Seth Godin, a leading marketing adviser, has a fantastic discussion of the difference between luxury and premium goods in his blog today. The entry is suitably titled Luxury vs. premium. Here’s what he says:
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 get better performance. They’re happy to pay more because they believe they get more.
This same rationale can apply to law firms. I know that every big firm detests the idea of doing "commodity" work ("they" do commodity work, but of course "we" don’t). I always wonder that everyone says that everyone else is doing commodity work how it is that no one is doing commodity work. But that’s another story.
If a client chooses to pay enormous rates for a New York firm for work that can just as capably be handled by a firm from Columbus or Chicago or Oklahoma City, it seems to me that they are using a luxury firm. In these days, how many GCs can afford a Rolex when an Omega will do the trick?