Luxury Marketing: A Social Status Game

In this guest post, AFFINITY strategist Caspar Yuill (pictured below) offers his top tips on playing at luxury marketing AND a few more on improving your own social cachet too…

Consider this brand proposition. A product with a ridiculously high entry price; extremely limited availability, to the point where you are looking at a wait list that can stretch for years; and a pervading sense of needing to prove your worthiness to part with an exorbitant amount of money for the privilege of purchase success. You would be forgiven for thinking this is a brand proposition destined to fail. In what universe could something that has such a difficult customer journey possibly succeed? That would be the Birkin Universe.

The Hermes Birkin handbag (main image), which can set you back anywhere from $10,000 to $300,000 (one even resold for half a million dollars recently), requires some serious strategy and effort. You can forget about just walking into a store and asking to purchase one or even see one. You have to be a Hermes customer who has demonstrated your love and expenditure before the coveted and limited bags are presented.  You have to prove your worthiness before being granted the privilege of ownership of the holy grail of bags.

This may sound nonsensical according to rational economic theory – someone wanting the optimal usefulness of an item would never choose a luxury good with so many other options. That said, luxury purchases are in fact quite rational if you consider the theory of social status, which also gives us clues and cues for successful luxury brand marketing.

The Foundation of Social Status

The pursuit and display of social status often receive a scoff as an expensive car drives by, or an eyeroll after seeing an outfit worth $20,000 strut down the catwalk. It’s not all that outrageous or surprising though, as pursuit of social status is intertwined with our evolution and biology.

Humans understand and recognise social status from a young age. Even pre-language toddlers can grasp social dominance, and anticipate that social dominance leads to more rewards. Social status may have health benefits – one study found that increased social status may help us respond more productively to stress. And luxury is a viable route to getting more of it: one study found that displaying luxury labels versus no-name brands results in more favourable perceptions and gets the wearer preferential treatment.

This idea of social status is not new. Economist Thorstein Veblen coined the use of conspicuous consumption to signal social status in 1899 when describing luxury goods that defied conventional economics. In opposition to the usual relationship between price and demand, that as price goes up, demand goes down, Veblen goods see increases in demand as their price increases. The likely explanation for this is that the Veblen goods are scarce, and in turn act as a social signal that the person has an appropriate amount of resources, either means or social connections, to obtain them. Accrue enough of these signals and your social status increases.  

Status Across Social Groups

Social status is not only restricted to class structures. Social status can be accrued in any group and vary based on the group. The signals that would show social status for people in the corporate world, like a designer watch or frequent postings on LinkedIn, are vastly different to the signals that show status in skate culture, like nailing a backside tailslide, for example.

The Importance of Proof of Work

What I think is the cause of Veblen goods is how these items display proof of work – the demonstration of the resources like time, money, or effort, to be able to show a signal that accrues social status.

The Birkin is a classic example of proof of work. The wearer indicates that they have put in significant work buying Hermes products over a long period of time, and therefore, by holding that bag, they are a person of considerable status. Another good example of proof of work is used by luxury streetwear brand Supreme, which uses limited edition drops so its wearers can show their proof of work in acquiring these rare collabs and products.

A Cheat Sheet For Applying Social Status Theory

Identify Who and What?

• Identify the target audience, the group you want to accrue social status with, and what behaviours create those signals.
• Psychographic research may be useful here to establish a broad audience. For example, a recent study from Mindshare America identified 5 distinct luxury personas, each with different strategic considerations for marketers.
• Once you have an audience in mind, do some qualitative research to identify what behaviours lead to social status. This can be as simple as walking onto the street and taking note, as crafty as delving into forums and subreddits or as complex as conducting ethnographic research.

Build Proof Of Work

• Consider how to create and display proof of work from the people buying it. Usually, this is by manufacturing scarcity.
• One way to do it is by limiting where and when one can purchase it, or by collaborating with another big name in the field for a limited run of items.
• Fashion retailers, from luxury brands like Louis Vuitton to high-end athleisure Gosha Rubchninskiy, use both tactics with “drops” of limited release clothes to create urgency and scarcity.

Think About The Signal Of Social Status

• Consider how prominent the signal should be for your target audience. One study found that as luxury products became more expensive, their labels and logos became smaller.
• This is because the higher the status of the group, the less likely they’ll be to want to associate with the lower classes. To that end, they’ll want to be more subtle about signalling to each other what class they’re in. Think Maison Margiela jackets, with their signature four stitches, versus a Kenzo technicolour tiger. Your price point will have a bearing on your design.

Use Your Customer Experience As A Dry Run

• Establish a microcosm of treatment within the brand experience that the buyers might expect from using the product.
• For example, Net-a-Porter recently launched shopping experiences picked for you and presented in your home, and invitation-only events. This experience of extra status in the brand suggests it might apply outside the brand as well

So, is this article simply a way to raise my own social status in my chosen group? Well yes, of course it is! But it could be said that most of our behaviour is.