A recent news item in The Economic Times began with words, ‘Mercedes Benz launched its ‘A Class’ luxury hatchback in India…to competitive luxury car market. The new Merc A Class is a compact car priced between Rs 21.93 lakh and Rs 22.73 lakh. The car is meant to target the affluent youth. Mercedes Benz expects to sell about 100-150 units of A Class in a month.
Luxury is a complex phenomenon. Luxury brands create and command value disproportionate to good or service (embedded functionality) that they sell. In this regard high price is both an indicator and ingredient of luxury brands. This means luxury and low price are mutually exclusive. The exclusiveness and prestige on the socio-psychological plane is to a great extent is created by a price meant to exclude majority. Therefore exclusion by creating barriers to reach (un-affordability) and access (distribution) are crucial aspects of luxury brand building. Luxury brands thrive on the paradigmatic opposition between ‘class’ and ‘mass’; ‘function’ and ‘aesthetic’ and ‘form and content’. This dichotomy is essential to luxury brand building. Luxury branding is about adding layers meaning in disguise aimed to make an impact without saying anything. The purveyors of luxury therefore refrain from using verbal communication. They talk through a language comprised of symbols and signs.
The paradigmatic opposition between luxury and non-luxury stems from certain codes that set them apart: conspicuous value, uniqueness, hedonistic pleasure and quality. (1) The conspicuousness or visibility value originates from a brand’s ability to signal status wealth associated with a class (Veblen’s conspicuous consumption). Luxury brands act as class markers. For instance the one who drives a Rolls Royce belongs to top layer of economic hierarchy. (2) Scarcity and rarity of something endows it with uniqueness accordingly especially commissioned to master makers of jewelry, watches and carpets. This fits with human desire for uniqueness. (3) Luxury brands serve human needs to experience a certain affective states. The pleasure/ joy of indulgence in a luxury brand derived from tradition, heritage and authenticity. The sheer feel and joy of sporting a Cartier necklace or a Tiffany ring is unparalleled. Finally, quality and workmanship is essential building block for luxury brands. It is a sine qua non. Both Mercedes and BMW have lot to their credit in perfecting quality of automobile. BMW for a long period of time positioned their brand as the ‘ultimate driving machine’. This campaign has now been taken to a higher level and BMW now promises its owners an unmatched ‘joy’ / ‘pleasure’ (hedonic benefit) of driving.
The launch of Merc A class at a price point which puts the brand within the reach of a larger set of potential customers makes perfect sense considering the share objectives. But many non-luxury companies like Hyundai and Toyota have cars which are priced higher than entry level Mercedes. This intersecting point presents an interesting dilemma for a potential car buyer. The purchase motivation beyond a certain price band is governed predominantly by symbolic considerations. The buyer ‘cross over’ so achieved by this strategy is likely certainly likely to expand the brand ownership. But fundamental question that needs to be addressed the psychographic fit of this customer segment with the target segment.
- Luxury is a two way street. Brands develop their sign value from cultural resource located in the form of prestige groups within a society. The highly selective brand owner group and its lifestyle feed back into the symbolism of luxury brands. A large part of its symbolism is based on ‘how a brand is used’ (how a car is driven by a new money and old money) – which represents intangible core of the brands. It is this intangible core which holds a lure for luxury buying customers who seek non-material cultural transformation. Mercedes A Class prima facie violates many luxury codes. The lure of market share is genuine but it can potentially be a mirage.