ANDhe luxury market refers to the specific segment of the industry where high-quality, exclusive and prestigious products and services are offered. This market is characterized by being aimed at a select target audience that values and is willing to pay a premium price for unique experiences and products. In the last 25 years, the luxury market has experienced growth that has exceeded the growth of the global economy. This trend is also reflected in Colombia, where it is estimated that the luxury goods market registers a compound annual growth of 6 .2% until 2024.
Luxury brands are wealth generators both individually and nationally. Their capacity for constant growth and their resistance during economic crises make them a benchmark for generating employment and economic income. In addition, the average profit margin for luxury brands is around 21%, which is considerably higher than for consumer brands. This demonstrates the ability to generate higher profits and provide greater economic leeway. According to Euromonitor International. The luxury marketing expert, César Val, highlights that luxury is a versatile market that can be applied to any category or sector, which represents an opportunity for business and economic growth in the country.
For César Val, the key to raising the value of a brand and generating greater profitability in the luxury market lies in focusing on people’s desires rather than their needs. It is necessary to generate memorable experiences with products or services that generate unique sensations. “Luxury is not necessary to live, and that is precisely what makes it so desirable,” says Val. The premiumization process, which consists of raising the attributes and perceived value of an existing brand, makes it possible to justify a higher price, thus generating differentiation and greater profitability.
How to raise the value of a brand to generate greater profitability?
For its execution, the expert proposes a seven-step brand building method, which increases the value delivered to the consumer, generating VAL (Luxury Added Value). The result is differentiation and greater profitability:
- Define a purpose around a dream.
- Define the client, clearly, since you should not try to reach everyone.
- Determine the natural ecosystem in which the brand will be present (physical and digital); and very important, where it cannot be.
- Write the history of the brand from the emotional side: how it was born and why it exists.
- Talk about our purpose, with a language that “artifies communication”. Using the language and media of the most exclusive brands, which is inspired by art.
- Accumulate an infinity of small and “perfect details”. Each consumer connection point must be consistent with story and purpose.
- Define a fair price, but above the industry average.
“The premiumization process can be applied to any sector and consists of raising the attributes and perceived value of an existing brand, in such a way that a higher price is justified, which automatically generates differentiation and greater profitability. The reference to do so is the extreme value creation model of luxury brands” stated Val.
The main objective of luxury marketing is to build a brand image that transmits exclusivity, quality, prestige and status, thus generating greater loyalty among customers and increasing the profitability of companies. The main attributes of a luxury brand include generating desirability, offering extreme quality, highlighting craftsmanship, possessing uniqueness, beauty, and emotional attributes such as care, values, and cultural relevance.
Main attributes of a luxury brand
- It generates desirability.
- Extreme quality.
- Artisan work. Luxury owes its existence to the craftsman, who is usually the origin of the legend behind each brand.
- Emotional attributes: care, values and cultural relevance. Luxury and culture are inseparable. Brands that do not have cultural credibility are destined to lose relevance among the new generations and that credibility is defined by the coherence between what you are, what you communicate and what you do.
Luxury marketing in Colombia represents an opportunity for business and economic growth in the country. Luxury brands have the potential to generate higher profitability and to be generators of wealth. The key is to focus on people’s desires, generate memorable experiences and increase the value delivered to the consumer; By building a unique, exclusive, and high-quality brand image, luxury companies can set higher prices and maintain a leadership position in the market.
In Latin America, the luxury market is expected to evolve towards a more focused approach to positive luxury, where sustainability, inclusion, authenticity and corporate social responsibility are priorities. Brands that can demonstrate their commitment to these pillars will have a competitive advantage in the region, fueled by the increased purchasing power of the upper middle class. In addition, the local factor and origin play a fundamental role in the luxury market.