Luxury vs. premium

fluffynotes:

Luxury goods are needlessly expensive. By needlessly, I mean that the price is not related to performance. The price is related to scarcity, brand and storytelling. Luxury goods are organized waste. They say, “I can afford to spend money without regard for intrinsic value.”

That doesn’t mean they are senseless expenditures. Sending a signal is valuable if that signal is important to you.

Premium goods, on the other hand, are expensive variants of commodity goods. Pay more, get more. Figure skates made from kangaroo hide, for example, are premium. The spectators don’t know what they’re made out of, but some skaters believe they get better performance. They’re happy to pay more because they believe they get more.