Veblen goods theory and why we buy expensive goods

With the set launch date of our milliondollarbottle.com site fast approaching, I can definitely say we have things cut out for us, as this is the biggest task we have undertaken as a company to release information and our new signature premium product “collection” (as we like to coin them). In relation to these collections we will be offering in 2009, I received a very interesting article about Veblen goods, from an industry person whom reads this blog. So I wanted to explore this theory in relation to Mendis and our price points and buyers, as I had stated a few weeks back I would touch on this topic.

Veblen goods are high-status luxury goods that are desirable because of the price they are sold at and the associated status that comes from purchasing something so expensive. In such a case, the desirability of a good is perceived to lesson should the face value of the high-status good be reduced, because accordingly the status or should I say luster is reduced. High-status goods that fall into this category are generally cars and jewelry and are termed Veblen goods.

Mendis signature-premium coconut brandy collections could potentially be termed as a Veblen good. Although these signature-premium collections we are offering in 2009 hold intrinsic value due to their; uniqueness, artistic scarcity and signature markings, which makes them priceless, it is ultimately the price points of these priceless collectibles that has created demand for them through our agent.

Now it is true that our goods hold intrinsic value at the price we are offering them at, but should we lower the price below the value of the good itself, the status of the good would in turn be tarnished and potentially not attract buyers. Therefore, appropriate pricing levels must be enforced for high-status luxury goods (or as we call them signature-premium) that are offered as very limited highly valuable collectibles.

In effect, yes entities buy certain high-status luxury goods for the status associated with possessing such a good, though in reality goods termed as Veblen goods are not just over priced goods but goods that are innovative, of supreme quality and of the finest craftsmanship, anything less and the status associated with such goods would be lower. Case in point, not all cars or jewelry are perceived as a Veblen goods, it has to be broken down by brand.

If a brand is perceived as high-status luxury that is desirable because of the price it is sold at, introducing lower priced goods to reach the mass market must be done carefully so as not to tarnish the image of the brands flagship product. One brand that has perfected the art of this is the car maker BMW, they executed the introduction of their cheap mass produced 3 series and now 1 series cars without tarnishing their desirability of their high price point 7 series car. People are still willing to buy the most expensive BMW regardless of price, in order to attain the “perceived” status of driving it, not that I care to be seen in a BMW, though I do like and drive a German car.

In regards to alcohol, there may be a few brands that have the potential to offer product at an unjustifiable price point due to the status they hold, of which can been seen with some vodka brands, that are inflating prices of this basic flavorless neutral ethyl alcohol product purely off demand, with what I perceive as holding little intrinsic value to the face value they are retailing at.

At the end of the day I believe in offering a valued luxury good based off the unique offering. I would not offer the first bottle of coconut brand for $1 million, that we have US TTB world first “coconut brandy” COLA approval for, unless this product is going to offer the purchaser of it true long term collectible value. The Mendis coconut brandy products are priced as such due to unique attributes of our liquid, exclusive signature marking, limiting offering and supreme craftsmanship.

If Mendis is to be perceived as a high-status luxury brand that is desirable because of the price it is sold at, it will be due to the quality and the real value of our brand. When someone buys our million dollar bottle of coconut brandy they valued it based off acquiring the first of a new category, just as if they could buy the first bottle of vodka or say first bottle of ultra-premium Grey Goose, had the founder Sydney Frank signed the first bottle.

Mendis coconut brandy and our soon to be announced signature premium collections for 2009 is more than just an offering of a new alcohol product, it is about bringing lifestyle to alcohol in a way no other alcohol company has been able to do, creating a luxury status in alcohol unheralded to date. You’re not going to see Mendis being swilled by the bottle at some hot night spot, but you will see Mendis showcased and treated like a fine piece of art work, treasured and valued, also maybe, just maybe, enjoyed by a select few.


Chris S. Richardson
President