The New York Times ran a story recently, titled ‘When High Price Is The Allure’. The gist of the article? That there are many consumers out there who are more likely to buy a luxury item just because it carries a big price tag.

The article cites increasing profits at luxury companies Prada, Gucci and LVMH, in the face of a weakening American dollar, as evidence of the lack of price sensitivity of luxury consumers. This is a well-recognised fact, and the lack of correlation between the strength of the American dollar and the performance of these companies is not surprising. For another thing, the United States is far from the only country into which these companies sell.

The article goes on:

…another consumer cohort is driving the trend, shoppers for whom a high ticket can in itself be an inducement to buy. Just as makers of premium ice cream have persuaded consumers to pay $4 for a cone instead of 90 cents, and California vintners convince them that a $100 cabernet is better than a $50 bottle, the makers of designer clothing know that high prices can cast a spell.

Robert Burke, a retail consultant in New York, is quoted as saying that “People are willing to pay a significant amount of money to make sure they don’t see their purchase on other people.” Another retail consultant, Marvin Traub said that “Price is part of the status of certain luxury items,” and that some consumers of luxury goods derive a large part of the ‘value’ from their purchases from the social cachet conferred by the price paid.

Milton Pedraza, CEO of the Luxury Institute, was asked for his opinion and said that manufacturers of luxury goods ask for price increases because they can, not because they’re forced to by increasing costs or fluctuating exchange rates. In other words, products sold by luxury brands generally have enough margin built into their retail prices to buffer against the vagaries of supply and foreign exchange.

The article includes some excellent quotes. One of the most revealing came from Jeffrey Kalinsky, owner of fashion emporiums in New York and Atlanta and director for designer merchandizing of Nordstrom, shared that when he was younger (and, presumably, what luxury marketers would call an ‘aspirational’ consumer) he would “just walk into a store and see a sweater, and something inside of me would say, ‘Oh, I hope I can afford it. I bet it’s at least $800.’ “That sweater would be $1,100,” Mr. Kalinsky confided, “but, miraculously, then I would want it more.”

My opinion on this phenomenon? It’s real, but not positive! There’s nothing logical about being more likely to purchase just because something is expensive. Smart consumers - affluent or otherwise - should make their purchase decisions on the basis of the fit of a product with their needs and tastes, and I think there’s something wrong if items are bought because the price is high. Of course, there are often very good reasons to purchase the product that happens to be more expensive (things inherent to the product, rather than its cost), but the high price shouldn’t be a reason to buy. Disagree? Please send in your thoughts - I’d love to hear from you.

The original article may be read online at The New Tork Times.

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