The Luxury Business Model
The term Business Model is a strategic management and entrepreneurial tool. It dates back to the earliest days of business and describes the way in which a company operates. Many entrepreneurs strive to make their business attractive to customers in the top financial bracket, the ‘high rollers’. This is widely described as a luxury business model. But why is this type of business model attractive to the entrepreneur?
Perhaps the first reason would be that they know that if they choose these products then payment will be forthcoming, affordability is not an issue. However, they will need to ensure that the products or services on offer can be distinguished by providing the highest quality of privileges and levels of service associated with the utmost comfort.
What appeals to these customers? Perhaps, uniqueness, personal service differentiation and the goods should have the marketing associated with the brand that means and oozes quality.
Therefore the focus for the entrepreneur entering this marketplace has to centre on; • Employing competent and knowledgeable staff • Frequent memorable events • Comfort and after sales attention to the highest standard • Detail throughout • A snob factor (cannot be put simpler?) • Pricing associated with the goods
This concept has been around for many centuries. Merchants presented ancient Roman patricians precious fabrics and intricate jewellery. Architects designed pompous and spacious villas and palaces, for example the visit Forbidden City and Summer Palace in Beijing, built in 1420 are prime examples. Both have an air of superiority and respectability.
The current super rich are the new royalty and they expect the same. They may not have the kingdom but they share the same desires.
Think of any product and then consider the finest or ‘brand leader’ in the range. From a motor vehicle to a watch, we all know what we should be driving or wearing. For travel the hotel brand is obvious. Air travel is cheaper in economy than first class, so even for those 8 hours "the rich" want more. They deserve more for the price being paid, limousine collection, the use of a private lounge, a first rate service and to be served ahead of others and more space while flying. A palace in the air! Also consider banking. We know where the Queen carries out her banking. Also in the US there is the equivalent. It only services those able to invest $50million in cash. We can all aspire to join those few.
You may now be tempted to increase your prices, but if you do, then the service has to be measurably better than anything else around. There is substantial potential in emerging markets to cater for the emerging millionaires, but a luxury product or service should be exclusive and highly desirable.
Next week I shall be talking about the Chinese economy and sharing some insight from my recent visit. In the meantime, please feel free to comment below and follow me on social media: