The Effect of Brand Loyalty through Advertising of Luxury Goods on Demand Elasticity and Sales of Products Sold

The market for luxury goods is a rapidly expanding sector of the economy. Sales of goods from the top 100 luxury companies contributing an average of over $2.1 billion USD to the global economy annually. The prices for luxury brand prices are known to be inelastic, with expensive price tags for goods sold contributing to a neutral or positive impact on the brand’s image. Quality of production and prestige help to keep luxury goods popular among a limited consumer-base that can afford the exorbitant costs of purchase, yet this doesn’t explain why sales continue to accelerate in brands like Balenciaga, Gucci, and Supreme. How do such luxury companies continue to grow their sales?

 

The goal of this research project is to investigate the role of brand loyalty and advertisement on the demand elasticity and sales of products by the top luxury companies in the world. By collecting previous research and contacting officials from such companies, I hope to develop a set of key findings regarding how luxury companies actively create an image for their products that can help make their goods appeal more to an already limited consumer base. This research will determine what strategies, if any, luxury companies take to market their products in a way that is effective in driving sales in today’s information age.

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