Answering Luxury’s Most Pressing Pricing Questions

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In the second edition of our Daily Jing x Equity webinar series on the luxury metaverse, with a focus on extreme value creation and pricing. The presence of brands such as Gucci, Louis Vuitton and Vacheron Constantin underlined the importance of the subject.

Creating digital value in luxury is one of the most critical aspects, as pricing is complex and poorly understood. It is important to note that the psychological effects of paying for NFTs with crypto plus using auction mechanisms may seem like a benefit at first, as it increases willingness to pay, but the long-term risks of a decline in value are significant.

The conclusion of the webinar was that brand storytelling has never been more critical than it is today, and to maintain pricing, every metaverse project needs a unique, intriguing, and desire-creating story. Here, many luxury houses have significant gaps that impact their ability to price and retain the value of their digital products over time. Given the large number of questions asked during the Q&A, I decided to dedicate this column to answering the most pressing questions.

In a nutshell, getting the right price means first creating value, then pricing it. Unfortunately, the reality for most metaverse initiatives is different. There is not enough emphasis on structuring projects to create extreme value and prices are often determined arbitrarily. This can lead to catastrophic results. We break this concept down below.

What are your thoughts on rarity factors in the metaverse and how they relate to physical products?

Scarcity alone does not create value. The rarity should be tied to a unique story that resonates with the audience. Like physical products, the combination of a desire-creating story and scarcity will increase the value of an initiative, hence the willingness to pay.

Do you think the concept of “loss of virtual property” in auctions can be amplified if you virtually show the object moving from one bidder to another in a metaverse?

The effects of virtual property and its loss are felt at the individual level. If I bid for an NFT and the highest bid exceeds my bid, I will feel like I have “virtually” lost the item and feel the psychological pain associated with it. I wouldn’t expect it to increase showing how the object moves from person to person as I will feel the pain of losing my virtual property instantly once I know someone another placed the highest bid.

Visualization should have no significant additional effect. It is more important for brands to be aware that the peculiarities of the pricing mechanism can lead to a measurable increase in willingness to pay. In a short-term scenario, this might seem like a great option. However, in the long run, there is a significant risk of customer alienation if (too high) prices cannot be sustained over time and value plummets.

If I set my NFT price lower than my competitors, is my brand likely to be perceived as less valuable?

Your goal should be to first strategize about the value that each individual initiative brings. This includes creating a powerful narrative that is unique to your brand. The price should reflect that individual value, not what your competitors are doing. If your competitors’ story creates 100x greater value, then their ability to price will be significantly greater than yours, and vice versa. So instead of worrying about the pricing signal, my recommendation is to obsess over value and then set pricing based on value. There are tools like the Luxury Index (LI), which is detailed in my book “Luxury Marketing & Management”, which helps to estimate the value of brand storytelling and initiative.

How can luxury brands create a customer experience in these virtual worlds? We all know that one of the biggest advantages of luxury brands is the customer experience in stores.

Even in stores, the customer experience often differs significantly. I recently visited the Parisian flagship store of one of the world’s most iconic luxury brands and the service experience was so miserable that I haven’t bought anything from the brand since. In a digital reality, there are more opportunities to control the environment and use real-time data about the customer, such as their preferences, to ensure consistency.

There are also downsides like, in most cases, the lack of human interaction. This means that there are pros and cons. It’s essential for brands to be aware of both and make the most of the opportunities while minimizing the gaps. The customer experience must be mapped and designed in a holistic way combining the physical and the digital.

How does a brand audit work?

Every brand we work with has a different starting point and different goals. It is essential to approach a brand audit holistically and ensure that we analyze the internal perspective and an external view specific to the client. This includes comprehensive customer sentiment analysis, experience audits that focus less on the obvious (great service is not a differentiator, it’s expected), and benchmarking of typical customer stories. competitive set.

It is a structured process that can take several weeks and leads to actionable recommendations, which in most cases result in a significant refinement of the brand story (90% of audited brands have significant deficits ), a redesign of the customer experience and a redefinition of digital messaging and touchpoints. In an increasingly complex world, these audits are essential to the survival of brands.

Named one of the “Top Five Global Luxury Key Opinion Leaders to Watch”, Daniel Langer is the CEO of luxury, lifestyle and consumer brand strategy solidify Equity, and executive professor of luxury strategy and pricing at Pepperdine University in Malibu, California. He consults with many major luxury brands around the world, is the author of several best-selling luxury management books, a main speaker, and conducts luxury masterclasses on the future of luxury, disruption and the metaverse of luxury in Europe, the United States and Asia. Follow @drlanger

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