Prestige Pricing in Markets for Luxury & Premium Products

This paper analyzes pricing strategies within various luxury sectors and identifies latent structures between brands and categories. Unlike previous research, we focus on firms’ actual conduct, esp. on firms’ pricing behavior. Through our approach, we expect to enhance the external and predictive validity of our results. More precisely, we web scraped market-data from numerous luxury maisons’ products such as women’s shoes, luxury cars, haute couture and men’s watches (online shops owned by producers as well as other platforms). The results are rather intriguing. First, we arrived at another surprising gender-related finding: Men’s luxury items (e.g. shoes and watches) are significantly more expensive than female products of the same kind. An interesting and counter-intuitive finding. Next, a hierarchical cluster analysis shows primary effects of both gender and price in defining luxury categories. We find that in the category of personal luxury goods, LV is more of a feminine brand. Next, our results show a somewhat expected positive correlation between brand value and prestige pricing. We like to think of this finding to possess much validity as it is based on primary data reflecting actual firm conduct. Interestingly, we find that in some categories, considerable competitive pressure is coming from-luxury-wise--lower-scaled companies. For example, we find evidence that Mercedes- Benz attacks Bentley and even Rolls Royce. It will be most interesting for future research to investigate the degree to which this conduct challenges established high-end manufacturers .

Keywords: luxury, prestige/premium pricing, web-scraping, online fashion, luxury cars