Luxury Branding: The Difference Between Premium and Luxury

An article on the NBC News website announces the new 2014 Hyundai Equus, with a price tag of over $70,000:

“At next week’s New York Auto Show, Hyundai will spotlight the 2014 Equus, the mid-cycle update of its premium-luxury sedan. The sedan will compete with high-end makes, such as the Mercedes-Benz S-Class and BMW 7-Series.”

Did you notice the dash between the words “premium” and “luxury”? Has the distinction between “premium” and “luxury” become so insignificant  that it’s almost impossible to quantify?

Can a brand such as Hyundai, that many would equate to “affordability”, suddenly become a player in the premium, or even luxury segment?

I have to admit the line that separates the “luxury” from “premium” has become blurry. Is Volvo a premium, or a luxury vehicle? What about BMW?

Many luxury brands launched “teaser” products, at much more affordable prices,  in order to attract the new, younger clientele.

In Canada for example, the lease offers for the entry level BMW 3 Series are very aggressive: the difference between driving a Toyota and a BMW can be as little as $100/monthly.

Luxury branding requires proper distinction between the terms. Because, as shown in a previous article, luxury brands have to be managed differently then ordinary, and even premium ones.

The chart below summarizes the differences between the true luxury and premium brands.

ATTRIBUTE

PREMIUM BRANDS

LUXURY BRANDS

Target Audience

Broad-whoever can justify rationally and financially the added benefits has access to the brand. Narrow-only a small percentage of the general population can afford the brand.

Price

The higher price is justifiable by the extra features versus a regular brand. Greatly exceeds the functional value of the product. Acts as a selection tool that limits the access to the brand.

Distribution

Broad, a variety of channels can be used simultaneously: corporate stores, independent retailers, online, catalog. Highly selective, and almost exclusively through a corporate-owned channel.

Communication

Mass communication. The goal is to inform and create brand preference. Appeals to both ration and emotion. A blend of imagery and sometimes (extensive) copy. Selective communication. The goal is to educate rather than inform.

Product Line

Can be broad-one product for each segment targeted. Very narrow-a flagship product and only few variations.

Production

Mass production. The goal is to produce as profitably as possible. Manufacturing country is not important in purchase decision. Hand made. Method of production is part of the brand myth. Brand should not relocate manufacturing facilities to lower cost countries. Country of manufacture very important in the purchase decision.

Delivery

Immediate. Customers are not willing to wait. Not urgent. The wait for the product to be built/create/fully matured contributes to the overall luxury experience.

One last note on luxury branding: stretching the brand upwards into the premium segment is common practice (see the Hyundai example above).

Stretching a luxury brand downwards in order to broaden its appeal should be avoided at all costs. The risk of  loosing its core and profitable customer base greatly offset the short term (financial) benefits.

In the last article in the luxury branding series I will review a brand management book that provides detailed guidelines on how to manage a luxury brand.

Comments

  1. Hi Maria,

    Sorry for my late reply, for some reason I missed your comment. The date of the article is April 2, 2013. Please contact me through the contact form for a faster reply.

    Regards,
    Michael

  2. Dear Michael,

    Thank you for this interesting article. However, I could not find the date of this publication. I am writing my master dissertation, and your materials are very useful (of course I will mention your authorship). But I need the date of publication. Thank you in advance!
    Best regards,
    Maria

  3. Murad Jazy says:

    Hi Michael,
    Looking at the chart in the article , a question arises that do the luxury brands really qualifie the luxury category ? many luxury brands such as Prada , Hugo Boss have been exposed in a clean clothes campaign report on conditions in the “Euro -Mediterranean textile cluster”
    According to the report, workers in these low wages countries (one may add Asian countries to the report) produce clothes for high street brands ,they also sew for high end luxury brands.
    It is low minimum wages that draw corporations to such countries globally. Profit depends on companies maximizing the difference between a garment’s sales price and its production cost. High end retailers and the luxury sector can appear to exist under the garb of ideas like craftsmanship and design,but behind the hype and glitter is the same unsung work force.
    Opinion ,as we know, is a socially constructed reality . These brands thrive on a “Made in Europe “-concept that purports to be a guarantee of standards above and beyond those of “Made in Asia” despite the fact that the real age old craftsmanship dating back to “Silk route “and way back dipped into the oldest civilizations in Asia and Africa.
    In my opinion today’s luxury brands are actually “premium brands” ; the real luxury brand is the hand made/handicrafted product as it qualifies A story to tell (history, pedigree) ,naturally limited quantities ( the rarity or uniqueness factor and authenticity) unlike artificially limited quantities . Will there ever be a real “Max Havelaar” or will it remain fiction character forever ??

  4. Very interesting. Thank you for sharing.

  5. Hi David,

    I am glad you found the article useful.
    The two books I recommend to those interested in luxury marketing are:
    “The Luxury Strategy” by Jean-Noël Kapferer and Vincent Bastien. You can find my review here: http://branduniq.com/2013/book-review-the-luxury-strategy-by-jean-noel-kapferer-and-vincent-bastien/

    “The Management of Luxury”-you can read my review here:http://branduniq.com/2015/book-review-management-luxury-benjamin-berghaus-gunter-muller-stewens-sven-reinecke/

    I hope this helps.

    Michael

  6. Great post. I can clearly discern the distinction you have signified. Is there any literature you recommend dealing with premium branding?

  7. Good article, except when talking about cars there is a distinction between “premium” and “luxury”.

    Premium means premium indeed, but “luxury” is a term used to describe a class of automobiles, defined by dimensions, price and features – “full size”, “F segment”, “luxury car”, they all mean the same thing – think of BMW 7 Series or Mercedes S-Class.

    That means “premium-luxury” means a premium car belonging to the “luxury”/”F segment” class of automobiles.

  8. Thank you for you kind words Richard.

  9. Truly inspiring information Michael. I picked up on this idea from my reading of “The Luxury Strategy”

  10. Michael says:

    Very good question Seeba. I don’t think the luxury buyers do comparison shopping.They choose the brand that best reflects their personality, and how they want to be perceived by their peers. As an example, a person who wants to be perceived as successful will choose a Mercedes-Benz, while a fan of performance vehicles will drive a Porsche. It’s all about crafting a brand story the luxury shopper can identify with.
    Michael

  11. Hi Michael,

    Very nicely written and very informative! Just a question, you have said that positioning in this market doesnt help as all brands court the elite. How exactly would you compare brands with each other then? Eg in automobiles, BMW, Merc, Audi, Lexus, and Porsche are all luxury brands. What criterias would you use when comparing them except probably the brand value

  12. Hi Maria,

    The article was published on April 2, 2013. The reason I don’t add a date to my articles is because my goal is to provide “evergreen” content that’s relevant for more than a day or week.

    Best regards,
    Michael

  13. Nice Article, Michael!

    But when was it written? Would you mind adding a date to it?

    Best regards,
    Maria

  14. Your succinct encapsulation of these principles is enjoyable to read.
    Thank you.
    It is not always easy to follow them especially when starting the process as one gets tempted by standard well proven branding methods. Companies do not always understand the long term benefits chasing short term financial goals first.

  15. Thank you for your kind words Shanane.
    Michael

  16. Dear Michael,

    Quite nice to find someone writing on the field of luxuries and their unique branding. Interesting and informed, I will come back to see the last article in your luxury branding series regarding your review of a brand management book that provides detailed guidelines on how to manage a luxury brand.

    Best,
    Shanane Davis

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