Some disruption is predictable, like the ever-changing technology disruption that’s reshuffling industry leaders in the luxury car, luxury watch, and luxury communication device industries. But others are unpredictable, like the outbreak of the Covid-19 virus in China, which has affected millions of people with a magnitude that’s impossible to predict.
All these disruptions can have a significant impact on markets, categories, or businesses, and these dramatic changes often reveal the real, hidden drivers of luxury’s value. One category that’s in high demand due to safety concerns over the Covid-19 virus is private aviation. What many people previously thought of as elite travel for a select few, is now a go-to transportation choice for consumers who never traveled in a private jet before — in China or elsewhere.
The Telegram published an article on February 13, 2020, with the headline: “Interest in private jets surges as Covid-19 virus keeps airlines away from China.” This reveals the importance of one “hidden driver of luxury value” — the concept of “public protection.” What is interesting about this concept — in conjunction with other hidden aspects like “enhanced attractiveness” or “the signal of being an expert” — is that it’s one of the true drivers behind why people pay enormous premiums for luxury goods and services.
Why is this important? Most luxury brands focus their attention on the tangible products and then market those products. For them, it’s the product that creates brand perception. However, our research indicates that intangible “hidden aspects” are the true drivers of luxury value.
This has become evident during this recent virus outbreak. With commercial travel restricted in many places because people are concerned about their health and safety, the demand for a higher degree of protection increases. As a result, private aviation as a category sees a higher demand due to the extreme value it creates by protecting the public.
This is an important reminder for luxury brands that true value doesn’t come from the product itself but is driven by intangibles that are of importance to the customer. We find that most luxury brands don’t put enough of their resources toward managing these hidden, intangible drivers, and instead earmark them for marketing their products. And without a sufficient focus on luxury value drivers, luxury brands aren’t creating optimal value.
With ever-accelerating disruptions on the rise, now is the time for luxury brands to refocus their attention on their true value drivers. And with more and more globalization, any impact in one region has a greater worldwide effect than it did in the past. Therefore, understanding the precise mechanics of extreme value creation has never been more important.
Daniel Langer is CEO of the luxury, lifestyle and consumer brand strategy firm Équité, and the professor of luxury strategy and extreme value creation at Pepperdine University in Malibu, California. He consults some of the leading luxury brands in the world, is the author of several luxury management books, a global keynote speaker, and holds luxury masterclasses in Europe, the USA, and Asia. Follow @drlanger