Luxury at a discount: Here to stay?

Isaac Mostovicz writes that discounts in luxury will likely widen the "masstige" market, but also risks alienating Lambda personalities....

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Over the weekend Advertising Week ran a thought-provoking piece about discounts in the luxury industry, titled “Even Luxe Buyers Expect Discounts”. In it, the new reality of a discount culture in luxe is addressed:

With affluent consumers joining in on the national skittishness about spending money during a deep recession, discounts have become a fact of life in the luxury sector. But while this may have kept sales from grinding to a halt, the ploy is not without its long-term costs.

The discounts were good for the bottom line, and surely kept a number of brands afloat during the worst of the recession, but the damage done to brand image through discounts among the wealthy may be beyond repair.

Essentially it boils down to the luxe industry shifting target markets way from Lambda personalities, to the less fickle Theta personalities. Thetas are more likely to take an interest in luxe items at a discount. Whereas Lambdas, who seek uniqueness and exclusivity, will be turned off by the perceived pedestrianization of the brands. Luxury Institute chief executive officer Milton Pedraza shared his thoughts on this:

“It does dilute the value in the minds of luxury consumers,” Pedraza says of discounting. “If an item that used to cost $1,200 is suddenly on sale for $800, you’ll never pay $1,200 for it again.” The marketer may get a sale now, “but you lose your opportunity to price in the future,” Pedraza adds. Greg Furman, chairman of the Luxury Marketing Council, concurs: “Radical discounting is a disaster,” he says. “It tells people how big the margins were.”

A likely by-product of the new range of discount luxe is that the “masstige” market will widen, creating something of a “middle class” in the luxe market.

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