at the most expensive place

  • A house with sprawling green lawns and a swimming pool

  • Holiday on an island

  • Holiday on Alps

  • Taj Safari in Kanha

A cursory look at these statements is enough to understand that luxury has a very vague meaning. It is not just about brands or expensive products. It is what the customer values and there is a high intangibility factor in the total value that the customer wants. In other words, it is about living and life.

Luxury: One word, many definitions

Luxury is a word that, despite its simple origins, is hard to define. According to the Oxford Dictionary, luxury is “the state of great comfort and extravagant living” or “an inessential, desirable item that is expensive or difficult to obtain”.

But does it mean that every expensive item is a luxury item for everybody?

There is an old saying that goes “One man’s trash is another man’s treasure”. Tastes differ; so do situations. What may be a regular item to one person might be cherished as priceless by someone else. The perceived value of a luxury product or item changes with the context of usage.

Luxury always requires a context.

A true understanding of luxury needs a subjective, objective as well as a collective point of view. After years of studying the luxury value perceptions of consumers across the globe, researchers have now identified four dimensions of value: Individual (personal enjoyment), Social (prestige and status), Functional (product excellence) and Financial (exclusivity). Another model proposes a different set of dimensions: symbolic/expressive, experiential/hedonic, utilitarian/functional, and cost/sacrifice.

The importance of each dimension can vary due to many factors such as demography (nationality, culture, gender) and situation (time, occasion, mood). It is only when a product or service is placed in the right context that it becomes luxurious for a set of consumers.

As luxury becomes global in a digital age, brands have to deal with the varying concepts of luxury in each country. In France and Italy, luxury and grandeur are accepted as a way of life. In Germany, functionality and precision get higher importance. On the other hand, the Asian luxury market is driven by the need to stand out socially.

The responses by the participants give us the best insight into the importance of context in luxury. For many, being “dressed in Armani Suits, Jimmy Choo Shoes, Chanel No 5 and white ceramic watch” is the definition of luxury. But for an urbanite, “fresh air” and “green pastures” indicate lavishness. Spending time with family and relaxing by the waves is the peak of luxury for a businessman with a hectic schedule.

Thus, we realized that luxury is not about the price, but the value. The greater the value of a product or service in a particular context, the more luxurious it becomes.

The Personal Significance

The definition of luxury has undergone some changes over the years. Earlier the concept of luxury was based on social status. It was about establishing a unique place in society. People indulge in a Louis Vuitton handbag, a Mercedes car, a penthouse suite or exclusive stationary as a status symbol.

But, as we saw in the previous post, the discussions during the ESSEC – IIMA Global Management Program on Luxury in 2011 had brought forth interesting insights on the contemporary meaning of luxury. While the classic symbols of luxury do hold significance today, luxury has become more personal than ever before. Now, the indulgence does not focus on simply the expensive and exclusive. Luxury, for many, is more evocative and meaningful than just owning a branded item.

Luxury Is In the Eye of the Beholder

A study by research firm Ipsos Mendelsohn based on interviews of over 2,000 affluent households in US over two months found that luxury has become much more subjective than before. Emerging from the recent recession crisis, the country’s wealthy households now feel that they deserve to ‘treat’ themselves. How they pamper themselves is a personal decision. While image building remained a prime reason for luxury purchases, people also need their indulgences to be substantive.

Displaying an evolution of luxury, more and more people are looking for meaningful experiences rather than mere ownership. They are starting to appreciate the small things in life that attain the status of being ‘luxurious’ just for them alone. They need to have a relationship with the product or service. Or maybe it is just something that makes them happy. As Greenberg puts it, “it could be something like chocolate truffles, a Keurig coffee machine, imported cheese – even a latte from a favorite coffee shop.”

Self-gratification is the latest mantra in luxury. No longer is it only about making a mark in the world. People buy even low ticket items just because they feel they deserve them. Perhaps it is because of the surge of optimism after gloomy economic conditions. Perhaps it is the due to the rise of a youthful generation of high spenders who follow a pampering lifestyle. The Ipsos Mendelsohn study only corroborated what the participants of the ESSEC – IIMA luxury management programme realized after an hour-long discussion. When Stephen Kraus, chief research and insights officer at the firm, was asked about the kind of luxury vehicles that the respondents had purchased, he said, “It was not necessarily brands you might expect. Yes, people mentioned Mercedes-Benz, BMW and Lexus, but also Mini Cooper, Harley-Davidson and Corvette, and someone even said they had just bought a John Deere tractor.”

The altering meaning of luxury will probably not hurt the established high-end brands but it does pave roads for untraditional brands to enter the luxury and lifestyle market. Moreover it expands the concept to luxury to beyond fashion and vehicles. From real estate and hospitality to beverages and wellness, every segment is now opening up to luxury!

The Aspirational Value


“To understand the heart and mind of a person, look not at what he has already achieved, but at what he aspires to.” – Khalil Gibran.

Aspirations drive our lives. Our dreams and ambitions are the fuel to our actions. The age-old words of Khalil Gibran tell us that our decisions are influenced by our aspirations. Thus recognizing a person’s aspirations might help us predict his actions. This is the very learning that many luxury marketers have been using in modern times to attract buyers. But have they been able to identify the true aspirations of their consumers?

Traditionally luxury purchases have been very conspicuous – a way of affirming one’s social status. But now people consider anything that fulfills their personal desires as luxurious. The tendency to chase one’s aspirations of success and fame has explained the classic purchase behaviour of luxury consumers. Being seen with an exclusive and/or expensive brand is associated with a high standing in society. However, the small luxuries that more and more people are indulging in nowadays do not seem to conform to this reasoning. So what are the aspirations driving these new-age consumers?

Aspirations of Consumers

To understand how aspirations influence important consumer decisions such as brand preference, purchase and loyalty, we need to have a grasp on the kinds of aspirations held by consumers. Aspirations are basically psychological needs that motivate personality development and growth1. Researchers have uncovered seven universal aspirations, which can be grouped into two categories: extrinsic and intrinsic. People tend to follow either of these two categories more purposely. 2, 3

Extrinsic aspirations include financial success (money and luxury), social recognition (fame), and appealing appearance (image). Intrinsic aspirations may consist of self‐acceptance (growth), affiliation (relatedness), community feeling (helpfulness), and physical fitness (health).

People pursue intrinsic aspirations for deriving satisfaction, enjoyment or personal meaning. On the other hand, people with extrinsic aspirations are concerned with others’ perceptions of them and desire praise and rewards from others. Such consumers display the ‘Veblen effect’ i.e., they are ready to pay a higher price for a more prestigious product, despite being presented with a functionally equivalent alternative of lower prestige.

Aspirations and Luxury Marketing

A study by Truong, McColl and Kitchen in 2010 showed that the consumers’ preference to purchase luxury brands is affected by the kind of aspirations they pursue in their lives7. They found that while extrinsic aspirations led people to purchase more luxury brands, intrinsic aspirations, in fact, caused avoidance behaviour towards luxury products to a certain extent.

However, most luxury brands today cater only to the extrinsic aspirations of their consumers. Most marketing efforts – from advertising to positioning – are directed towards fulfilling the desire for success, prestige, fame and image building. The need for deriving personal pleasure and meaning from the experience is often neglected. As a result, a major chunk of consumers with largely intrinsic aspirations are left unimpressed by luxury brands.

The stimulating discussion during the Essec-IIMA Global Management Programme on Luxury in 2010 revealed the increasing significance of intrinsic aspirations on the meaning of luxury. As high-end consumers become younger for whom personal enjoyment takes center stage, luxury brands can no longer afford to ignore the this rising trend among modern consumers.

It is helpful to understand that intrinsic values of quality and hedonism are neither contradictory to, nor incompatible with, the extrinsic values of exclusivity and prestige8. So, luxury marketers can and should engage both sections of consumers with intelligent and integrated marketing plans.


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