Filling the gap between luxury, necessity, February 9, 2007, 7C.

You are hungry, need food, and decide to go to a restaurant.  Where do you go?  It is time to buy a new car.  Which model do you buy?  You need a new shirt to wear to work.  Where do you shop and what brand do you buy?

With all three of those questions, you have choices.  You might choose healthy fast food, an economical and low-cost automobile, and a shirt on sale at a nearby discount retailer.  However, you might also choose to dine at a high-priced restaurant, purchase a luxury automobile, and buy a fashionable and popular-brand shirt from an upper-end clothing store.  Regardless of whether you choose the options from the first or second set of alternatives, you end up with a full stomach, an automobile, and something new to wear to work.  There are important similarities and differences between the two purchase decisions.

All three of the items described could be considered “necessary” things in our culture.  Food, transportation, and clothing are needed for people to survive and to provide for themselves.  The second list of alternatives yields something more than the alternatives in the first list.  All three items on the second list will likely cost more than the corresponding items on the first list.  Consumers who purchase the things on the second list pay for the benefits of the “basic” items plus something more.  In some cases, the premium might be for higher quality.  In other cases, the premiums paid for higher-priced goods and services provide consumers with satisfaction of personal needs.

Organizations that choose to cater to luxury (that is, above and beyond the needed) markets need to justify and reinforce to consumers the reasons that the extra expense for their goods and services are worth the extra money.  In the minds of consumers, the gap between necessity and luxury offerings need to be filled with value.  Organizations convince consumers that their offerings are worth the extra price through brand development and marketing and by offering features that cannot be found with other offerings. 

Exceptional quality, workmanship, materials, and warranties/guarantees might fill in the luxury gap for manufactured goods.  Outstanding customer service, personalized assistance and attention, and service after the sale can create additional perceptions of value for retail and service organizations.  Additional benefits, features, and offerings can also create value in the minds of consumers as well as a host of other organizational characteristics and features—which can function as unique selling propositions.

Regardless of their chosen value-adding characteristics, organizations must inform, emphasize, and continually reinforce the characteristics in the minds of consumers.  Advertising messages, sales techniques and promotions, and corporate culture must all give support to the value-adding characteristics.  Customers seek opportunities to satisfy personal needs, sometimes consciously and sometimes unconsciously.  To encourage consumers to engage in profitable exchanges, firms must create value in the minds on consumers.  They must make every exchange seem like a deal that cannot be passed by—if not, consumers might pass them by for their competitors. 

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