Category: 

What Is Prestige Pricing?

Gourmet potato chips may be more expensive than regular ones.
Article Details
  • Written By: Patrick Roland
  • Edited By: A. Joseph
  • Last Modified Date: 23 August 2014
  • Copyright Protected:
    2003-2014
    Conjecture Corporation
  • Print this Article
Free Widgets for your Site/Blog
A walnut can be used to remove furniture scratches.  more...

October 1 ,  1890 :  Yosemite National Park was established.  more...

Many marketers and economists say value is in the eye of the beholder, and nowhere is this theory practiced more heavily than in prestige pricing. This economic theory advocates charging higher prices for goods in order to give the impression that there is added value for the cost. Many of the world's most famous brands of automobiles, clothing, jewelry and food use this method as a marketing strategy. However, many people claim to have problems with this logic because the cost does not always represent the quality.

Prestige pricing, also known as premium pricing, is a price system that implies added value of a product because of its location at the higher end of the price scale. Prices within this type of financial modeling are artificially elevated for a psychological marketing advantage. This type of pricing aims to capitalize on buyers' notions that one brand's high-priced item is superior in quality to a similar item that could be purchased for significantly less.

The strategy behind prestige pricing is not tied to its quality but more to its image. By giving a product an elite look because of its high price, the theory states that its implied value will rise. This is accomplished most commonly through marketing campaigns. If the packaging and delivery reflect an elite look or higher value, the theory states that individuals will pay premium prices for this idea alone, rarely investigating whether the price is an accurate reflection of the product's value.

Ad

Prestige pricing is used in everything from designer shoes to gourmet potato chips. One example where this psychological pricing strategy is used frequently comes from the automobile industry. High-end automobiles that cost several times what an average automobile costs are presented as a luxury item that has superior performance, interior and perception among other drivers. The materials and labor used to produce these cars might cost the same or slightly more than an economy car and perhaps have no performance differences, but its elite image demands a much higher sticker price.

Many customers and marketers have complaints about the morality of prestige pricing. The sellers are aware that the product is possibly no better than the standard version, so certain individuals see it as a form of dishonesty. By not providing a measurable advantage over modestly priced products, the theory is that these organizations are cheating customers who are unaware of the difference.

Ad

More from Wisegeek

You might also Like

Discuss this Article

ZsaZsa56
Post 3

Prestige pricing might seem like a callous and easy marketing trick. You just raise the price and then people think it's nicer and you make more money. But it is not that simple. It is about more than price. The product has to reflect the quality that the price implies.

That is where branding comes in. All of your marketing efforts have to make your product seem like it is worth the price that people pay for it, worth more even. That has to show in the packaging, the print and TV ads, the copy, the endorsement deals, everything. You have to maintain the class of the brand and then people will happily pay the price.

whiteplane
Post 2

When I read this article the first thing I thought of was Apple computers. I cannot believe how many people buy Apples and then only use them for the internet. They basically buy a very expensive very powerful computer and then use the simplest weakest feature.

Why not go out and get a cheap Dell or Toshiba that will do everything you want for a quarter of the price?

Ivan83
Post 1

Prestige pricing is more common than most people realize. It is rampant in the grocery store. By and large, all processed food is the same. There are difference is taste and style, but as far as quality goes the bottom and the top are pretty close together.

But the prices are not at all. Everything from canned tomatoes to frozen pizza to cream cheese comes in a generic form and a premium form that costs three or four times more. It is basically the same food, some retailers just charge more and design fancier packages to make you think that it is better. It is a grand manipulation.

Post your comments

Post Anonymously

Login

username
password
forgot password?

Register

username
password
confirm
email