Luxury in the Digital World

When it comes to the material world, the subject of luxury goods has been well-researched. There are studies, articles, and books that explain why designer bags sell for thousands of dollars, or what makes shoppers form a line in front of a shoe shop before a unique design “drops.”

There are people whose job title is “consumer psychologist,” and whose day-to-day consists of researching customer behavior. And rightfully so, since understanding what makes some items more “luxurious” than others may unlock the door to influencing shopping behavior – and that’s a path that can lead to riches.

In the material world – or “real” world if you’d like – it’s easier to explain how something is “higher quality” than its competitor. It may be made up of better materials. Or its design is more unique. It may be that fewer were made. For a designer-anything, creating exclusivity can be as simple as making sure that there’s only a limited amount of that something available.

But how does this translate to the digital world? How exclusive can something be, really, when it can be copied for free? And how can we make a piece of software be perceived as “higher quality” than the rest?

Self-expression in a handbag

Customers are motivated to buy luxury items for various reasons. One of the more obvious ones is that these goods help us buy status and prestige. Owning something exclusive and high-end is often associated with a certain social standing, and the purchase serves as a visible symbol of that success.

Luxury brands carefully cultivate an image of exclusivity and desirability, so purchasing something from one of these brands is a reward in itself. Some people are also looking for high-end aesthetics and craftsmanship. For them, the better design, superior materials, and attention to detail justify the higher price.

Some objects can even be considered an investment. A buyer may anticipate that an expensive item will retain or increase in value over time, making it a smart financial decision as well as a lifestyle choice.

Others look at luxury purchases as a form of self-expression. Their object of desire can also become an extension of their identity, helping them communicate their sense of taste, personality, or individuality. People often compare themselves to others, and purchasing a luxury item from an exclusive brand is influenced by the desire to outperform – or to keep up with – peers.

What luxury feels like

Customers come in many shapes and forms. Luxury comes at a price, but it may not be the full price on the price tag, and not even the “window” price at that. Brands may also be available at a discount, from an outlet, purchased second-hand, or gifted. Some goods can even be rented out, available through a timeshare, or – stolen.

Regardless of how someone comes into possession of their riches, when people use luxury goods, it affects them both psychologically and behaviorally. In one experiment, Yajin Wang, a professor at the University of Maryland, gave women either a luxury product (such as a Prada handbag) or its unbranded counterpart, and then went on to observe their behavior. The research team found that the women with the luxurious item contributed less money to charity and exhibited more selfish behavior than those with the unbranded bag.

Wang highlights that the experience of brandishing an exclusive item can lead to a status boost for consumers, as long as the luxury product maintains a sense of rarity and exclusivity. Their research also suggests that the opposite is true: The spell of an exclusive brand breaks when the brand becomes more commonplace.

Digital luxury

I Am Rich was an early iPhone app, with one unique feature: It was priced at $999.99. Its only apparent function was to affirm that the owner could, in fact, afford to throw a thousand dollars out the window. Although an interesting approach to signaling wealth and power, the app still sold a handful of licenses in the 24 hours before it was chucked out of the App Store.

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Price, by virtue of excluding buyers who can’t afford the item, is certainly one way to ensure exclusivity. When the first Apple Watch was introduced, its top-of-the-line model sold for $17,000, and its marketing was punctuated with the most potent words and phrases in the luxury marketing arsenal.

As Dr. Kit Yarrow, professor emerita at Golden Gate University, explains: “…despite the fact that few will purchase it, the $17,000 Apple Watch Edition was designed with the everyday shopper in mind – as a way to elevate the stature of lower priced models. All that luxury lingo rubs off to the lower priced versions. Consider: Next to a $17,000 price tag, $350 (or even $550) seems like a bargain.”

As for what the future holds: The Bain & Company Luxury Study revealed that, in the post-Covid era, the expanding universe of luxury customers expects more from brands than before. Well beyond the quality of the physical items, customers want to see sustainability, social responsibility, and a strong voice on social issues. Luxury brands will have to continue to innovate, redefine themselves in a way that aligns with their customers’ values, and expand on their historical mission if they want to remain worth the price.