News

Luxury brands extend their names to non-luxury items — and consumers buy it

August 4, 2009

An article in the latest issue of Time magazine is fodder for retail skeptics everywhere. It rehashes the results of an upcoming study in the Journal of Consumer Psychology, in which groups of people were given identical products; half of them were told they were sampling luxury wares, while the other half were not.

Perhaps unsurprisingly, the subjects who were told they had luxury products rated them higher than the other group.

What does this suggest, aside from the fact that people are susceptible to marketing messages (which is certainly not news to any smart retailer)? Namely, it underscores the opportunity for luxury brands to extend their names onto products that have not historically been in their areas of expertise.

But they need to do so carefully, as the article points out:

if a brand expands to another category, it had better retain its luxury claim. If Cartier is going to license its name on cheese, it had better be damn good cheese, and it had better sell this cheese at exclusive, upscale stores. When Bulgari licensed its name to a hotel, it chose a luxury hotel. Hermès has weathered the recession in part by expanding into premium, yet relatively more affordable, accessories and fragrances.