Luxury Travel for Less

That’s the title of a June 8, 2012 ABC News video.  Sound intriguing?  Then you’re not their ideal customer.  Here’s why.

Background

Before we get into the why, allow me to give you a little background information.  The luxury travel packages cited in this piece were 45% to 50% off their regular price.  These discounted prices didn’t make the trips inexpensive, just more affordable.  Now we can begin the discussion of why you’re not their ideal customer.

Not ideal customers

First, those of you who don’t believe you can afford luxury travel, or simply don’t feel that it’s a good use of your money, may be intrigued by how the other half lives but you’re not going to pay for this level of luxury even at the lower prices.

Yes, you’ll watch the news piece.  You may even decide to visit one of the destinations, but you’re not going to pay luxury prices to stay there.

Second, if you are inclined to purchase luxury at lower prices, whether it’s to treat yourselves to a rare experience or impress your friends at the next cocktail party, you’re not going to be frequent purchasers of this luxury.

Business impact

What does this mean to the companies offering these deals?  Let’s frame this in the form of a risk/reward analysis.

Rewards

The company may gain additional revenues from people who want a rare treat or bragging rights.  But their profit margins are going to be significantly lower.

Risks

These promotions (discounts) may not generate additional revenues.  If it doesn’t they’ve cheapened their offering without gaining anything in return.

If the company is successful in selling these discounted packages, they’re likely to experience higher levels of customer dissatisfaction.  It’s not difficult to imagine these price buyers walking into their room and thinking “It’s beautiful, but I don’t know that it’s worth x.”  Nor would it be unusual to hear them complain that service wasn’t instantaneous, after all that’s what luxury means to them.  Oh, by the way, these are the same folks that will be very vocal about their disappointment.  Ouch!

Then there’s the fact that the company cheapened its offering in the eyes of its ideal customers.  Their existing customer base can’t help but wonder whether or not they’d previously been over charged or why they should pay full price going forward.  A luxury car buyer told me that he questioned whether or not he would continue buying Mercedes cars after Mercedes announced its C-class.  Image is an important element in buying luxury.  To cheapen that image is to reduce its value.

Finally, people like to surround themselves with people who are like them.  That means that these companies’ ideal customers prefer to be around other people who enjoy, appreciate and can afford luxury.  Being around people who don’t appreciate or know how to enjoy luxury would diminish their experience.

Hopefully this simple analysis will help you understand the risks you, as a seller, take when you offer deals to attract buyers that typically wouldn’t buy from you.  It’s an expensive trap, one that I’d like you to avoid.

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