Termed by author Pamela Danziger – Luxflation is the inching up of price. A form of self-induced inflation, experienced by consumers willing to pay what seems a little more for much better experiences – when, in fact, that little more may be a 500% to 5,000% premium.
This is important to grasp, as it affects every business.
If you cultivate these opportunities, these little indulgences can really add up for you in your business.
Find out how
Transcript:
Some of the meanest people I know are the wealthiest I know.
Strange isn’t it, that while many wealthy consumers can easily afford high-fee cosmetic dentistry, luxury cars, first-class travel, designer fashions they find the price tags too big to swallow.
A $70,000.00 sticker on a car, a $35,000.00 fee quoted by the dentist, a $12,000.00 airline ticket are all so in-your-face. On the surface, the difference between the $70,000.00 car vs. the $35,000.00 car isn’t so great; a car may feel like a car. On the plane, all the seats arrive at the same time.
I am sure you have heard this logic before.
Oddly however, these same people are easily wooed by little luxuries.
For what seems like a small uptick (which is a very big increase in profit margin) they can feel special without guilt.
The fact that you can pick up two litres of ice cream at the supermarket for about the same price as a tiny cup of ice cream at a Gelateria is more disconnected. The experience is dramatically different. At the creamery, you pick out your flavour, your ground up cheesecake crust and chocolate chips, and watch your dessert being made for you on a granite slab. The price is still easily found in pocket or purse. It requires no thought, is done on impulse, feels good, and is easily rationalised. If I need had a hard day, I deserve it.
These little indulgences do add up.
Allow me to introduce you to a concept called luxflation.
Termed by author Pamela Danziger it is the inching up of price. A form of self-induced inflation, experienced by consumers willing to pay what seems a little more for much better experiences – when, in fact, that little more may be a 500% to 5,000% premium.
It’s ironic that the government, economists, and the media sweat bullets and display great angst over inflation creeping up by a half of a percent while consumers cheerfully accept 500% inflation in dozens of purchases every day.
This is important to grasp, as it affects every business.
If you cultivate these opportunities, these little indulgences can really add up for you in your business.
Luxflation is not new.
The story is now a legend of how “burger chains” use the point-of-sale strategy, where the cashier responds, “Do you want fries with that?” ATS (average transaction size) is one of the most important numbers to know, manage, and work at improving in many businesses, whether you sell burgers to frequent customers or motor vehicles to very infrequent repeat customers.
Let’s say we own an ice-cream stand where the cashier responds to each order by presenting the offer of a double flavour shot and an extra scoop of fresh fruit. If half say yes to the extra $4, and they serve 200 ice-creams a day, that’s $400 added to revenue. But we may have increased the profit margin, invisibly, by much more.
If we can alter the whole experience to support a higher price, still add the extra fruit, and add a big chocolate chip cookie, well, we might take our $9 average transaction to $15. On a grander scale, we may turn our ice-cream stand into a much-talked about, much preferred destination rather than just one of a dozen same-as places in town.
Being in the little indulgence business in a big way, can lead to much bigger profits, but even to something more valuable:
sustainable unique positioning in your customers’ minds and lives.
