The true cost of Luxury

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sunny_socal
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The true cost of Luxury

Post by sunny_socal » Thu Sep 14, 2017 8:17 am

Interesting article:
https://www.waremakers.com/the-post/how ... t-guardian
According to marketing professor, and luxury industry specialist, Vincent Bastien, the aim of the "luxury" brands is to create the highest possible brand value. They do this by following a particular set of marketing rules, including:

• Dominate the client
• Keep raising the average price of the product range
• Keep non-enthusiasts out
• Make it difficult for clients to buy
• Luxury sets the price, price does not set luxury

The client should be "dominated" by the marketing constantly reaffirming qualities such as "time, heritage, country of origin, craftsmanship, man-made, small series etc.," says Bastien.
luxury brands madison avenue new york rent fit out costs store money

Luxury brands spend exorbitant amounts renting and fitting out stores in prime locations around the world — such as New York's Madison Avenue.

This, according to the marketing expert, is how the industry can "command their incredible pricing power and margins." And it seemingly doesn't matter if the products are actually made in China or Transylvania. As long as the image of "heritage, country and craftsmanship" is continuously reaffirmed and nurtured, the prices can stay high. As Bastian says:

"The more [the product] is perceived by the client to be a luxury, the higher the price should be."
I constantly wrestle with this myself - am I buying the brand, or am I buying quality? (The article concludes that people are starting to gravitate toward the latter rather than focusing on the label.) Here on BH the hot topic tends to be luxury cars but it can apply to almost anything.

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Re: The true cost of Luxury

Post by livesoft » Thu Sep 14, 2017 8:24 am

The top-20 universities know all this oh so well. Talk about domination!
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Re: The true cost of Luxury

Post by TheOscarGuy » Thu Sep 14, 2017 8:26 am

sunny_socal wrote:
Thu Sep 14, 2017 8:17 am
Interesting article:
https://www.waremakers.com/the-post/how ... t-guardian
According to marketing professor, and luxury industry specialist, Vincent Bastien, the aim of the "luxury" brands is to create the highest possible brand value. They do this by following a particular set of marketing rules, including:

• Dominate the client
• Keep raising the average price of the product range
• Keep non-enthusiasts out
• Make it difficult for clients to buy
• Luxury sets the price, price does not set luxury

The client should be "dominated" by the marketing constantly reaffirming qualities such as "time, heritage, country of origin, craftsmanship, man-made, small series etc.," says Bastien.
luxury brands madison avenue new york rent fit out costs store money

Luxury brands spend exorbitant amounts renting and fitting out stores in prime locations around the world — such as New York's Madison Avenue.

This, according to the marketing expert, is how the industry can "command their incredible pricing power and margins." And it seemingly doesn't matter if the products are actually made in China or Transylvania. As long as the image of "heritage, country and craftsmanship" is continuously reaffirmed and nurtured, the prices can stay high. As Bastian says:

"The more [the product] is perceived by the client to be a luxury, the higher the price should be."
I constantly wrestle with this myself - am I buying the brand, or am I buying quality? (The article concludes that people are starting to gravitate toward the latter rather than focusing on the label.) Here on BH the hot topic tends to be luxury cars but it can apply to almost anything.

Good article.
I think I have fallen pray to some "reaffirming qualities" described in article, like country of origin, craftsmanship. I think I am getting better at it, and when quality of a product disappoints me I let it known to the manufacturer.
There is also a social aspect to it -- gotta have it cause someone else I know has it. It does apply to a lot of products besides clothing and bags.

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Re: The true cost of Luxury

Post by TheOscarGuy » Thu Sep 14, 2017 8:30 am

livesoft wrote:
Thu Sep 14, 2017 8:24 am
The top-20 universities know all this oh so well. Talk about domination!
That I disagree with.
Many jobs open up saying "top 20 university graduates apply", because their admissions process is stricter, more demand while supply of seats for incoming students is lesser. You might be right that quality of education may not correlate to what some of these universities charge, especially the private ones. But the fact that I am a product of such a university means that I have gone through rigorous admissions process, that everyone with me was (at the time of entering college) smart, and at least some doors will open for me when I apply for a job based on the name. That has to count for something.

BTW not all top 20 are private so they can't charge a premium only because they are highly rated.

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Re: The true cost of Luxury

Post by nisiprius » Thu Sep 14, 2017 8:31 am

The problem is that it is hard to judge quality before a purchase. Consumer Reports once was fairly helpful about this, but not any more. And they started to be less and less useful because of model proliferation, and because many brands simply are no longer very consistent.
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Re: The true cost of Luxury

Post by staythecourse » Thu Sep 14, 2017 9:45 am

I own zero in the luxury department, but my wife does own a few shoes, purse, etc... that fits the nomenclature. My experience in observing hers there was no difference in wear and tear of the material between them and the level of brands right below. There definitely is a difference in quality and rate of wear and tear from the luxury to cheap as one would expect.

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Re: The true cost of Luxury

Post by Pajamas » Thu Sep 14, 2017 9:59 am

That website is hilarious, selling $48.20 "luxury" tee shirts with a story about the company's name:
Gregory de Harlez, founder of classic menswear brand Escuyer, explains his company's unique ties to medieval shield bearers
Company was founded in 2013, but its name provides that unique tie to the past.

https://www.waremakers.com/shop/men/t-s ... over-green

Shipping is extra.

I usually settle for the tier of something that is below "the best" because you generally have to really pay up for that last bit of quality because you are paying for the brand and the expensive storefront or advertising in addition to the quality and because I don't usually need "the best" in the first place. A $15 tee shirt is fine for me. I don't need or want the $50 one.

I'm sure a lot of people are thinking the new iPhone 8 is a good deal compared to the iPhone X, which starts at $999.

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Re: The true cost of Luxury

Post by btenny » Thu Sep 14, 2017 10:52 am

$1000 apple iPhone 10

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Re: The true cost of Luxury

Post by Dottie57 » Thu Sep 14, 2017 11:33 am

btenny wrote:
Thu Sep 14, 2017 10:52 am
$1000 apple iPhone 10

Iphone 8 64gb. Is a good phone. No need for the X.

I kept mt iPhone 5 until I lost it.

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Re: The true cost of Luxury

Post by alfaspider » Thu Sep 14, 2017 12:33 pm

btenny wrote:
Thu Sep 14, 2017 10:52 am
$1000 apple iPhone 10
Apple is a bit different from Madison Avenue luxury goods purveyors. They don't tout country of origin (everyone knows it's China), and the products are quite easy to buy. Non-enthusiasts are welcomed- even encouraged.

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Re: The true cost of Luxury

Post by HomerJ » Thu Sep 14, 2017 12:41 pm

alfaspider wrote:
Thu Sep 14, 2017 12:33 pm
btenny wrote:
Thu Sep 14, 2017 10:52 am
$1000 apple iPhone 10
Apple is a bit different from Madison Avenue luxury goods purveyors. They don't tout country of origin (everyone knows it's China), and the products are quite easy to buy. Non-enthusiasts are welcomed- even encouraged.
Doesn't X stand for Exclusive? Sounds exactly like Luxury marketing 101.

book lover
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Re: The true cost of Luxury

Post by book lover » Thu Sep 14, 2017 12:45 pm

From hunter gatherer to the iPhone X, quite the journey.
Last edited by book lover on Thu Sep 14, 2017 12:47 pm, edited 2 times in total.

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bligh
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Re: The true cost of Luxury

Post by bligh » Thu Sep 14, 2017 12:45 pm

There is a also the concept of a Veblen Good. https://en.wikipedia.org/wiki/Veblen_good

"Veblen goods are types of luxury goods for which the quantity demanded increases as the price increases, an apparent contradiction of the law of demand. Consumers actually prefer more of the good as its price rises, and the result is an upward sloping demand curve."

By the way the iPhone X isn't all luxury marketing. There is a good clip floating around of Steve Ballmer making fun of the $600 iPhone when it first came out. It is priced the way it is simply because the manufacturing capacity needed to make enough to meed the demand of new devices doesn't exist. So they are basically trying to make extra money while they proceed to limit the demand. Sort of like how Disney fearlessly keeps jacking up the ticket prices for their theme parks to try to reduce the waiting lines for all the rides.

I wouldn't be surprised if they cut the price once the waiting lists drop down some sort of like how they did for the original iPhone.

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Re: The true cost of Luxury

Post by alfaspider » Thu Sep 14, 2017 12:49 pm

HomerJ wrote:
Thu Sep 14, 2017 12:41 pm
alfaspider wrote:
Thu Sep 14, 2017 12:33 pm
btenny wrote:
Thu Sep 14, 2017 10:52 am
$1000 apple iPhone 10
Apple is a bit different from Madison Avenue luxury goods purveyors. They don't tout country of origin (everyone knows it's China), and the products are quite easy to buy. Non-enthusiasts are welcomed- even encouraged.
Doesn't X stand for Exclusive? Sounds exactly like Luxury marketing 101.
No, it's the roman numeral 10. It was introduced as the iphone "ten" (as in 10th anniversary), not the iphone "x".

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Re: The true cost of Luxury

Post by Fallible » Thu Sep 14, 2017 2:20 pm

sunny_socal wrote:
Thu Sep 14, 2017 8:17 am
...
This, according to the marketing expert, is how the industry can "command their incredible pricing power and margins." And it seemingly doesn't matter if the products are actually made in China or Transylvania. As long as the image of "heritage, country and craftsmanship" is continuously reaffirmed and nurtured, the prices can stay high. As Bastian says:

"The more [the product] is perceived by the client to be a luxury, the higher the price should be." ...
The statement above reminds me of the appeal-to-the-ego tactic used by Bernie Madoff to lure clients, i.e., make them think his investments were so special (the "luxury" draw) that only special people such as themselves were allowed in.

Good article and thanks for the link.
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DaftInvestor
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Re: The true cost of Luxury

Post by DaftInvestor » Thu Sep 14, 2017 8:05 pm

Luxury doesn't just mean higher quality it might also mean a better experience.
For example - A lot of people buy luxury cars for the quieter and more comfortable ride - not because they feel they are getting a quality product (sometimes the quality is known to be lower).

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Re: The true cost of Luxury

Post by bradshaw1965 » Thu Sep 14, 2017 8:13 pm

alfaspider wrote:
Thu Sep 14, 2017 12:33 pm
btenny wrote:
Thu Sep 14, 2017 10:52 am
$1000 apple iPhone 10
Apple is a bit different from Madison Avenue luxury goods purveyors. They don't tout country of origin (everyone knows it's China), and the products are quite easy to buy. Non-enthusiasts are welcomed- even encouraged.
I'm a long-time Apple fan and pretty disturbed by their move to luxury marketing. It's a pretty fine line to walk but I'm less disturbed by the price and the highest-end tech then the watch bands and the lifestyle branding. To each his/her own.

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Re: The true cost of Luxury

Post by Wildebeest » Thu Sep 14, 2017 8:29 pm

Great article. Thanks for posting.

The fancy Gucci hand bag, the bespoke suit. Here I thought that spending money on name brands got you quality. Transylvania?

I like getting my stuff from Costco so I feel I got a deal without breaking the bank.
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alfaspider
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Re: The true cost of Luxury

Post by alfaspider » Fri Sep 15, 2017 8:41 am

bradshaw1965 wrote:
Thu Sep 14, 2017 8:13 pm
alfaspider wrote:
Thu Sep 14, 2017 12:33 pm
btenny wrote:
Thu Sep 14, 2017 10:52 am
$1000 apple iPhone 10
Apple is a bit different from Madison Avenue luxury goods purveyors. They don't tout country of origin (everyone knows it's China), and the products are quite easy to buy. Non-enthusiasts are welcomed- even encouraged.
I'm a long-time Apple fan and pretty disturbed by their move to luxury marketing. It's a pretty fine line to walk but I'm less disturbed by the price and the highest-end tech then the watch bands and the lifestyle branding. To each his/her own.
They certainly have engaged in some luxury marketing with things like the Hermes branded apple watch. But watches have always played in the luxury marketing space. I don't see the iphones- even at $1,000 as being in quite the same category, however.

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Re: The true cost of Luxury

Post by new2bogle » Fri Sep 15, 2017 8:48 am

Pajamas wrote:
Thu Sep 14, 2017 9:59 am
That website is hilarious, selling $48.20 "luxury" tee shirts with a story about the company's name:
Gregory de Harlez, founder of classic menswear brand Escuyer, explains his company's unique ties to medieval shield bearers
Company was founded in 2013, but its name provides that unique tie to the past.

https://www.waremakers.com/shop/men/t-s ... over-green

Shipping is extra.

I usually settle for the tier of something that is below "the best" because you generally have to really pay up for that last bit of quality because you are paying for the brand and the expensive storefront or advertising in addition to the quality and because I don't usually need "the best" in the first place. A $15 tee shirt is fine for me. I don't need or want the $50 one.

I'm sure a lot of people are thinking the new iPhone 8 is a good deal compared to the iPhone X, which starts at $999.
Holy batman! $50 for a t-shirt??

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Re: The true cost of Luxury

Post by new2bogle » Fri Sep 15, 2017 8:49 am

Wildebeest wrote:
Thu Sep 14, 2017 8:29 pm
Great article. Thanks for posting.

The fancy Gucci hand bag, the bespoke suit. Here I thought that spending money on name brands got you quality. Transylvania?

I like getting my stuff from Costco so I feel I got a deal without breaking the bank.
:sharebeer

Costco is more than a good deal though. They really try to carry only high quality items and their awesome return policy backs it up. There are a lot of Costco fan boys (i'm one of them) but I think for good reason: value (reasonable cost for high quality and service).

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Re: The true cost of Luxury

Post by sunny_socal » Fri Sep 15, 2017 8:53 am

DaftInvestor wrote:
Thu Sep 14, 2017 8:05 pm
Luxury doesn't just mean higher quality it might also mean a better experience.
For example - A lot of people buy luxury cars for the quieter and more comfortable ride - not because they feel they are getting a quality product (sometimes the quality is known to be lower).
Yes, sometimes. In fact a luxury car worth $60k is much easier to justify when even 'regular' cars are now up to $45k (eg. loaded Honda Pilot or Toyota Highlander.) The delta isn't that big.

Purses are just crazy. Purse from a craft fair is $50. Brand name purse from a mall, $200-500. LV purse $2k-$5k. Hermes $10k-30k. The price difference is exponential. Is the $30k Hermes really that much better than the $500 'mall' purse? (eg. Coach, Kate Spade)

BackOfTheNet
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Re: The true cost of Luxury

Post by BackOfTheNet » Fri Sep 15, 2017 9:04 am

Wildebeest wrote:
Thu Sep 14, 2017 8:29 pm
I like getting my stuff from Costco so I feel I got a deal without breaking the bank.
Recently I came upon a "sidewalk sale" from a more expensive clothing company (Mountain High Outfitters). Even at 70% off, a pullover fleece was like $30-$40. The Costco fleece I was wearing at the time felt and looked just as good if not better and was like $14.99 full price.

All that to say, I think usually Costco offers a pretty good value.

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Re: The true cost of Luxury

Post by stoptothink » Fri Sep 15, 2017 9:05 am

new2bogle wrote:
Fri Sep 15, 2017 8:48 am
Pajamas wrote:
Thu Sep 14, 2017 9:59 am
That website is hilarious, selling $48.20 "luxury" tee shirts with a story about the company's name:
Gregory de Harlez, founder of classic menswear brand Escuyer, explains his company's unique ties to medieval shield bearers
Company was founded in 2013, but its name provides that unique tie to the past.

https://www.waremakers.com/shop/men/t-s ... over-green

Shipping is extra.

I usually settle for the tier of something that is below "the best" because you generally have to really pay up for that last bit of quality because you are paying for the brand and the expensive storefront or advertising in addition to the quality and because I don't usually need "the best" in the first place. A $15 tee shirt is fine for me. I don't need or want the $50 one.

I'm sure a lot of people are thinking the new iPhone 8 is a good deal compared to the iPhone X, which starts at $999.
Holy batman! $50 for a t-shirt??
Kanye West's $120 plain white t-shirt sold out almost instantaneously http://www.businessinsider.com/kanye-de ... out-2013-7

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Re: The true cost of Luxury

Post by 41Fin » Fri Sep 15, 2017 9:23 am

stoptothink wrote:
Fri Sep 15, 2017 9:05 am

Kanye West's $120 plain white t-shirt sold out almost instantaneously http://www.businessinsider.com/kanye-de ... out-2013-7
Craziest part about the Kanye brand is that it sells out because re-sellers buy it up and put it on ebay for double the price. So if he had the shirt at $200 it would still sell out in seconds.

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Re: The true cost of Luxury

Post by Capsu78 » Fri Sep 15, 2017 9:47 am

We have reached a point in international travel that we have stopped buying tourist items, but I am always on the lookout for one item, made in country that I both like and can afford. In Norway this summer I found a wool ski hat, branded with Norwegian flag and having all the right markings as well as a Norwegian price tag. I asked the upscale store owner to confirm it was made in Norway. He replied "nothing is made in Norway anymore- It's Norwegian wool assembled in Estonia. I appreciated his honesty... didn't buy the hat but did a smaller purchase with him I felt good about.

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Re: The true cost of Luxury

Post by TareNeko » Fri Sep 15, 2017 10:19 am

I am currently struggling with this. I know that something expensive doesn't mean it is well made. We need to replace our range and after looking at GE, Samsung, LG and the likes, I am just disappointed in the quality of these items. And they use so much electronics, that I am worried about reliability. Then, I run into Miele.. Super expensive, but seems to be rock-solid. Or is it? I don't care about the brand name or the luxury side of it. But it seems like a well made product. Their gas-only model doesn't have much electronics either so I see that as a positive. But still, I'm not sure if more money means better product in this case.

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Re: The true cost of Luxury

Post by Pajamas » Fri Sep 15, 2017 11:27 am

new2bogle wrote:
Fri Sep 15, 2017 8:48 am

Holy batman! $50 for a t-shirt??
Here's one for $895 but that includes shipping, but you would have to pay tax on it in my state as it is over the dollar limit for tax-free clothing items. There are probably much more expensive tee shirts out there but this just happens to be the most expensive one on the first website I looked at.

http://shop.nordstrom.com/s/givenchy-py ... olor=GREEN

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Re: The true cost of Luxury

Post by sunny_socal » Fri Sep 15, 2017 11:51 am

TareNeko wrote:
Fri Sep 15, 2017 10:19 am
I am currently struggling with this. I know that something expensive doesn't mean it is well made. We need to replace our range and after looking at GE, Samsung, LG and the likes, I am just disappointed in the quality of these items. And they use so much electronics, that I am worried about reliability. Then, I run into Miele.. Super expensive, but seems to be rock-solid. Or is it? I don't care about the brand name or the luxury side of it. But it seems like a well made product. Their gas-only model doesn't have much electronics either so I see that as a positive. But still, I'm not sure if more money means better product in this case.
It's the other way around - electronics are _more_ reliable than mechanical components.

When it comes to ranges, the BTU rating is the biggest ripoff. It costs the manufacturer next to nothing to include a big fat burner (it's just a metal disc with holes in it) but you pay hundreds/thousands more for that model.

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Re: The true cost of Luxury

Post by Dottie57 » Fri Sep 15, 2017 11:55 am

bradshaw1965 wrote:
Thu Sep 14, 2017 8:13 pm
alfaspider wrote:
Thu Sep 14, 2017 12:33 pm
btenny wrote:
Thu Sep 14, 2017 10:52 am
$1000 apple iPhone 10
Apple is a bit different from Madison Avenue luxury goods purveyors. They don't tout country of origin (everyone knows it's China), and the products are quite easy to buy. Non-enthusiasts are welcomed- even encouraged.
I'm a long-time Apple fan and pretty disturbed by their move to luxury marketing. It's a pretty fine line to walk but I'm less disturbed by the price and the highest-end tech then the watch bands and the lifestyle branding. To each his/her own.
The branding is fine for me. I don't have to buy the higher priced version. I do buy for what is usable for me.

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DaftInvestor
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Re: The true cost of Luxury

Post by DaftInvestor » Fri Sep 15, 2017 12:19 pm

sunny_socal wrote:
Fri Sep 15, 2017 8:53 am
DaftInvestor wrote:
Thu Sep 14, 2017 8:05 pm
Luxury doesn't just mean higher quality it might also mean a better experience.
For example - A lot of people buy luxury cars for the quieter and more comfortable ride - not because they feel they are getting a quality product (sometimes the quality is known to be lower).
Yes, sometimes. In fact a luxury car worth $60k is much easier to justify when even 'regular' cars are now up to $45k (eg. loaded Honda Pilot or Toyota Highlander.) The delta isn't that big.

Purses are just crazy. Purse from a craft fair is $50. Brand name purse from a mall, $200-500. LV purse $2k-$5k. Hermes $10k-30k. The price difference is exponential. Is the $30k Hermes really that much better than the $500 'mall' purse? (eg. Coach, Kate Spade)
You can buy any of those purses on the streets of NYC for $5 or $10 :) They will NOT hold up the same.

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Re: The true cost of Luxury

Post by TareNeko » Fri Sep 15, 2017 2:13 pm

I design chips for living, and I know how unreliable electronics can be. Ovens can get to 500C, but most chips won't withstand >150C.

sunny_socal wrote:
Fri Sep 15, 2017 11:51 am
TareNeko wrote:
Fri Sep 15, 2017 10:19 am
I am currently struggling with this. I know that something expensive doesn't mean it is well made. We need to replace our range and after looking at GE, Samsung, LG and the likes, I am just disappointed in the quality of these items. And they use so much electronics, that I am worried about reliability. Then, I run into Miele.. Super expensive, but seems to be rock-solid. Or is it? I don't care about the brand name or the luxury side of it. But it seems like a well made product. Their gas-only model doesn't have much electronics either so I see that as a positive. But still, I'm not sure if more money means better product in this case.
It's the other way around - electronics are _more_ reliable than mechanical components.

When it comes to ranges, the BTU rating is the biggest ripoff. It costs the manufacturer next to nothing to include a big fat burner (it's just a metal disc with holes in it) but you pay hundreds/thousands more for that model.

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Re: The true cost of Luxury

Post by inbox788 » Fri Sep 15, 2017 4:30 pm

TheOscarGuy wrote:
Thu Sep 14, 2017 8:30 am
livesoft wrote:
Thu Sep 14, 2017 8:24 am
The top-20 universities know all this oh so well. Talk about domination!
That I disagree with.
Many jobs open up saying "top 20 university graduates apply", because their admissions process is stricter, more demand while supply of seats for incoming students is lesser. You might be right that quality of education may not correlate to what some of these universities charge, especially the private ones. But the fact that I am a product of such a university means that I have gone through rigorous admissions process, that everyone with me was (at the time of entering college) smart, and at least some doors will open for me when I apply for a job based on the name. That has to count for something.

BTW not all top 20 are private so they can't charge a premium only because they are highly rated.
[Timely that you ask this question on the day Blue Bottle gets taken over by Nestle for nearly half a billion ($425M for 68% per report). I had never heard of them and seem like they only have a few stores (29 growing to 55). Over $10M/store! http://smallbusiness.chron.com/average- ... 30768.html http://smallbusiness.chron.com/start-sm ... -2220.html ]

There about 50 Ivy League or near ivy league universities and colleges (i.e. wannabe - seven sisters, little, hidden, black, southern, public, etc.). They're all fine institutions and have their niche. Like brands, they likely developed their reputation based on quality, but some may no longer maintain the advantage, or are not worth the added cost.

Luxury brands are able to leverage the customer who is brand conscious. If a brand is labeled the best, they must have it at any price. Another buyer is the one that must have the better product (and knows or recognizes it) and even if the cost difference is high (remember the DG Razr?).
http://www.adweek.com/creativity/how-mu ... dow-19270/

There is overlap between Luxury products and Quality products, but not always. Jaguar may have been an example of Luxury without regard to quality (maybe quality interiors, but not reliable motors). Craftsman may have been quality without luxury. Today, those may no longer be accurate.

Finally, service and support of Luxury brands is expected to excel and can make up for deficits in the product. Some brands that have a luxury component (Apple, BMW, Lexus) are so common that they defy some of the above rules. These companies straddle the exclusivity vs growing sales objectives.

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