Luxury consumers want insider status, and marketers have found new ways to brand products that promise to get them there.

Urban legend in the 1980s held that the Hollywood elite and high-rolling Wall Streeters had a special black card that granted them admission to secretive, luxurious clubs and the ability to charge anything they wanted, even a private jet. No matter that the card didn’t exist. In 1999, American Express introduced one, the “Black” card, formally named the Centurion card. Even if you wouldn’t bat an eye at the $2,500 annual price tag, “Access to the Centurion ‘Club’ is for a chosen few and is by invitation only,” says American Express. The ability to acquire a black card is apparently so cryptic that Web sites have sprung up speculating on all aspects of the card.

It’s that aura of supreme exclusiveness that makes people want it more, says Pam Danziger, president of Unity Marketing, a consumer research firm. “Lots of people have money. What separates you from other people makes you special,” she says.

Danziger adds that creating a feeling of “insiderness” is essential in convincing consumers to choose one product over another. “Any luxury-goods marketer needs to start with the knowledge that no one needs your stuff, anyway. You have to transform your good into an experience to make a difference to a consumer.”

Economist Thorstein Veblen coined the phrase conspicuous consumption more than a century ago to describe the desire and use of what is pricey and unique. After all, a $60 Casio digital will keep time more accurately than a $70,600 Patek Philippe watch, but there is little question as to why someone would choose to wear a watch equal to the income of the average American. Just how much sway the insider factor holds over our everyday behavior is now coming into full focus, as the efforts marketers undertake to influence our choices grow more clever.

If you have to ask, you can’t afford it


Price has long been the easiest differentiator. Every business, from handbag makers to universities to investment funds, tweaks prices upward to represent a product offering as on par with—or superior to—the competition. But this tactic is quickly becoming less influential, says Claudia Strauss, managing partner of Kirshenbaum Bond + Partners, a New York marketing house representing companies like NetJets and Bulleit bourbon. “It used to be ‘the most expensive blank’ was enough. People are too smart for that now. We really need to go through a strategic process when we think about what is relevant to the brand and to the consumer,” she explains.

Exclusivity is evolving from price-driven to scarcity-driven. For some, this leads to bidding up wines like Screaming Eagle, a young Napa winery that makes just a few hundred bottles a year. For others, the desire for scarcity translates into events. Starwood Hotels, for instance, offers frequent guests opportunities for free stays at some of the world’s poshest locales, yet it also pushes beyond its properties to satisfy the yearnings of its most valued guests. Recently, one member was afforded the chance to hobnob at the Manhattan premier of the movie Hairspray with John Travolta and the rest of the cast. Virgin Atlantic frequent fliers already have access to anyplace on the globe, so the airline established a waiting list for a two-million frequent-flier point reward of space travel, even though no launches are imminent. “It’s about social currency. People like to say they have the thing other people can’t get,” says Strauss.

Even so, plenty of high-priced offerings are still on offer, from the world’s most expensive cocktail (a $1,400 mai tai at Belfast’s Merchant Hotel) to the one of the priciest hotel stays (the $25,000-per-night Bridge Suite at the Bahamas’ Atlantis resort). Those may never be purchased, but serve as a gimmicky way to draw attention. This kind of halo effect also serves as the core strategy of Parisian couture ateliers, the money-losing houses of high fashion. People rarely purchase the outlandishly high-priced items shown on runways, but they’re more likely to take notice of the designer’s off-the-rack (though still expensive) cocktail dress.

American retailers have tried to tap into this model, with varying degrees of success. Tiffany & Co. embarked on a strategy in the early 2000s of expanding into suburban shopping malls and offering a selection of sub-$100 items as an enticement for upwardly mobile middle-class shoppers. The strategy worked for a while, until Tiffany executives realized that the cheapest offerings were accounting for the bulk of sales, and the company’s core wealthy shoppers had started to avoid the rabble-packed counters of Tiffany shops. Now the company is again representing itself as an ultra-luxe purveyor, shunning the masses it once courted. Burberry, Cadillac and even Vlasic pickles have also experienced the downside of expanding what is perceived as a premium brand in the quest for more sales.

The vodka paradigm


The fact that exclusive brands seem to lose and regain their cachet over time may not be the fault of marketers or executives. It may just be human nature. Joshua Berger, a professor of marketing at the University of Pennsylvania’sWharton School of Business, has studied the nature of consumerism extensively. He determined that the desire to be an insider is perhaps far more widespread an influence than was previously believed. “The things we buy, the attitudes we hold and the places we go for vacation communicate things about us and our social groups,” Berger explains. “People buy things to look like other people, but also to avoid looking like other social groups.” In one experiment, Berger sold wristbands to students who lived in a “cool” college dormitory. After a few weeks, he switched to selling the wristbands to a neighboring dorm housing academically elite students. Once this group perceived as geeks started wearing the wristbands, the original group of students stopped. Similar studies of various groups repeatedly show this result. “People will express preferences for things—yet later, when they find out people they don’t want to look like prefer it, too, they abandon them,” says Berger.

Yet this pattern doesn’t seem to apply to all products. Preferences for more mundane items, like a certain brand of hand soap, tend to remain steady despite the knowledge of another group’s shared preference. There are also indications that the more wealth someone enjoys, the more kinds of items become subject to the vagaries of perception. A middle-class person may aspire to simply own a sailboat, for instance, but billionaires have a rivalry over how long their yachts are.

And nowhere do psychology and disposable income express themselves more clearly than with vodka. By definition, vodka is a clear, tasteless, odorless liquid—meaning that a basic level of quality distilling yields a vodka on par with any other. Yet through clever ads and higher pricing, Absolut vodka became the premium vodka over Smirnoff in the 1980s. Then, in the 1990s, Sidney Frank consciously decided to introduce Grey Goose vodka, which costs 50 percent more than Absolut, with reasoning that people would pay more for a brand they saw as more exclusive, just as they did with Absolut over Smirnoff. Frank later sold the Grey Goose brand for $2 billion.

“The problem [for brands like Absolut] is running in place,” says Dan Hill, the author of Emotionomics: Winning Hearts and Minds, the founder of Sensory Logic, and a consumer researcher. “There is an innate human drive, whether you look at the military, academia or the Indian caste system, to be better than others.”

With consumers who are more attuned to marketing techniques, ads alone can’t win the battle to make a brand appear exclusive, notes marketing executive Strauss. When Lexus wanted to appeal to younger affluent drivers, Strauss and her team commissioned an exhibition where hip contemporary artists incorporated the Lexus brand into their work. The idea was to tap into the desire of the target group to be associated with something trendy and creative, rather than old-fashioned and tony.

Luxury markets are also trying to bring in brand ambassadors—such as celebrities, journalists and others who hold influence in desired consumer circles—who are engaged to become publicly enthusiastic about a brand. “People like to hear things from a credible source. People who are influential in their communities hold great value for brands,” says Strauss. To gain brand ambassadors, marketers will give actors free goodies, hire models to order certain drinks at hot-spot bars, and pay bloggers to hype a brand in their entries.

As this trend continues, expect ever more sophisticated product placement intended to convince consumers that a brand is exclusive enough to make them insiders—members of an elite group.

BRENDAN COFFEY is a freelance writer and proud outsider in Boston.