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Why are Lush Products so Expensive?

Hey All! A very Happy New Year 2010 to all of you!

Kicking off the new year, I read a very interesting / controversial post today morning on "Why are Lush Products so expensive?" at the Beauty Brains website. (Read it here). This is one of my favourite sites to solve all my cosmetic queries.

Now this is not to bad mouth Lush (who I am sure make amazing products, which a lot of you swear by) or to make anyone feel bad about buying any of the products. It is after all a free choice society. I just wanted to share my perspective on how companies work and their pricing strategies (comes easy to me, after all am a Manager :-) )

During my MBA days I did learn about this exclusive high pricing strategy adopted by some companies to give a sense of quality and exclusiveness.

The price/quality relationship refers to the perception by most consumers that a relatively high price is a sign of good quality. The belief in this relationship is most important with complex products that are hard to test, and experiential products that cannot be tested until used (such as most skin creams, after all the sensation of soft skin is an experience that can be tested by you only after a couple of uses). The greater the uncertainty surrounding a product, the more consumers depend on the price/quality hypothesis and the more of a premium they are prepared to pay.

Premium pricing (also called prestige pricing) is the strategy of consistently pricing at, or near, the high end of the possible price range to help attract status-conscious consumers. A few examples of companies which partake in premium pricing in the marketplace include Rolex and Bentley. People will buy a premium priced product because:
  1. They believe the high price is an indication of good quality;
  2. They believe it to be a sign of self worth - "They are worth it" - It authenticates their success and status - It is a signal to others that they are a member of an exclusive group;
Now I have a hunch that this what Lush is doing.

Not that their products are bad, but as consumers we also shell out monies for the pyschological effect of feel good, besides their stories that accompany the products are quite endearing too and quite charming enough to want you to buy everything in the store.

As the Beauty Brains site explains, and I quote:  According to Lush, the Gorgeous Face Moisturizer sells for $72.00 (about Rs. 3600 /-)  for 1.5 oz (about 42.5 gms). Does the cost come from the ingredients? Based on what we know about the price ingredients, the cost of ingredients for 1.5 oz of a formula like this would be about $1.00 (Rs 50/-). Ok, maybe it’s $2.00 (Rs 100/-). But it couldn’t be much more than that. That doesn’t mean the company is being dishonest, or any thing like that. As with most cosmetic products the ingredients don’t usually cost that much. The majority of the cost of the product is in packaging, shipping, advertising, manufacturing overhead, etc.

So for those of you for who enjoy Lush, go ahead and indulge.

This is just to explain pricing of products is an art that takes into account a lot more things than just the cost of the ingredients and that perfectly cheaper products can at times be just as fabulous as high end store made ones.
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Comments

  1. I wuld like to agree with whatever you are saying. I have myself done BBA and I came across this concept.

    As far as lush goes, I think the products (atleast the two that I am using) are good so I have no regrets in buying them. :)

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  2. Tanvi, U r surely a beauty wid brains ;) God, y am I such a dumbo?

    luv

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  3. lush products are handmade and most of the ingredients are flown in from different parts of the world. true, that a small quantity should not cost much but if they keep their prices low (which i wish they would!) the demand would increase drastically (because you gotta admit it, the quality of products is awesome!). these guys simply want to cater to a small crowd while making the same amount of money.

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  4. Lush is all about making you feel good for the simple sake that you bought from Lush. It feels like you're part of a small, friendly, luxurious, yet world-conscious group. branding is everything for them. But I gotta say, that Dark Angels and Grease Lightning are giving me super clear skin. ;)

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  5. Very interesting. Nowadays it's difficult to find good quality and good prices. Sometimes a high price tag is worth it, and in other cases you can do your own scrub or cleanser. I think it's about what makes you feel good, even if you have been drawn in due to all the hype!

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  6. @ Rati: I am sure the products Lush makes are great. After all when you charge so much it better work :).. no seriously, I have mostly heard only good things about it :D

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  7. @ Divija: Come on Divs! Who said yr a dumbo? yr reviews are pretty smart too!!

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  8. @ Rima, Ashwini & Marce: Totally agree with all 3 of you.. :D

    Lush is trying to become an experience, so you go to their store, smell the lovely scents, feel warm & fuzzy all over, the products are a visual delight, I guess they are charging for all of this as well..

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  9. I totally agree T. I think the price is a ripoff for hand-made products. But maybe people wouldn't find it so appealing if it was cheap :P I swear... sometimes I'm in the store holding up a weirdly shaped soap @Rs 700-800 while looking at those globs they call bath jellies @ about the same price or more n think "WTH!!!"
    Bottomline ~ Overpriced no matter how good the products are, IMO.
    ♥XX♥

    ReplyDelete
  10. @ Cynthia: I agree with you ...

    My friend makes soaps at home. She too uses all natural ingredients, essentials oils & the soaps are all hand made. She retails them too at certain select stores. & I know from her that each bar of soap that she makes doesn't cost her more than 50 to 70 Rs, depending on the mix of essential oils that she uses.

    Even with Lush's imported ingredients & all, I doubt it would cost them more than 150 Rs. per soap. They manufacture in bulk and as a result get more discount on ingredients than my friend does. & to retail the same soap for 800 Rs. is just a indicator of their marketing strategy and not of the goodness or the quality..

    ReplyDelete
    Replies
    1. Agree. I make handmade cold process soap. All the ingredients I use are imported also (e.g. essential oil from all over the world, base oils as well). And no volume discount since I only make soap for neighbours, friends and household use.

      Delete
    2. Agree. I make handmade cold process soap. All the ingredients I use are imported also (e.g. essential oil from all over the world, base oils as well). And no volume discount since I only make soap for neighbours, friends and household use.

      Delete
  11. I agree with Ashwini...U feel like u belong to an exclusive grp which common and 'lesser' average ppl cannot afford-like u've raised ur ranks!

    ReplyDelete
  12. Lush is a rip off, not that they have a bad business model, in terms of ideals, but the prices are WAY too high for the product they spit out. The soap doesn't clean the skin. Come on, how can mashed up bananas and dried fruit really cleanse and remove dirt? They can't. The shampoo is debatable; some actually work pretty well - but here's why, they contain SLS, Sodium chloride and other sulfates. The same stuff that's in regalar, store bought shampoo. Bathbombs - again, come on! They are like 6-7$ and up, and last one bath, maybe 2 if your lucky. Cheif ingredient is sodium bicarbonate - google and see just how cheap soduim bicarbonate is. Why are they charging so much? I don't paying high dollar for a good product, and Lush has one or two items that I like to keep around, Jungle and body butter bars. Stuff that lasts. Otherwise I stay away from Lush, they are ripping us off with a big smile on thier Lushy faces

    ReplyDelete
  13. While I agree that they use pricing strategy's I feel like they're only over priced by 20% because you're not just buying the skincare, you're also buying there ethics; They don't use palm oil in there products and help support charities etc. I personally don't mind there use of SLS and Parebens if it means I'm supporting something that does so much good else wear; we can't all be perfect right?

    ReplyDelete

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