Business Economics
What is luxury?In economics, a luxury good is a good for which demand increases more than proportionally as income rises
Luxury?
219 USD23 000 JPY750 ml
300,000+ USD31,000,000+ JPY
iPhone 7: Luxury?
Elasticity of demandIncome elasticity of demandPrice elasticity of demand
What is Price Elasticity of Demand?% change in quantity demanded-----------------------------------% change in pricePrice Elasticity of Demand =
P
P12P
P12E > 1ElasticdE < 1Inelasticd
Q1Q2Q1Q2DDPrice elasticity of demand measures how the quantity demanded responds to a change in price
Price Elasticity of Demand
15%20%20/15 = 1.33 Ice Cream is Elastic
Price Elasticity of Demand
Price# VisitsMedical Care is Inelastic:
A small increase in price leads to a small fall in # visits demanded
Reference: The Demand for Medical Care: intranet.tdmu.edu.ua
What is Income Elasticity of Demand?Income Elasticity of Demand =% change in quantity demanded-----------------------------------% change in income
Income elasticity of demand measures how the quantity demanded changes as consumer income changesNormal goodsInferior goods
Income Elasticity of Demand
$10,000
$300,000
Value ChainPrada case
Value Chain+ Activities and Operations+ Value Adding+ Greater Value > Cost Incurred
Specifications & Quality Standard
Low internal and external production costs
Timely production Schedule
Adhere products to original design
PRADA VALUE CHAIN
PRADA VALUE CHAIN
Communications and Public Relations
Marketing trends in luxury goods
BIGTRENDS
(1) DIGITAL INNOVATION (2) ENVIRONMENT CUSTOMER(3) EMERGING MARKET(4) Satisfy HENRYs
(1) DIGITAL INNOVATION
(2) ENVIRONMENT CUSTOMER
(3)EMERGING MARKET
(4)SATISFY HENRYs
(1) DIGITAL INNOVATION
(2) ENVIRONMENT CUSTOMER
(3)EMERGING MARKET
(4)SATISFY HENRYs
LOreal_ cut greenhouse gases by 50% by 2020. (According HBR, 2016)
(b) TiffanyandForevermark certified diamonds using the independentKimberley Processas conflict free. (According HBR, 2016)
+ Eco-change in Government laws & in social norms about Environment
MARKETING IN GREEN & SUSTAINABILITY TREND
(3) EMERGING MARKETs
(2) ENVIRONMENT CUSTOMER
(1)DIGITALINNOVATION
(4)SATISFY HENRYs
Data from ASSOCHAM:The Associated Chambers of Commerce & Industry of India
(4) SATISFY HENRYs
(2) ENVIRONMENT CUSTOMER
(1)DIGITALINNOVATION
(3)EMERGING MARKETHigh earners, not rich yet+ Earn $100,000 - $250,000 a year + Save 8.5% income.+ Control 40% consumer spending(According to BloombergBusiness, 2015)MR. HENRYs?
LUXURY GOODS & HIGH-END PRODUCTS CONSUMPTION SURVEY, US 2014Source: Unity Marketing
- Team 8 -THANK FOR YOUR ATTENTION
2016. Nov. 03
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