Why Luxury Branding Is So Valuable

In economics, a luxury commodity is a good that increases in value more than proportionately to income, so that expenses on the luxury good become a smaller percentage of overall income. Examples of luxury goods include cars, computers, holidays, and designer clothing. The prices of luxury goods tend to rise faster than most other commodities. Luxury goods have a distinct position in markets, with demand usually exceeding supply, creating an environment that is favorable for luxury goods to gain market dominance.


The perception of value of luxury brands has a direct relationship with their price point. A brand’s perceived value is based on how much consumers perceive it to be. If consumers believe that the brand has a quality that is not matched by any other in the market, they will be willing to pay a premium price. Conversely, if they believe that the brand is of poor quality but it is in high demand, the demand will result in the product being sold at a lower price than competitors are offered. Therefore, understanding consumer perceptions is a valuable asset for luxury brands looking to increase sales.

For luxury brands looking to expand into new markets, understanding consumer perceptions of these brands is critical in creating a successful expansion strategy. Luxury brands must also be willing to develop new markets to tap into, or risk their reputation being left behind by the traditional, highly regarded brands in their field. The current trend of consumers moving more towards small, niche manufacturers creates an opening for these brands in an ever-expanding marketplace.