Premium vs. Luxury

How companies like Audi are redefining product classes at the expense of long time brands, who are now trying to get back into the premium game.

Lately, I have been thinking of a couple luxury themes I’d like to explore in my posts. They center around a couple main questions:

  • How can a brand communicate luxury through pricing?
  • Should pricing emote a sense of selectivity or should it be strategically welcoming to a larger group, yet segmented in the facilitation of the consumer experience?
  • What is the difference between “premium” and “luxury” as contextual product categories?
  • Do luxury marketers and business practitioners need to gain formal academic training in luxury branding or is working experience the best way to improve your mettle in this industry?

Eric Pesola is a good friend of mine from business school (and hopefully someone I’ll work with in the future). He’s always thinking and reading interesting stuff, which he passes over to yours truly. Below is an article he sent me discussing the divergence between the premium and  luxury auto segments.

How companies like Audi are redefining product classes at the expense of long time brands, who are now trying to get back into the premium game.

How companies like Audi are redefining product categories at the expense of long time brands, who are now trying to get back into the premium game.

As I said to him in my reply:

Thanks a bunch for this article. It is very engaging. I’ve been thinking a lot about the difference between premium and luxury… It seems like today’s premium was yesterday’s luxury. I’m starting to see a class [product] continuum going first from Luxury (which has ultra, super, accessible, aspirational and so many variants) to Premium, and then Commodity (or everyday goods). So far, the main factors that I think can move a product from one group to another are pricing and branding. At the higher tiers I think you can seal your position with exclusivity, limited distribution (or scarcity), and innovation (presenting the old in a novel way). Thanks so much for sharing this article. It got me thinking, and I think it’s worthy of a post on my blog.

My thoughts are not yet solidified on this question of premium versus luxury, but at the least I’m thinking about this seriously. I’ll let you know when I refine this thought. In the meantime, check out this other article from Luxury Society summarizing the thoughts of Jean-Noël Kapferer (co-author of The Luxury Strategy). I think it holds good insight on the answer(s) to this profound question in the business of luxury.


4 thoughts on “Premium vs. Luxury

  1. I think premium is things you pay extra for to meet your requirements while luxury is things you pay extra for to meet your personality or ego. Premium is practical while luxury is lust. Product is in the same category but the buyer is not.
    (Premium) I buy the titanium watch because I go salt water diving.
    (Luxury) I buy the titanium watch because it looks better than steel.

    • Jason,

      Your perspective is simple, but profound. Thanks for chiming in. What personal preferences or reasons do you think would make you consider the titanium in the first place. I ask because it seems to me that you wouldn’t care if it was marketed as premium or luxury. So I am wondering how you would typically first come across the product without some direction from a branding marketer. Thanks again.

      – Edmund

      • I would care how this was marketed. Being the premium buyer, the branding marketer would have to grab my attention by its practical functionality and purpose. They would have to educate me why this product is worth the premium price. If I were the luxury buyer the marketer would get my attention with sex appeal, status symbol, etc. Do I believe this titanium feature will make me feel happy? Or will this feature make people view me the way I want them to see me? Hope this makes sense. Great topic, keep it going.

      • Thank you for sharing your opinion on the matter. It’s interesting to see how you define luxury. I’m starting to notice more brands that are redefining the term in ways that can appeal to tastes like yours. Awesome contributions.

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