Research Article

Does luxury have a minimum price?

An exploratory study into consumers’
psychology of luxury prices
Received (in revised form): 13th October 2013

Jean-Noë l Kapferer, Cindy Klippert and Lara Leproux

HEC Paris, Jouy-en-Josas, France

Jean-Noë l Kapferer is a world renowned expert on brand management. Professor at HEC Paris, he holds the
Pernod-Ricard Research Chair on the Management of Prestige Brands. Co-author of The Luxury Strategy, he
directs executive seminars on luxury strategies in the United States, China, Japan, Korea and so on.

Cindy Klippert and Lara Leproux are HEC graduates and acted as research assistants on this project.
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Correspondence: J N Kapferer, HEC Paris, 1 Rue de la Liberation, Jouy en Josas, 78350, France.

ABSTRACT Consumer studies show that luxury evokes high prices. However, the remarkable growth of
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this sector is based on its extension to the middle class, with affordable prices. This is a paradox: luxury needs
to be expensive, yet grew being accessible. Hence the question: If consumers want to access to luxury, below
what price would they consider that it is no more luxury? Is there a minimum price? This research explores how
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consumers decode luxury prices, how are lower prices compatible with luxury. Strong brands have indeed a
larger latitude for accessible pricing than new luxury brands.
Journal of Revenue and Pricing Management (2014) 13, 2–11. doi:10.1057/rpm.2013.34;
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published online 22 November 2013

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Keywords: luxury; price; conspicuous; dilution; status; masstige

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THE ELUSIVE LUXURY latin but etymologists disagree as to its root: Is it

DEFINITION excess or standing apart? Luxus has no equivalent
Although luxury shops are everywhere in our in Japanese nor in Chinese. This is why Japanese
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modern cities and online, there is still no con- people speak of ‘lugujuri’ (phonetic adaptation of
lu-xu-ry). They refer not to the concept but to
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sensus about the definition of luxury. In short

luxury refers to rare, hedonic objects and experi-
ences beyond the necessities of life, therefore
affordable mostly to those who have surplus
money. Such definition is subjective: for some
people Ralph Lauren is luxury, for others it is not
rare enough. It is not our purpose to address
this elusive question of definition: looking after
a common one is probably vain for luxury is
a relative and cultural concept, fluid and changing
(Yeoman, 2011). The word luxus comes from
what they experience in the stores of prestige
brands anywhere in the world.
Another definitional difficulty is that people
confuse a concept and a conception. Thus, the
luxury creators – the brands – emphasize such
facets as exceptional quality, craftsmanship, hand-
made, rarity, noble ingredients, maintaining tra-
dition. The luxury buyers tend to speak of sense
of exclusivity, hedonism, access to rare quality
and to authenticity and experiences (Yeoman and

© 2014 Macmillan Publishers Ltd. 1476-6930 Journal of Revenue and Pricing Management Vol. 13, 1, 2–11
www.palgrave-journals.com/rpm/

McMahon-Beattie, 2010). Finally the majority,
the non-buyers equate luxury with conspicuous-
ness, excess, waste: they underestimate the pro-
duct, paying no attention to craftsmanship.
A recent research (De Barnier et al, 2012)
factor analyzed three main scales used to mea-
sure luxury (Dubois and Laurent, 1998;
Kapferer, 1998; Vigneron and Johnson, 1999).
They converge but each one measures some
specific factors. Thus, luxury can be identified
by six dimensions:
! a very qualitative hedonistic experience or
product made to last;
! at a price that exceeds what functional values
command;
! tied to heritage, know-how and culture;
! available in restricted and controlled distri-
bution;
! offered with highly personalized services;
! acting as a social stratifyer, giving a sense
of privilege.
As shown by Kapferer and Bastien (2012, p. 47),
these criteria are necessary but their weight
differs according to the sector (service versus
product, automobiles versus clothing and so
on). They capture the two facets of luxury: for
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oneself (reward) and for the others (appearance,
sign of power).
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PRICE AND LUXURY
Despite the elusive nature of luxury, consumers
and professionals converge on one point: price
is part of that definition. Bain, the expert world
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consultancy on luxury, defines it as ‘premium
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products sold in premium stores at a premium
price’. Kapferer and Bastien (2012) have shown
that luxury is not just more of premium.
Premium goods price needs to be justified by
objective facts about quality. In luxury, quality
is assumed, price does not have to be explained
rationally: it is the price of the intangibles
(history, legend, prestige of the brand). In his
blog, Sheth Godin (17 May 2009) echoes this
key distinction by quoting luxury as being
‘needlessly expensive’. US wine professionals
© 2014 Macmillan Publishers Ltd. 1476-6930
Does luxury have a minimum price?
(Cholette and Castaldi, 2007) classify wines
according to price: popular and medium
(US$7–$10), mid-premium ($10–$14), ultra-
premium ($14–$25), luxury ($25–$50) and
super luxury ($50–$100). Those wines still more
expensive are called ‘icons’. As an icon is a fixed
religious figure, this implies that such prices
have no rational basis but a spiritual one.
Recent international consumer studies point
out the key role of price in the categorization of
anything as luxurious (Godey, 2013). Being
‘expensive’ is the first criterion for qualifying
luxury in Japan, the second in France, the third
in China and Germany. These results are not
surprising. Historically luxury has been the life-
style of the Aristocracy, and later the wealthy
bourgeoisie (Veblen, 1899). The modern evo-
cations of luxury retain from this history feelings
of exclusivity, exceptional quality, craftsman-
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ship, uniqueness, noble ingredients, rarity,
hedonism, art and prestige today attached to
those who can afford this life style by their own
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success. In fact, in the same study ‘exclusivity’ is
the N°1 criterion for defining luxury in the
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United States, Germany, Italy, the N°3 in Japan.
The rate of growth of the luxury sector since
1995 is remarkable. The personal luxury pro-
ducts market (watches, jewelry, leather goods,
clothing, fragrance and skin care) has grown
from €77 billion in 1995 to €210 billion in 2012
(Bain & Co, 2012). This steady growth has been
possible because luxury has become ‘the ordin-
ary of the extraordinary people and the extra-
ordinary of the ordinary people’. Once limited
to High Net Worth Individuals, with more than
a million dollar in cash (CapGemini, 2012)
luxury made the dream accessible to the middle
class and ‘excursionists’ (Dubois and Laurent,
1995), who buy only once a year for a break.
Most of the luxury buyers are not ‘rich’. HBR
article ‘Luxury for the masses’ (Silverstein and
Fiske, 2005) identify how an accessible new
luxury has allowed the masses to trade up. New
luxury refers to luxury brands’ downward
extensions (Chanel make up or skin care),
to premium goods (Grey Goose vodka or
Callaway Golf clubs) and masstige products
Journal of Revenue and Pricing Management Vol. 13, 1, 2–11 3
 Kapferer et al
(Victoria’s Secret, Ralph Lauren Polo and so
on). In this article we focus on luxury brands.
THE PARADOX AND RESEARCH
QUESTION
At this point we face a contradiction: being
expensive is part of the concept of luxury, yet
the luxury sector has grown partly because it
stopped being out of reach of the many. This
leads to a question: If consumers want to access
to luxury, below what price would they con-
sider that it is no more luxury? This question is
important for managerial purposes: how far
should a brand go in price accessibility if it
wants the product to remain a luxury.
A recent survey (Kapferer and Laurent, 2012)
based on 8370 actual luxury buyers, 21 product
types and 7 countries showed that threshold
prices of luxury had a long tail shape with a
majority of respondents declaring quite low
prices (€300 for a pair of shoes, or €450 for a
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men’s suit). Just as the professional wine classifi-
cation where ‘luxury’ starts at $25 a bottle!
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This above-mentioned survey did not aim at
uncovering what psychological processes did
the interviewees use to determine the price
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below which luxury would be absent. This
research aims at it.
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Academic literature on luxury rarely talks
about price. When it does, it often refers to
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brands not fully perceived as luxury: Yeoman
and Mc-Mahon-Beattie’s (2006) analysis of
pricing strategies in luxury markets use as
examples Victoria’s Secret – a masstige brand –
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or of MINI – a premium brand. However,
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there are exceptions: Amaldoss and Jain (2005)
demonstrated that luxury prices are subject to
externalities effects. People called ‘snobs’ are
ready to pay more for a product if the effect of
this price increase is to reduce the number of
‘conformists’ also buying the product. ‘Confor-
mists’ are people who buy because they want to
look like aspirational people. If snobs exhibit a
typical Veblen effect (demand grows when
prices increase) conformists follow the classical
law of price elasticity: demand grows when
4 © 2014 Macmillan Publishers Ltd. 1476-6930 Journal of Revenue and Pricing Management
prices go down. Hence, the success of luxury
trading down. Becker’s (1991) analysis of res-
taurants’ pricing shows that unlike what classical
economy recommends, a successful premium
restaurant should not increase its price to the
point where demand equates supply for there
would be no more waiting list. In luxury
one keeps supply below demand, obstacles to
purchase increase perceived value. Allsopp
(2005) analysis of premium pricing shows how
higher price create desirability: not only as
quality signal, but also as a measure of one’s
ability to afford it. Luxury is a way of showing
both to oneself and to others (the two facets of
luxury) that one can pay the price of luxury,
extravagant from a rational standpoint, as a
$1500 Château Latour Bordeaux. For econo-
mists, luxury pricing is discriminatory pricing: it
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follow (Groth and McDaniel, 1993).
This literature is mostly focused on the attrac-
tiveness of high prices. Here we address a
symmetrical one. Where does luxury price stops?
Marketing literature on price psychology
(Mazumdar et al, 2005) proposes the concept of
reference price: consumers would estimate that a
product is expensive on the basis of a price
stored in their memory, coming from their last
purchase experiences with the same product
class. However in luxury, unlike FMCG, pur-
chases are infrequent. Also on the Internet,
famous luxury brands restrict the diffusion of
informations about price: one must ask for it.
However, we cannot discard the idea that
through personal inquiry or social media inter-
action, typical prices circulate about the hot
items of the season.
Our research questions are:
! What psychological processes intervene in
defining the minimum price of luxury?
! What is the relative part of tangible and
intangibles in these processes?
! How do price and brands interact in these
processes: can brands trump the price?
! What individual differences play a role in
determining the luxury price threshold?
Vol. 13, 1, 2–11

These questions have academic and managerial
relevance. To understand a phenomenon one
should analyze it at its frontiers. To get at the
essence of luxury, identifying the parts which can
be played down and those which are quintessen-
tial, should one study Rolls Royce or borderline
cases? From a managerial perspective, the reality is
that to grow luxury brands will have to recruit
new comers. Analysis of consumers’ reactions to
luxury lowered prices will be insightful.
To address the research questions, an explora-
tory study was set up, semi-quantitative: 150
questionnaires were sent in March 2013 to
parents, friends and relatives of MBA students at
HEC Paris, an elite school; 110 were received:
66 per cent from female buyers, 67 per cent
between 20 and 30 years old, 54 per cent
declaring annual revenues above €27 000, 34 per
cent above €60 000 and 54 per cent saying they
buy luxury goods two or three times a year.
The questionnaire ran as follows:
! Under what price do you estimate that a ring
is not luxury?
! In your mind, what is the typical price of a
Mauboussin ring/Ralph Lauren shirt? Would
you say it is luxury?
! If Dior decided to reduce their prices on an
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item by 50 per cent would it be still luxury?
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Why?
! For you, can a very well done counterfeit be
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luxury? For instance, a superb copy of L
Vuitton bag sold at €200 instead of €2500?
! Finally what justifies for you the high price of
a luxury product?
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The products used with the questions varied
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according to gender (for instance, rings for
females, watches for men and so on). We used
Mauboussin jeweler and Ralph Lauren as
brands because their luxury status is debated as
shown by IPSOS (2012) World Luxury Survey.
Mauboussin is a historical prestigious jeweler
who – to avoid going out of business – engaged
a complete turn around and is now selling at
very accessible prices, advertising on TV to
wider audiences. This strategy is worldwide.
We used Hermès and L Vuitton as typical
© 2014 Macmillan Publishers Ltd. 1476-6930
Does luxury have a minimum price?
luxury brands: according to IPSOS, they are
among the most spontaneously quoted luxury
brands in the world.
We also included a follow-up qualitative
part: eight actual luxury buyers were interviewed
in depth in Paris. After discussing their last
luxury purchases, what luxury was for them,
the interviewer addressed the central question
of the minimum price in a given category. Then
we asked the interviewees whether sales and
supersales or Websites selling luxury goods at a
discount price (like Netaporter) were still lux-
ury? The perception of counterfeits was also
checked. Finally, as many luxury brands buy
some of their products from small craftsmen,
would buying directly to the craftsman – of
course then at reduced price – be qualified as
luxury experience?
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RESULTS AND INSIGHTS
As luxury is a cultural notion, we do not claim
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that the results are generalizable worldwide.
This is the case for all studies undertaken in
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one single country. However, because people’s
understanding of luxury is shaped by luxury
global brands acting worldwide, these results
have external validity.
Price threshold or no man’s land?
To identify a minimum price of luxury we
followed two ways: the first one says ‘under
what price would you say that a ring is not
luxury?’ and the second ‘at what price would
you say that a (ring) is luxury?’. Surprisingly,
these two questions provide quite different
answers: where luxury stops and where it starts
are not the same notions! There is a gap of €853
between these two ways (Table 1).
The higher the price, the higher is the like-
lihood of luxury. This is why new comers in
any luxury market often buy the expensive
items. As they lack the culture, price acts as
diagnostic cue: it signals luxuriousness.
On the other end, brands have a latitude of
acceptation when they decide to create an
Journal of Revenue and Pricing Management Vol. 13, 1, 2–11 5
 Kapferer et al
Table 1: Luxury minimum price
Below what price would you say
a ring is not luxury?
At what price would you say
a luxury ring starts?
Table 2: Is Mauboussin typical ring luxury?
Perceived typical price of €1213 (varying from
a Mauboussin ring €150 to €7000)
Is it luxury? YES 60%
Is it luxury? NO 40%
accessible range. Consumers do not have one
threshold price in their mind acting as a ‘guillo-
tine’, but two. Below €1983, the luxury status
of a ring is conditional: it will depend on other
factors, one of them being the brand status.
However there is a limit, a lowest point (€1130)
where none of these factors can help.
The moderating role of brand status
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Tiffany is a famous American jeweler with a
prestigious heritage starting in 1837. In the early
nineties, the brand launched an accessible silver
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line at $110. It was a success called ‘Return to
Tiffany’, attracting many young people to the
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brand. However it hurted the feeling of exclu-
sivity and dream attached to Tiffany. In 2007,
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they increased the price from $110 to $175. The
Wall Street Journal wrote ‘Fashion victim: to
refurbish its image, Tiffany risks profits. After
silver took off, jeweler raises prices to discourage
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teens’.
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At $110 did these young buyers perceive it as
luxury? Using Mauboussin present trading
down strategy, we asked what is the typical
price of their rings and if it is ‘luxury’? (Table 2).
The perceived average price of a Mauboussin
ring (€1213) falls just within the no man’s land
identified above. The lower quoted price is
€150, the higher €7000. Actually, Mauboussin
rings extend from €400 to €24 000.
Results show no systematic link between
the average price quoted by an interviewee and
6 © 2014 Macmillan Publishers Ltd. 1476-6930 Journal of Revenue and Pricing Management
his/her perception of such a ring as luxury
or not. Some consumers declare €300 as the
€1130
average ring price, yet categorize it as luxury.
€1983
Others quote €1000 but say it is not a luxury
ring. For the former, if Mauboussin is a luxury
brand, its typical ring is a luxury ring. The
second ones compare Mauboussin with famous
jewelers, such as Cartier, to deny any luxury
status to Mauboussin even if they said €1000.
This illustrates the power of the brand to trump
the price alone. For those consumers with
no clear idea about Mauboussin, price alone
becomes a diagnostic cue to categorize as
luxury: at €3000 or above it is hard to say that
it is not luxury.
Negative effects of price reductions
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Fashion brands need to discount their unsold
inventory. As a rule, luxury brands do not
(Kapferer and Bastien, 2012, p. 227). We pre-
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sented a situation where Dior, a prototype of
luxury, ‘would reduce their price by 50 per cent
on some products without changing anything in
the product nor in the associated services’, then
would it still be luxury? (Table 3).
There is a split half in the answers. What are
the reasons invoked by those who say that this is
still luxury?
! First comes the brand strength. Dior has been
a synonym of luxury for decades. It shaped
what luxury means. Whatever it does remains
luxury. A quote from the interviews is
insightful: ‘Dior products are not luxury
because of their price’. ‘The fact that it is
luxury has nothing to do with price’. How-
ever, they voice a little restriction: in the
short term, despite the price drop, Dior
remains Dior, therefore luxury. If it would
Table 3: Would a 50 per cent price reduction hurt
luxury?
If Dior reduces the price of an item by 50 per 45%
cent it remains luxury
It is no more luxury 55%
Vol. 13, 1, 2–11

be repeated, doubts could rise: ‘Is the brand
admitting it is now weaker, it has lost some
prestige?’. There is a risk of brand equity
dilution.
! The second reason is that the product
remains unchanged with the same amount
of work, craftsmanship, service too.
! A third reason is that, despite the 50 per cent
price reduction, it would remain expensive,
in two ways. It would remain above normal
brands’ retail prices. It would also be beyond
one’s financial resources: ‘A Dior watch at
€6000 instead of €12 000 will still be far
above €1000, my own limit today’.
What about those 55 per cent who declare that
Dior product sold with a 50 per cent discount is
no more luxury? What drives this answer?
! The product may be the same, it has lost its
exclusivity cachet, the feelings of rarity
attached to it. The new price leads the
product closer to mass, is less discriminating.
‘Luxury is not given to everyone’: price drops
hurt this source of perceived value.
! These consumers also feel betrayed in the
intimate relationships they had woven with
their brand. This price drop indicates the
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brand is wooing another target, a sign of
disloyalty.
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! Finally, some remarks suggest that luxury is a
total behavior remote from what other brands
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do. Luxury should never use price promo-
tions. Also how can the same luxury product
be worth €1000 and then €500. Luxury is not
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fashion: its value should be timeless.
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Is a superb L Vuitton counterfeit
luxury?
Today counterfeits propose excellent copies of
luxury products at a much reduced price. It is
luxury made accessible. But is it perceived as
luxury? (Table 4).
Of the 110 interviewed, 7 persons declared
that if it is a great copy that no one can identify
as such, then counterfeits are luxury. What are
their reasons?
© 2014 Macmillan Publishers Ltd. 1476-6930
Does luxury have a minimum price?
Table 4: Is counterfeit an accessible luxury?
Counterfeit is still luxury 6%
Counterfeit is no luxury at all 94%
As luxury has two facets, luxury for oneself
and luxury for others, those people value more
strongly the second one. They pursue a social
adjustment goal (Wilcoz et al, 2009) valuing the
logo more than the product. When the coun-
terfeit cannot be identified by others, ‘it remains
luxury because others do perceive it as such’.
Now the majority (94 per cent) does not
consider counterfeits as luxury. First for tangible
reasons: equivalence of quality is denied either
on an a priori basis or with rationalizations (‘the
ingredients are not as noble’, ‘the design is less
refined’, ‘a connoisseur will identify it’). All the
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other reasons rely on intangibles as source of
value of luxury. The second reason is about the
pleasure of owning an original, the authentic
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versus the copy, however perfect the latter is.
Others relate to the defense of Intellectual
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Rights. Copying is by definition far less valuable
than copying, at least in the Western world that
holds innovation and creativity as important
values. Another intangible is that counterfeited
products have no umbilical link with the tradi-
tion, the history, the savoir faire of a renown
Maison. They are just products, made by anon-
ymous workers, in poor conditions, not objects
created by revered artisans pursuing a very long
tradition of excellence. Moreover, the buying
experience is miles away from luxury. Even
when one buys a small ticket item in a Hermès
store, the experience is luxurious. Counterfeits
are bought in the back of shops, fast, as if the
cops were coming soon. As a result, counterfeits
evoke negative feelings tied to fraud, decep-
tion and so on, owing to which the object is
desacralized. On the contrary, luxury brands do
sacralize their products, held as icons, sold in
temples (the flagship stores) revered as art and
heritage or legacy of a worshiped creator.
A final reason given by interviewees is
the lack of pride when buying a counterfeit.
Journal of Revenue and Pricing Management Vol. 13, 1, 2–11 7
 Kapferer et al
By frauding one cannot symbolically enter the
meritocratic club of persons who can afford the
price on their own merit, and hard work.
Is buying directly to a craftsman
luxury?
In the qualitative interviews, we presented the
case of a new brand creating rare crafted
product. These products attracted the attention
of a famous luxury brand that incorporated them
in its own offering. For instance, Norlha –
founded in 2007 – produces textures with
unique yak fibers, processed by hand by nomads
living on the Tibetan plateaux. They are now
sold by Hermès too under its own label. Would
buying directly at the nomads’ camp or factory
still be luxury?
One clear conclusion emerges. Buying
directly at a craftsman or at a luxury brand store
are two different experiences: one is not above
the other. However, only brand creates luxury.
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Quotes speak for themselves. ‘If I buy it directly
at the craftsman, this remains craftsmanship: just
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a nice product with nice quality, made by nice
people, surely something rare too but not
luxury either’. ‘A jewel bought at a craftsman
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is nice but not luxurious: buying it at Cartier
brings you in another world’. The brand creates
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trust, confidence: it elevates the product at the
level of luxury.
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What justifies the high price of
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luxury products?
How do consumers justify the high prices of
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a luxury product? What values do they identify
making this price fair?
Unsurprisingly, among the 110 collected
answers, quality is quoted 47 times. An extra-
ordinary quality is what most justifies a signifi-
cant price difference with products fulfilling
the same function.
! Quality refers first to the ingredients
(27 occurrences), how they are selected, from
what country they come, their ‘nobility’.
8 © 2014 Macmillan Publishers Ltd. 1476-6930 Journal of Revenue and Pricing Management
! Quality is also experiential. The luxury pri-
cing has similarities with the placebo effect
(Carmon and Ariely, 2005). One quote
expresses this effect ‘we had parties with
cheaper wines, but had less fun’.
! Quality refers also to the work itself, its
complexity, the know-how, handmade, the
amount of time spent to create one single
product. These dimensions of quality guar-
antee an exceptional durability and reliability.
! Quality concerns the persons involved:
luxury brands hire talents, not workforces.
For some interviewees they are even artists.
Everybody in a luxury house (creators,
designers, seamstress and so on) is highly
qualified: they justify extra costs.
! Quality of service too: there is no luxury
without services, before, during and after the
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! Finally they mention esthetic qualities of the
object, or the place where service is deliv-
ered. The client has to pay for the good taste
the brand guarantees. In return the brand
endows the client with surplus elegance and
self-confidence. This has a price, that of
having the right to exhibit the logo, marker
of good taste.
Rarity is mentioned 19 times, with other words
such as exclusivity, unicity, authenticity, origin-
ality. This rarity has a cost when it is actually the
result of the scarcity of ingredients, of talents who
work with them. However, rarity is also virtual,
produced for the sake of creating a halo of
exclusivity, special feelings for the clients who
can believe they are now somehow different or
that they symbolically belong to some club of
happy fews. Such clubs have an entrance fee.
Finally one has to pay more for the brand
itself (10 occurrences): for prestige attached to
history, heritage, the dream associated to the
brand, the famous clients and celebrities, extra-
ordinary people in the dual definition of luxury.
Thus, price is not merely the consequence of
extra costs of luxury: it is the precondition for
the luxury magic to operate (Dion and Arnould,
2011): magic happens when objects transmit
Vol. 13, 1, 2–11

supernatural forces onto their owner. To trans-
fer onto oneself the prestige of the brand one
must pay the price. The higher the prestige, the
higher this price: ‘in fact one does not buy
a L Vuitton bag, one buys the right to flaunt
with this bag at one’s arm’, ‘it is the price to pay
to be allowed to buy this allegory of success’.
This is why successful brands have to be more
expensive. Each year Rolex increase their
price systematically, without any objective rea-
son (cost based), just as an entrance fee.
Last but not least, some consumers attribute
luxury high prices to the costly artifices of
marketing (paying top models, ad campaigns,
extravagant défilés and so on).
SUMMARY OF THE FINDINGS
Figure 1 epitomizes the three paths used by
consumers to determine the minimum price
of luxury. In the first path, household budgets
are anchoring points for any evaluation. ‘At
€200, these days it would already be a folly for
me to pay this price’. This explains the high
variance observed by Kapferer and Laurent
(2012) in their quantitative study on price
thresholds: when in financial difficulty, no one
can spend on non-necessities, even low priced.
This limen may move through time for the
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same person. The second path is close to
reference price theory: consumers use prototy-
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pical luxury brands asking what is their entry
range price. ‘Panerai watches are beautiful.
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ANCHOR : MYSELF
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How much is it
unreasonable to
spend, considering
ANCHOR : LUXURY
my own resources ?
ANCHOR : PREMIUM
BRANDS
What is the price of
significantly more
the entry lines of my
iconic luxury brands?
premium brands?
My estimate
of the
LUXURY
PRICE
THRESHOLD
Figure 1: How consumers evaluate luxury prices.
© 2014 Macmillan Publishers Ltd. 1476-6930
Does luxury have a minimum price?
There is nothing below €6000!’. The third
anchoring process rests on the necessary gap
between luxury and premium. Luxury is not
premium: it is another world. Both prices should
be contrasted strongly. ‘To get a very good solar
eyewear, really protecting your eyes, you need
to pay at least €200 just for the glasses, may
be €100 for the frame. That makes €300 in all.
Therefore, I would not expect a luxury brand to
be close to this price, it should be significantly
above, say at least €500’. Another quote is
‘Vanessa Bruno bags are priced €340, and this
not at all a luxury brand. I guess luxury bags
to be three times more expensive’.
When his/her disposable budget is tight,
the consumer experiences guilt in indulging in
a luxury purchase. This is why Websites such as
Netaporter or Ventesprivees.com have devel-
oped considerably. They authorize the trans-
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gression attached to luxury purchases by giving
the impression of a very good deal. Still they
respect the exclusivity of the brands by work-
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ing either like a private club, or by leveraging
chrono-rarity (reduced prices during 1 day
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only) or virtual rarity (there will not be more
than 100 bottles). However, for other consu-
mers who are less financially tight or less ‘value
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for the dollar’ oriented, such sites have an
adverse effect: by stressing the price they bring
luxury back into normal purchasing modes.
Also they suppress the pleasure of the transgres-
sion attached precisely to the folly of the price.
IMPLICATIONS FOR LUXURY
PRICE MANAGEMENT
This research suggests that luxury brands have
a latitude of pricing. Price alone is used to
Is the price
disruptive, qualify as luxury only when the brand is not
expensive than known. If they wish to attract new clients
luxury brands can create entry lines as long as
three conditions are respected.
! The prices of these entry lines must repro-
duce the positioning of the brand vis-à-
vis competitors’ own entry lines. Chanel
Journal of Revenue and Pricing Management Vol. 13, 1, 2–11 9
 Kapferer et al

fragrances should be priced above Armani or Our findings, based on a qualitative methodol-
Dior fragrances, for instance. ogy, indicate that consumers draw inferences on
! The so-called entry lines must really deliver the basis of the price of an item, but these
the key brand values and extras. inferences also are influenced by the brand.
! Their price must be far above normal lines, to Many brands are endowed with so much
signify that there is no comparison, luxury prestige that they can overcome any inferences
being another world. that might be made on the basis of the price
of selected product lines. Thus, a nice leather
At these conditions, the entry lines of famous
belt with a Dior logo remains emblematic of
luxury brands will be perceived as luxury.
luxury for consumers. Managers should take
Unlike premium products where quality is to
advantage of this evident halo effect.
be demonstrated, it is implicit in luxury: it is
This finding is particularly good news for
what the consumer assumes. This is why he/she
luxury brands that actively seek to find a balance
will focus on other details and small extras: ‘My
between exclusion and inclusion. Attracting
small bracelet by Hermès is only €100. This is
new consumers (often younger ones) may
not too expensive yet it is luxury: look how
require lowering the price barrier, which is not
nice it is, the materials are nice, …’; ‘A nail
necessarily risky if the product retains present
varnish Dior at €22.50; yes it is luxury. I have
physical elements that make it stand out as
the brand, I have a feeling of already being
PY a qualified form of luxury, even at an accessible
a Dior client. Yet it is four times the price of
price. For instance, Dior recently launched
a normal varnish’: ‘My Guerlain fragrance at
a pair of earrings at €250: it has been a total
€90 is my luxury, although neither precious,
success. Despite this very accessible price, the
nor rare: but is very well done and it transmits
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product was endowed with Dior’s halo of
all the values of the maison Guerlain, I buy
prestige. However, for the halo effect to persist,
a bit of the savoir faire of this House (maison)’,
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the brand’s prestige must be continuously

‘€150 for a L Vuitton scarve, it remains luxury:
reaffirmed. That is, luxury brands need to trade
I have all the know-how and quality, plus the
up to fuel the dream too. Consider Armani: on
brand, the prestige, the purchase experience
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the one hand, it created accessible lines (Armani

(they offered me a cup of tea!). Finally my name
Jeans, Armani Exchange) to attract youthful
is now on the list of Vuitton clients!’
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consumers, whereas on the other, it launched

What about young luxury brands. They
Armani Privè, a highly exclusive label compar-
cannot leverage a status they do not have. As
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able to haute couture brands. Ralph Lauren

a result their price should be bolder. Without
created its Purple and Black labels for the same,
reaching the sky-high prices of Richard Mille
trading-up purpose. Thus, many consumers still
first watch (RM-01 at €250 000), to signify
feel distinctive when they purchase a product
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luxury one has to create the gap.

from the Polo line, even though prices on these
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items regularly are slashed for promotion or

CONCLUSION
This research offers several implications for
managers responsible for luxury brands. Each
year, managers must find ways to increase their
sales; for many, the temptation to expand the
customer base by creating more accessible pro-
duct lines has been irresistible, despite warnings
that such trading down can dilute brand equity
and cause the brands to lose their luxury cachet.
in factory outlets. If price alone were the only
cue of luxury, the brand already would have
lost its considerable cachet.
For future luxury brands, this study also
offers predictive insights. Young luxury entre-
preneurs might pursue the highest price points;
for example, some watch brands offer an aver-
age price above €50 000. However, these are
inherently niche brands. A luxury strategy does
not mean being the most expensive of the

10 © 2014 Macmillan Publishers Ltd. 1476-6930 Journal of Revenue and Pricing Management Vol. 13, 1, 2–11

market. One can enact the luxury strategy at
different price points (Kapferer and Bastien,
2012). For an entrepreneur, the pricing ques-
tion relates to the firm’s ultimate goal and its
target market. Expensiveness has distinct mean-
ings across different consumers. Therefore, an
entrepreneur must first determine the price at
which the targeted market considers a product
equivalent to, or no longer, a luxury offering.
For the targeted market, the optimum price is
above this luxury threshold but still a price he
or she can afford, close enough in reach, so that
the dreams come true.
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