Sneak A Peek At The Luxury Segment- Take On Indian Market

Published by MBA Skool Team, Published on October 13, 2012

It is a product or service that is not a necessity. It is something that the owner takes pride in owning. An interesting way of categorizing a luxury good would be by considering the affinity and trust of customers for respective brands. On the Brand resonance model you would probably rate such goods in the Resonance category – representing intense and active loyalty, strong and favorable and unique brand associations.


Brand Resonance Model

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India and Luxury

The preliminary need for identifying successful luxury brand strategies in India has been recognized. Globalization, information pervasiveness and increase in purchasing power are the three primary reasons for the growth of this segment in the Indian market. Although certain salient aspects of luxury brand management remain constant, yet there is a need for identifying the stage of mindset of the Indian consumer towards these brands.

Are the luxury goods worth the price?

Well, a finance guy would probably say no, or maybe even laugh at the price quoted. Who says a ladies handbag can be worth INR 30,000? But, I have a different opinion. A Prada dress is worth every bit of the penny it costs. They charge for brand Equity [The differential effect that brand knowledge has on consumer response to the marketing of that brand]. Brand equity is that amount which the consumer would not have paid if he or she was unaware of the Brand of the product.


Brand Equity

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When the customers are ready to pay a billion why will I charge only a 900 million? In economic terms, if I do so, I would be  losing out on my consumer surplus, and thus reducing my profits. A wise man would find ways to  capture the entire one billion. And how would this wise man manage to do that is by creating Brand Value.

The Concept of Status Signaling through Segmentation

A study proposes a taxonomy that assigns consumers  to one of the following four groups based on wealth and need of status:

  • Patricians – they possess significant wealth and pay a premium for inconspicuously branded products than outrageously branded products. They want to associate themselves with other likes of their group. They use quiet signals and do not want to flaunt the brands they carry. For example they would carry a GUCCI bag with no label on the outside. Or a small logo.
  • Parvenus – they possess significant wealth but believe more in status flaunts.  They associate themselves with others who have and also want to dissociate with the have not’s. To them a distinctive Louis Vuitton’s “LV” monogram is more important than the usefulness of the product.
  • Poseurs – They aspire to have; mimic the Parvenus. They often use first copies or cheaper imitations of the high end brands.
  • Proletarians – Lower social or economic class. Do not engage in status signaling.

Pricing and Brand Prominence

The study further states that Brand Prominence and Price are negatively correlated. That is the more subtle the brand appearance (logo, symbol etc) on the product, the costlier it is. Which in fact is true,  The smaller the logo on a Mercedes, the more high end it is. Thus, within the luxury band Portfolio, if we arrange the variants in an increasing order of luxury, in our product line depth, the cost also moves as we move downwards. Whereas the relation between price and brand prominence works in the opposite way for Counterfeit goods. This is because the consumers of these counterfeit goods are looking for more Brand Prominence.

Thus, a Patrician would go for a higher price and lesser Brand Prominence in contrast to a Parvenu who would want higher Brand Prominence and a cheaper good.

Loud and Quiet GUCCI Handbags

[Choice of Patrician Vs Parvenu]

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Quality, Perception and Luxury

Quality comes with a price. If we plot a graph between quality and price, there is a directly proportional relation. The luxury segment goods mandatorily come under the high quality standards. All these goods are highly durable. It is obvious that a customer will not pay a price for a product that does not last long. Consumers of luxury products and services, especially in emerging markets like India, are becoming increasingly selective  in allocating their  expenses. They are not only spending less, but are also becoming more aware of the price / quality ratio. Another important defining criterion in purchases of luxury goods is the investment aspect of the product. Consumers are looking at non seasonal and durable products, hence the success of the classic brands which have never compromised on the quality of their products. There is an increased awareness of raw materials; with consumers paying attention not only to their quality but also to the standard of processing. For the same reason it is also observed that these products belong to the more classic and ever green category rather that falling in the so called `trendy` segment.


There have been a number of studies on the Indian market in the luxury goods segment. Yet, a lot more needs to be covered in this sphere. The mindset of the consumer needs to be studied thoroughly and the gaps that exist in the perception of the consumer and the brands should be filled. A study conducted by the AT Kearney suggested that the Indian Luxury segment would be around US $14.7 billion by the year 2015. The rising elite class and the increasing purchasing power of the affluent class is a signal enough to capture the eye of these foreign luxury brands. Not only will it be the survival of the fittest but it will also be the survival of the most vigilant!

This article has been authored by Sukhda Dhal from Great Lakes Institute of Management.

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