Polo Ralph Lauren is a luxury retail brand that designs and markets men’s and women’s clothing, accessories, and home furnishings. Their collared shirts and shorts are the poster-style of clothing choice for many fraternities here at the University of Texas at Austin. I am not a part of a fraternity but I do, on occasion, wear luxury retail brands. Wal-Mart and Target have been known to sell clothing that is very similar to the clothing that luxury brands sell, however, without the beloved logo. Has American materialism gotten so bad that we’d rather pay $100 for a shirt with a logo rather than pay $15 for almost the exact same shirt, without the logo? Mark Twain once noted about Tom Sawyer, “Tom had discovered a great law of human action, namely, that in order to make a man covet a thing, it is only necessary to make the thing difficult to attain." Is the exclusivity and difficulty to obtain certain retail items the reason us Americans buy these products? I am going to dig down and explore what exactly has driven us to purchase luxury and overpriced products.
During the 1970s, an Italian diamond dealer, Salvador Assael, and a Frenchman, Jean-Claude Brouillet went into the black pearl business . Assael’s initial marketing efforts failed because of the lack of demand for black pearls. However, rather than lowering the prices for the pearls, he took them to an old friend, Harry Winston, the legendary gemstone dealer. Winston then put them in the window of his store on Fifth Avenue, with an extremely high price tag. Assael topped off this new marketing plan with a full page advertisement that ran in some of the more upscale magazines. The black pearls eventually made it throughout Manhattan, hanging around the necks of the city’s elite.
How was Assael able to persuade the people of Manhattan that these black pearls were now luxurious and fashionable? First, we shall look into the anchoring effect and how it affects the way we purchase things.
The anchoring effect occurs when people consider a particular value for an unknown quantity before estimating that quantity. It all stems from the idea of imprinting; that is, we are initially imprinted to a certain price or exclusivity, and from then on we are anchored to that specific price or exclusiveness. In the case of Assael, he anchored his pearls to the finest gems in the world (with the large price tag), and then the prices followed forever after. The full-page advertisements in the upscale magazines were enough to convince the people of Manhattan that the black pearls were exclusive; they were then anchored to this exclusivity and the price tag then felt appropriate.
This idea of anchoring is what happens to us when we buy luxury retail; we assume that the price tag is appropriate for the product and we are imprinted with it. Many people are guilty of buying into companies exaggerating marketing schemes and don’t even know it. An appropriate quote would be this one from Daniel Kahneman,” You are always aware of the anchor and may even pay attention to it, but you do not know how it guides and constrains your thinking, because you cannot imagine how you would have thought if the anchor had been different."
There’s a cornucopia of brands and products that are marketed in such a way that is meant to display a type of exclusivity. Modern brands such as Apple, Polo Ralph Lauren, Louis Vuitton, and Mercedes are the first that come to mind; but companies have been using this type of marketing scheme for centuries.
In the eighteenth century, a man by the name of Josiah Wedgwood began selling luxurious pottery in Great Britain. Wedgwood understood that in the emerging consumer society, marketing was as important as manufacturing. He was an innovator who sought a new way of creating and sustaining customer loyalty by building his brand systematically. Seeking exclusivity by using brand marketing had been unheard of up to this point. In the latter part of the eighteenth century, he began impressing his own name in the unfired clay; now every piece advertised the Wedgwood name.
The Industrial Revolution brought many new manufacturing processes and the working class now had more money to spend on luxury goods. Wedgwood understood that much of the spending was the result of social emulation. The term ‘social emulation’ describes the idea that whenever people buy something in a manner to attract attention; they do it to keep up with their peers.[1] This concept is basically ‘keeping up with the Joneses.’ Eighteenth century Britons were much like modern consumers in that they spent like the rich did even though the Industrial Revolution did not distribute this income equally. Middle-class Britons aspired to be like the rich and their aspirations went into the luxury retail they bought.
Another tactic that Wedgwood used to market his brand was celebrity endorsements; a tactic that is constantly used by modern companies. He had traveling salesmen carry samples of goods endorsed by aristocrats along with a sales manual with specific marketing guidelines. Even with prices that were well above the industry average, he continued to generate high revenue.
Modern day advertisements are smothered with our favorite celebrities and athletes endorsing all varieties of products. When selecting a celebrity endorser, a company might consider the physical appearance, intellectual capabilities, lifestyle, and compatibility between the brand and celebrity. Many people thrive to find some way to relate to these celebrities; even if it means spending more money than they should.
With the advances in social media, it is now easier than ever for companies to market their brand using celebrity endorsements. Images of our favorite superstars endorsing products are all over Twitter, Facebook, and many other social media sites.
Tom Sawyer had consumers all figured out more than a century ago. For hundreds of years, our favorite companies have used price anchors, brand exclusivity, and celebrity endorsements to get consumers to stray away from rationality; which ultimately leads them to pull a little more money out of their wallet than they would have if they were behaving rationally. The underlying agenda of these marketing schemes has been to convince consumers to purchase products that they might not have wanted if such anchors or advertisements had been different (or not have existed).
Hook 'em
[1] Katie
Whitford, Conspicuous Consumption, Social Emulation and the Consumer
Revolution (http://newhistories.group.shef.ac.uk/wordpress/wordpress/?p=1338),
1/24/13.
