One of the most common questions I get asked is: what’s the difference between premium and luxury. Even when brands use the term luxury, there is a lot of confusion. When is luxury “real,” when is it “aspirational,” and when is it “affordable?”
Actually, this question is what inspired me to do my Ph.D. research, leading to my thesis “Decoding luxury” and my luxury textbooks including Luxury Marketing & Management.
In the book, I explicitly highlighted the dilemma: “Upon closer inspection, however, difficulties of defining and managing luxury come to the surface. Expensive, exclusive brands become more and more ubiquitous, easier to buy and therefore easier to consume… but can something still be ‘luxury’ if it's owned or consumed by many people?”
Can something still be a “luxury" if it's owned or consumed by many people?
Similarly, CEOs of luxury brands often tell me about their dilemma in defining their precise space. Where does premium end and luxury start? Importantly, what are the principles of managing luxury brands successfully? And how can brands increase their desirability to be able to sell at higher price points and to more people?
In my point of view, the most critical question that the leadership team of a brand — independent on the positioning — should ask is, how much value do we create? When I created the luxury pricing tool “Luxury Index,” I was able to compare the degree of value created between categories in a quantitative fashion.
The result was stunning. In many categories, such as champagne, most brands create a similar value proposition even at the top tier, leading to a relatively low Luxury Index. This indicates that the category as a whole has somewhat limited value creation compared to, say, handbags or shoes — despite champagne being a symbol of luxury for many.
In other words, the top champagne brands could create significantly more value and by this become more profitable and desired.
When analyzing the brands and categories that achieve the highest perceived value, or the most luxurious brands, there is a unifying factor: They all have a great story.
In fact, luxury brands are masters of storytelling. They create powerful narratives that make their values tangible, far beyond heritage, craftsmanship, or quality. These stories help consumers connect with the brand on a deeper level and justify the high price points. The stories often evoke a sense of cultural connection or artistic expression.
Importantly, great brand stories offer an emotional connection that goes beyond the tangible product. The best brands engage with consumers on a deeply emotional level, invoking feelings of belonging, prestige, aspiration, or exclusivity. The story is more important as the product itself, because it drives the value significantly.
Premium brands, on the other hand, focus more on functional benefits and tend to appeal to the rational side of consumers. They are superior in terms of quality, features, or design compared to mass-market products but do not necessarily evoke the same emotional resonance as luxury brands. As a result, their narrative is more focused on the tangible benefits of the product, such as performance, reliability, or innovation. They tend to talk more about the “us” (we do, we create, we craft…) instead of the “you.”
Premium brands are superior in terms of quality, features, or design compared to mass-market products but do not necessarily evoke the same emotional resonance as luxury brands.
My extensive research over the last 15 years could show that people buy a personal positive perception shift when they buy luxury. Therefore, creating cultural capital through the brand storytelling is not optional or nice to have; it's the central nucleus of creating extreme value for clients and the basis for luxury perception. Without the story, there is no value.
Premium and aspirational luxury brands often lack a comprehensive and, importantly, differentiating story, and thus don’t manage to create extreme, non-linear value within their categories. As a result, premium or aspirational luxury brands may only achieve minor price premiums over the category average, often less than 10 to 15 percent, whereas extreme-value-creating luxury brands can achieve as much as 1,000 times more.
And this is where luxury brands have an enormous opportunity. A lack of storytelling impacts everything: a customer's willingness to pay, engagement, loyalty, and even acquisition cost.
In a project for a French luxury brand, a step change in social media engagement and purchase conversion was achieved simply by clarifying the brand story, making it more tangible and relatable, and making it consistent in execution. It’s the single most important lever for brands that want to create dramatically more value.
So, are the most expensive champagnes too cheap? Our data indicates yes. And so are the most expensive items in many other categories. The difference is in the story. And, crucially, the delivery of the story across all touchpoints and under all circumstances.
A great brand story means nothing if clients don’t get it. It's time for many luxury brands to rethink their stories and elevate their value creation model. Are you ready to break the mold and become truly exceptional, or will you remain trapped in the shadows of mediocrity?
This is an opinion piece where all views expressed belong to the author.
Named one of the “Global Top Five Luxury Key Opinion Leaders to Watch,” Daniel Langer is the CEO of the luxury, lifestyle and consumer brand strategy firm Équité, and the executive professor of luxury strategy and pricing at Pepperdine University in Malibu, California. He consults many of the leading luxury brands in the world, is the author of several best-selling luxury management books, a global keynote speaker, and holds luxury masterclasses on the future of luxury, disruption, and the luxury metaverse in Europe, the USA, and Asia.
Follow him: LinkedIn: https://www.linkedin.com/in/drlanger, Instagram: @equitebrands /@thedaniellanger