Premium versus Luxury

We got a typically IDEO email query yesterday: "What's the difference between premium and luxury?"

My immediate reaction was that it was just semantics, but then the differences seemed to gel. In fact, it got me thinking the rest of the afternoon about these two classes, how often people mistake one for the other, and how much of a premium I place on Premium.

In my mind, premium is something that provides the best of what the product or service has to offer. Like premium power tools, premium beer, or a premium banking experience. These are things I would pay for, if they are important to me, because (hopefully!) I am getting the best possible core quality.

Luxury, on the other hand, is having more than you need, just because you can. Something like a diamond-studded MP3 player, where opulence is added, not because it betters the core experience (it still might be a crappy sounding MP3 player), but to promote itself. Or where more is done, purely for more's sake, like the Ford Ex(cretion)pedition and other mega-SUVs. Luxury of this sort just doesn't appeal to me.

Of course there is much overlap. Premium done right elevates & celebrates the beauty of a considered solution, and becomes luxurious. Luxury done right walks the fine line of over-the-top, staying just this side of fanatic. My favorite examples from limited personal experience are boutique hotels such as the W in San Francisco, and of course, Apple's fab MP3 player. These are two experiences I have gone out of my way (ie paid more) for.