Why High Prices Don't Define Luxury for Gen Zers

Key Takeaways: To create extreme desirability, brands must understand the consumer, solve their relevant problems, and give them meaning and authenticity. Most brands only focus on their product's exclusivity and craftsmanship. But they often omit the most fundamental part of the luxury equation: the customer. Gen Z grew up using social media and quickly learned how to broadcast their curated lives. As a result, the brands they want to be associated with must be compatible with their personal brands. What is luxury? One common answer is: “It has to be expensive.” However, is that truly the definition of luxury? Let’s take a look at luxury real estate and look at two buyers. One is a 28-year-old first-time house buyer looking at a 700,000 property for his young family. For them, this purchase is the largest investment they have ever made (and may ever make). This house is their dream, in which they want to make lifelong memories. In scenario two, a billionaire buys a 20-million-dollar mansion in Malibu as part of his investment portfolio. Although the purchase price is much higher, it is only a fraction of his wealth. The purchase gets handled by his family office — he merely approves it and has no intention to live in the property full-time. Which purchase is more “luxury?” When purely looking at the numbers and comparing the size, location, and amenities of the two houses, the latter would clearly be the luxury purchase. But for that specific billionaire buyer, the house is merely an addition to a portfolio. So, from an individual perspective, the first purchase — despite its significantly lower price — is more luxurious. This comparison indicates that the concept of luxury is more elusive than most recognize. It is not necessarily about “more and better,” but rather a result of what creates more perceived value. And sometimes, for some people, this can be the seemingly lesser purchase. Let’s look at another example. I don’t fish, but one of my best friends does. You can wave some of the most sophisticated fishing equipment in front of me, and I will not react. It would have zero value because I don't perceive luxury and, therefore, have no willingness to spend since the category is irrelevant to me. However, the same fishing equipment may be a dream purchase for my friend: a luxurious desire on which he would spend a significant amount of his money. Therefore, a better definition of luxury from the perspective of individual customers is "extreme value creation." To create extreme desirability, brands must understand consumers, solve their relevant problems, and give them meaning and authenticity. It sounds intuitive and almost banal, but a lot of luxury brands fall short on it. Most brands only focus on their product's exclusivity and craftsmanship. But they often omit the most fundamental part of the luxury equation: the customer. In the end, it is always the customer who decides what creates extreme value. If they perceive this extraordinary value and the highest desirability, then the willingness to pay will equal the value perceived at the budget available. That is why a 700,000 home purchase can be more luxurious than a 20 million one from a customer's perspective. So what does it mean for luxury brands when it comes to connecting with Gen Z? Firstly, the stakes with this target group are much higher. They grew up using social media from day one and quickly learned how to broadcast their curated lives. As a result, the brands they want to be associated with must be compatible with their personal brands. No generation has ever been this informed, and none was this willing to go the extra mile and scrutinize the brands competing for their attention. For Gen Zers, a luxury product's high quality is a given. In other words, they expect top-notch quality from their brands. If it is not there, they move on but won't pay a premium for it. Instead, they value brands that have values like sustainability, diversity, and inclusion. And make no mistake, they will immediately identify if a brand is just faking it or if their values are sincere. To win over Gen Zers, luxury brands must think beyond the price. It does not mean they should lower their prices, but rather, they should create relevant strategies that resonate with the high expectations of younger audiences. And they must know how to connect with them through social media, key opinion leaders, and inspiring content. In essence, luxury brands do not just compete with other luxury brands; they also compete with any experience that feels casual, beautiful, inclusive, or respectful like an Apple Store experience or those from brands like Nike or Glossier. Today's luxury looks and feels very different from how we defined luxury in the past. Unfortunately for many luxury brands, their in-store experiences are interchangeable and not distinctive or disruptive enough for Gen Zers to see them as relevant. When I do luxury retail immersions with our Gen-Z advisory board, I often hear a comment like: “This brand is boring.” That is the kiss of death from a Gen Zer. It should be clear why a high price doesn't define luxury for Gen Z. So, to attract this critical target group, a brand needs to disrupt the way it does business, think from the customer's perspective, and precisely define how they create value for them. And since Gen Z will be the number one customer group for luxury brands by the end of this decade, there is no time to waste. This is an op-ed article and reflects the views of the author and does not necessarily represent the views of Jing Daily. 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

Why High Prices Don't Define Luxury for Gen Zers

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Published November 22, 2021

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Why High Prices Don't Define Luxury for Gen Zers