Advertising high end products without compromising status is a delicate game

March 5, 2007 -- Appealing to the luxury consumer is a tricky balancing act. A product needs to compare favorably with its direct competitors, but it can't appear too similar to other items in the firm's product line. According to a business professor at Washington University in St. Louis, it's important for firms to use an advertising strategy that utilizes image-oriented appeals to differentiate its premium products from the rest. Premium products need to be positioned beyond the claim of "higher quality" alone.

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"Pure quality based positioning has an impact on competition between brands, but it ends up having an indirect impact on choices customers make within a product line," said Chakravarthi Narasimhan, the Philip L. Siteman Professor of Marketing at the Olin School of Business.

"As a result, firms with product lines that include high- and low-end products have two tensions" — how to manage inter brand competition while mitigating intra brand trade offs.

"The more aggressively a firm competes with rivals on price at one end of the product spectrum the more it has to worry about intra brand trade offs," he said. "Offering a product line competing on price at the low end could be a losing strategy because, if you compete on price, you risk losing your customers from other higher margin products. You end up cannibalizing your own firm."

To mitigate cannibalization while remaining competitive, Narasimhan said that the appeal to premium customers has to be based on something other than saying "this is a high quality product."

"This is why you'll not see an advertisement for a Lexus that discusses the car's efficiency and horsepower and reliability. That is a tactic you take for lower-end cars. Instead, in the Lexus commercial you create an image about ownership experience. The advertisement is designed to appeal to the experience or status of being a Lexus owner," Narasimhan said. "A commercial that includes only hard core features would only invite comparisons between the Lexus and a Toyota Camry, for example."

Chakravarthi Narasimhan

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Considering that advertising is one of the most important areas to allocate money, firms need to be aware of how to get the most bang for their advertising dollar. Advertising and product design strategy interact in a strategic way.

Narasimhan said premium products — through branding and advertising — need to be handled differently from the rest of the product line. The image or emotional appeal established in ads for the premium product will prevent consumers from being drawn to other items in the product line, while at the same time it will establish an effective means to attract consumers away from other brands.

Editor's note: Professor Narasimhan is available for phone, e-mail and broadcast interviews. Washington University has VYVX and ISDN lines available free for news interviews.