Discount Deals for Luxury Travel

Isaac Mostovicz writes that the recession has led to the luxury travel market resorting to value deals...

During the recession, many families have rain-checked luxury vacations, opting for staycations (holidaying at home) and cheaper deals, and with the economic damage that so much of the travel industry has suffered, comes the advent of substantial discounts and deals.

Kerzner International, the premiere holiday resort operator, has said that its guests are “still very attracted to value propositions” and has had to make changes to meet these demands. The company has embarked on a campaign to partner with similar high-end brands, to increase the potential of offerings for their clients. Extra value ads that have been introduced include resort credit, complimentary transfers, golf credit and even a fourth night free promotion.

For the luxury travel market, attracting, and retaining, a guest is a harder ball game to play these days. Kerzner has noticed several other changes in the behaviour of its clientele. They say their clients are booking shorter stays than before and make their booking only a couple of months in advance. Long-haul destinations are harder to market, as clients prefer to stay closer to home, and those that once flew privately, are now opting for commercial flights.

Within the niche sector of luxury travel, the economic downturn has compelled people to demand for more, for less. Now, luxury does not become “above my budget”, but rather is negotiated around the budget.

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Luxury brands say “no” to online discounts

Isaac Mostovicz writes that luxury companies with new websites should be aware of how people experience their sites...

According to this article in the New York Times today, several large luxury brands (including Marc Jacobs, Jimmy Choo, Hugo Boss, Vince, Lancôme, St. John, Theory, Kiehl’s, Lilly Pulitzer, Donna Karan and La Perla) have recently started or are about to start selling their wares online directly to consumers. While online retailing is a tried and true channel for many retailers, these luxury companies hesitated because they felt that the web couldn’t provide a similar experience to their stores, but the recession has made them more willing to try new things. Operating a website can be significantly less expensive than operating a storefront, and it can also cut out the department store middlemen who collect the difference between a good’s invoice price and retail price.

The most interesting part of this article is the repeated emphasis of luxury goods companies like Lacoste saying that they will never, ever discount the goods they sell through their online stores. These companies certainly don’t want to devalue their brands, but at the same time, they should be aware that the recession has made many shoppers more price-conscious and only willing to buy when they find discounts. According to a recent article in USA Today:

For others, it’s about buying luxury goods only when they’re on sale — or at a steep discount. Nearly three in four wealthy women say they’ll only purchase luxuries if they can get a good deal, reports a recent survey by AgencySacks, a branding firm that consults for some of the nation’s top luxury brands.

If for many people part of consuming luxury becomes the hunt for the deal, companies that refuse to discount may have to change their strategy.

Photo by Bludgeoner86.

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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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