Peter Smith: 7 Things to Know When Selling Luxury

Understanding why people buy luxury might just be the proverbial needle in the jewelry haystack.

If you’ve been in the business for even 10 minutes, you’d be forgiven for marveling at the degree to which even sellers of fine jewelry disagree on what motivates customers to buy luxury products.

There are, of course, important occasions that people choose to celebrate with jewelry: engagements, anniversaries, holidays, etc.

But the decision to mark those occasions with jewelry, as opposed to trips or other alternatives, is exactly that—a choice, not an obligation, and people are happy to do it.

In fact, they’ve done so in record numbers in recent years.

In the 1940s, De Beers launched a terrifically successful campaign that, in the ensuing decades, primed couples to covet diamond rings as the ultimate symbol of love and to mark their occasions accordingly.

Using diamonds in engagement rings went from about 10 percent when De Beers began their messaging in the ‘40s to about 85 percent today.

A decade later, Tiffany & Co., which had been the first retailer in the United States to carry Patek Phillippe watches (1851), combined on a co-branding initiative with Rolex that featured the Tiffany name on the dials.

The partnership served both companies until it ended in the 1990s, purportedly a result of disagreements over inconsistencies in the stamping on the dials.

Of course, our definition of luxury doesn’t have to include the aforementioned iconic brands. 

It’s clear we don’t buy jewelry out of necessity any more than we buy timepieces to tell time. There’s something more fundamental, almost mysterious, about our decisions to spend money on luxuries.

As we find ourselves heading quickly into the holiday season, so critical to so many in our business, what we do in the coming weeks will go a long way toward deciding what kind of year we ultimately will have. 

While this year has seen a decline in same-store sales at the majors, independent jewelry stores, as of the end of September, continue to track ahead of a very robust 2023.

To that end, there is no greater factor in year-end performance than superb sales execution and, if I may be so bold, store owner mindset.

If you believe customers are best served by imagining they’re all motivated to find a deal, a discount, or something a little bit cheaper than usual, you will be 100 percent correct, and you will under-deliver to both the customers and your business.

On the other hand, if you recognize that 95 percent of our thinking (read: customers’ also) happens in our unconscious minds, and customers may in fact prefer you not prejudge them or their motivations for buying jewelry, great things can happen.

I usually write a column this time of year with a list of tips for salespeople.

This year, I thought it might be more interesting to share a few reminders of why the behavioral psychologists and academics believe customers buy luxury products.

It might be an interesting topic for a meeting to kick off the season and help you flush out any stinking thinking about under-reaching your customers.

1) Sense of Control/Agency
From the time we are toddlers we crave control and agency.

We see in all walks of life the negative impacts of taking agency away from people, very evident when managing personnel.

That agency is also true in consumer behavior.

Sometimes, the act of spending itself is a significant factor in buying luxury. It’s as if the customer is saying, “I can, therefore I will!”

2) The Creation of Their Own Brand Identity
When a customer buys luxury products, it is often happening (consciously or otherwise) as a construct of their own brand identity.

They are literally buying to make a statement about who they want to be, and wearing luxury brands and products can be a self-directed and/or outwardly directed expression of that aspiration.

It may also be a declaration about their place in the social hierarchy.

3) Psychologically Rewarding to Gift
Giving important gifts can be more rewarding to the giver than to the receiver. Again, behavioral psychologists have identified givers as enjoying a dopamine hit when they gift to others. 

The joy of bestowing jewelry to a loved one, for formal or informal reasons, can be a more fulfilling experience than buying for oneself. 

4) Often Tied to a Background of Hardship
The late Jack Welch, former CEO of General Electric, once had a life-threatening heart attack.

He was later asked by a reporter what went through his head as he was being whisked to the ER in an ambulance and he replied that if he survived, he would never buy a bottle of wine under $100 again.

Welch revealed that he had grown up in poverty “without two nickels to rub together” and he’d had enough cheap wine in his life.

A life of struggle, hardship even, can be a great incentive to buy luxury if you later find yourself in a position to do so.

There is ample evidence to support the fact that even people generally not regarded as being part of the luxury product buying demographic do so anyway, even sacrificing other needs in their lives to make it happen.

It’s as if buying luxury itself is an act of defiance.

5) Price Is a Proxy for Quality
When purchasing luxury goods, especially so with products the customer does not have a good grasp of, price serves as a proxy for quality.

The customer reasons that if they are paying a princely sum for an item of jewelry, the piece must be of exceptional quality.

The effect is even more profound when the item is a limited edition, one of a kind, or in short supply.

6) The Act of Spending Is Hedonistic
There’s a certain hedonistic quality to spending large sums of money on luxury products.

Some psychologists speculate that because “investing” is done privately, the act of “spending” is a public statement you make, as it allows you to announce your status.

In those situations, the joy comes from the act of spending.

7) Just Because
Finally, people buy luxury products because they want to. 

They don’t always need internal or external rationalizations to make major purchases; it’s just something they choose to do for whatever reason, or for no reason at all. 

When customers spend money on jewelry, diamonds, or watches, we don’t need to know what their motivation is. Just compliment them on their good taste and thank them for their business.

Happy retailing!