I.5. Distinguishing Luxury Products and Brands from similar Concepts
I.5.1. Premium Products and Brands
Luxury products and brands can be distinguished from the premium segment by their constitutive characteristics. As discussed above, the major characteristics can be considered as dimensions ranging from a minimum level that is also necessary for non-luxury brands to a maximum level that corresponds to the highest form of luxury. As demonstrated in figure 1, premium brands rate higher on these dimensions than medium-level brands, but still well below luxury brands. While premium brands still remain down-to-earth and cannot lose sight of the value-for-money ratio, luxury brands are reaching exceedingly reasonable levels in the major luxury dimensions, and some of them even work on topping the current top-of-top luxury level. The differentiation between luxury and premium brands is mainly a matter of degree, which makes it difficult to draw a clear line, especially between top premium brands and entry-level luxury brands.
However, there is also an essential difference between these types of brands: while premium brands focus especially on functional characteristics, luxury brands put much more effort into creating symbolic meaning. For instance, Lexus entered the US market with the objective of growing by taking customers away from Mercedes, which was identified as its major competitor. Therefore, they took the Mercedes E Class as the model to overtake and developed a car with a similar design and even superior technical features that was only sold for about half of the price. Lexus generated high growth rates in the U.S. However, they still focused very much on functionality and even emphasized their car`s value-for-money, and also had no vision or story to tell – which clearly positions Lexus as a non-luxury brand (Kapferer and Bastien 2009b, p. 316).
Luxury Brands vs. Premium and Masstige Brands
I.5.2. Masstige Products and Brands
The emergence of this new type of brand resolved the traditional dichotomy between luxury and non-luxury brands. The term "masstige brands’" easily conveys their basic idea: offering prestige to the masses (some authors also use "new luxury" or "mass luxury" (Kapferer and Bastien 2009b, p. 312). Typical masstige brands include Coach, Godiva, Starbucks and Victoria`s Secret (Silverstein and Fiske 2003, p. 51). Although these brands are not luxury brands, they still rate higher than middle-market brands on the major dimensions of luxury products. Masstige brands concentrate especially on creating symbolic benefits and prestige; they care very much about shine and therefore also about design. Zara exemplifies the idea of selling taste and style to the masses, which is accomplished by imitating the design of luxury brands for their clothing, stores and advertising. However, as demonstrated in figure 1, they are forced to cut back on the other major characteristics. A mass-prestige-business in the mass/middle-class market reduces the level of rarity and can only be achieved with reasonable prices, which, in turn, requires a compromise on quality, extraordinariness and aesthetics (see also Keller 2009, p. 295). The study carried out by Truong et al. (2009, p. 379) demonstrates that masstige brands successfully differentiate themselves from middle-range brands by their prestige and from luxury brands mainly by their reasonable pricing. The authors found out that products from luxury fashion brands are about three times more expensive than masstige products, which, in turn, are about twice as expensive as middle-range products. While there is only a relatively small difference in prestige between luxury and masstige brands, the latter were indeed perceived as being much more prestigious than middle-range brands.
The masstige strategy is also applied by many luxury brands. They are trading-down by extending their product range with masstige products that are more accessible to middle-class consumers (Kapferer and Bastien 2009b, p. 321; Truong et al. 2009, p. 379). This kind of price differentiation marks one of the major growth strategies for luxury brands. The challenge that comes with this strategy is one of preserving an image of exclusivity (Keller 2009, p. 292 et seq.). This problem has been solved by Ferrari with line extensions in product categories that do not compete with the brand’s core identity: while Ferrari cars remain very expensive and exclusive, the value of the brand is exploited by offering products in categories as diverse as apparel to computers (Berthon et al. 2009, p. 54).
Both the trading-up strategy of masstige brands and the trading-down strategy of luxury brands make luxury-like products accessible for middle-class consumers. This development is referred to as the "democratization of luxury". According to the economic relativity of luxury (see above), democratic luxury products are characterized by Kapferer and Bastien (2009b, p. 314) as ordinary items for extraordinary people, which are at the same time extraordinary items for ordinary people.
Read another article about the implementation of the masstige strategey here (in German only).
I.5.3. Prestige Products and Brands
The terms luxury brand and prestige or status brand are often used interchangeably (Bagwell and Bernheim 1996, p. 349; O'Cass and Frost 2002). However, prestige ranks as one of the major purchasing motives over all product categories and allows for the achievement of social reward and status (Trommsdorff 2009, p. 117). Luxury brands have what prestige-seeking consumers crave: they enjoy social prestige, which can be gained by buying these products. Nevertheless, the consumption of luxury products is by far not the only way to satisfy the need for prestige. As mentioned in above, there are also non-luxury products that allow consumers to increase their prestige including premium products such as Adidas sneakers or masstige products such as Godiva chocolates and Häagen-Dazs ice cream. The ability to increase the prestige of their consumers is not enough to distinguish luxury from non-luxury products and brands. Therefore, the term "prestige brands" should rather be used for all luxury and non-luxury brands whose products allow consumers to gain prestige. Accordingly, prestige brands correspond with the mirco-economic scope of luxury (see figure 1). The study carried out by Dubois and Czellar (2002, p. 3) also demonstrates that in many categories, prestige can be achieved independently of luxury and that luxury and prestige are also perceived as different in the eyes of consumers.