Diamonds are just rocks mined from the bowels of the earth. They have been invested with value by good marketing — showing diamonds in use by the celebrities and royalty, promoting them as an expression of love, and as something that stood the test of time. This is true for Swiss watches and French wines. These products have become what they are today riding the back of successful marketing.

These products symbolize what a luxury brand is. They satisfy the need for self-worth and an aspiration to belong to an exclusive club. They demonstrate sophistication and class. The ownership and gifting of such products have high emotional values. Consumption of such products itself becomes a source of identity. A luxury product is a market of differentiation, e.g. LVMH bag or Cartier watch.

Price premium on luxury brands leads to huge profit margins for most luxury brand companies. A luxury brand’s value lies beyond its core product function. More than 80% of it consists of brand value and the rest is made up with features such as quality, technicality and aesthetics. A luxury product becomes justifiably expensive and is meant for a select few. Luxury is a matter of perception. It is aspirational. A brand has to meet this perception by premium quality. Luxury marketers have to shape the consumer perceptions. Even amongst the select audience of luxury brands, a smaller super niche super elite club can be created. Such elitist bias is shown by creating signature products and by-invitation sale. As many more people can afford luxury brands now, prestige, and exclusivity are created by distance, not necessarily financial, but intellectual and cultural. Ad agencies promote cultural and intellectual distances.

Corporate elite is a good audience for luxury brands. Luxury itself is vulnerable to dynamics of the market place — what is luxury to one is a matter of life-style for another. Luxury brands cannot afford to become common place, and hence have to innovate constantly.