The market for luxury product is hit by crisis just like any other market, but in fact it's in a much trickier position. The marketing strategies must be chosen very carefully.
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First, the expenses for luxury products are usually very high due in part to the finest materials used and in part because of high wages the best workers earn. Unfortunately, that can't be avoided: you simply need the best materials for, say, Porsche or Louis Vuitton, and you need the best masters of craft to make the best products in their class.
So, when crisis hits the luxury products company, in a very short time the loss can be tremendous: no luxury company can allow their products to stay on shelves for several months because that means the end of the company. Because of that, product strategy is much more important question while talking about luxury product than in some other, cheaper markets.
The first and most important economic rules says that there is a clear connection between demand and price. If there is no demand, the price must go down, in fact the market will lower it down. However, in the field of luxury products there is one more fact that must not be forgotten: customer expect high price. Thus, we have two contradictory facts that we must balance well if we want to overcome the crisis.
The first move you must not do is to lower down the prices. The sole fact that your product is cheaper means that your product is not luxury anymore. Porsche on sale for 10,000 dollars is not Porsche anymore although it has all technology and knowledge built-in as any other "normal" Porsche.
There are essentially three things you can do. Which one will work, well that depends on your product and target group of customers. The first is to strengthen advertising and to show the market that you respect your brand and all values it brings to the buyer. In the crisis advertising must rely on emotional aspects on the brand, and technical characteristics must fall in the second place.
For example, Porsche is a symbol of freedom and expensive lifestyle and advertising should repeat time after time that there's no better way to show that customer is successful, even in the time of crisis, if he drives a Porsche. New model should be advertised as the new symbol of success, not as a more powerful engine or better design.
The second thing is to come up with new group of products at a lower price. That may be, for example, a line of mobile phones for, say, 350 dollars. That will have two good consequences: buyers who can't afford a new Porsche will be able to buy a "Porsche phone" and they will not abandon the brand, and you'll have another source of income. In almost every luxury market there are possibilities to create a new product line in cooperation with other companies, but it is important to keep the prices above the "usual" products.
The third option is strip down some parts of the product, but this is very dangerous method and it must be done very carefully. Again with our example, Porsche may decide to bring down the prices by slashing luxury leather in the inside, use cheaper car radio, or throw away a GPS system.
This strategy aims at the customer who is on the verge of buying: he may have 50,000 but not 55,000 dollars. So, with this move your target group is small - but in crisis every customer is important - and you must be careful not to ruin your product too much.
As odd as it may seem to some, luxury products feel the crisis as any other products. However, when they start to go down, they go down very fast and that's the reason why marketing luxury products is a very delicate question. ■