Prestige pricing is a marketing strategy where higher prices are charged to give the impression of added value, often used by famous brands. The strategy is not linked to quality but rather image, and is intended to capitalize on buyers’ notions that a high-priced item is of superior quality. However, some people see it as a form of dishonesty.
Many marketers and economists say that value is in the eye of the beholder, and nowhere is this theory practiced more than in prestige pricing. This economic theory advocates charging higher prices for goods to give the impression that there is value added to the cost. Many of the world’s most famous car, clothing, jewelry and food brands use this method as a marketing strategy. However, many people claim to have trouble with this logic because cost does not always equate to quality.
Prestige pricing, also known as premium pricing, is a pricing system that implies the added value of a product due to its location at the higher end of the price scale. The prices within these types of financial models are artificially high for a psychological marketing advantage. This type of pricing is intended to capitalize on buyers’ notions that a brand’s high-priced item is of superior quality to a similar item that could be purchased for much less.
The strategy behind the prestige prices is not linked to its quality, but rather to its image. By giving a product an elite appearance due to its high price, the theory states that its implied value will increase. This is most commonly accomplished through marketing campaigns. If the packaging and delivery reflect an elite look or higher value, the theory states that people will pay premium prices just for this idea, they rarely investigate whether the price is an accurate reflection of the value of the product.
Prestige pricing is used on everything from designer shoes to gourmet fries. An example where this psychological pricing strategy is often used comes from the automobile industry. High-end cars that cost several times what your average car is presented as a luxury item that has superior performance, interior, and perception among other drivers. The materials and labor used to produce these cars may cost the same or slightly more than a budget car and may not have any performance differences, but their elite image demands a much higher sticker price.
Many customers and sellers have complaints about the morality of prestige pricing. Sellers are aware that the product may not be better than the standard version, so some people see this as a form of dishonesty. By failing to provide a measurable advantage over modestly priced products, the theory is that these organizations are cheating customers who are unaware of the difference.
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