Prestige products

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Prestige products
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Prestige products are goods that are perceived as being very high quality. The purchaser therefore is willing to pay more as he/she suspects that they have higher added value. For producer it is convenient to have prestige products, as then he can earn more. The margin is much higher, as buyer doesn't buy only the product, but also the prestige, which is virtual. Interesting part of prestige products are luxury services like health & wellness, exotic tourism, hospitality, restaurant or membership in elite sport clubs.

Veblen effect

Luxury goods are inseparably common with Veblen effect. In this economics model, demand increase along with the price increase. The reason of this situation is need to show purchasing power by rich people. This paradox apply to rare, expensive, desirable or trendy products like exotic cars, works of art or limited collections from well known fashion designers. (T. Pettinger 2017)

Sources of prestige

In fact prestige products not always have increased quality. The prestige sometimes comes from good marketing and that how other people see those products. For example, people buy prestige cars because they are prestige cars, and not because of high technical quality. In most cases it is possible to find similar functions in cheaper cars. That what is really important for those buyers is a show off need.

According to Vigneron and Johnson, definition about that, what is prestige product and what separate it apart normal product, is based on 5 pillars:

  1. possession of prestige products is symbol of wealthy and signalize high social standing
  2. unavailability caused by, for example, high price or limited production
  3. prestige is an end in itself and most important factor in purchase decision-making process
  4. choice of particular product is based on subjective elements like appearance
  5. in some degree prestige is resulted by technical specification or detail-orientated manufacturing process, inherent for example in watch or jewelry industry. (F. Vigneron, L.W. Johnson 1999, p. 3)

Example in automotive industry

In general opinion, an Audi cars are seen as prestige product, while Skoda's are associated with basic level product. However, many parts used in both cars are identical (both are manufactured by Volkswagen) and functions are similar.

For example, part of engines and transmissions using in Audi models portfolio are the same as in other popular VW AG brands like Skoda, Seat or Volkswagen. Despite of that, prestige related to Audi is higher than to Skoda.

This situation is result of different marketing, history, perception, and emotions which are triggered by every of that brands. Really important thing is also positioning inside a consortium. The most common parts or even models are shearing Skoda, Seat and Volkswagen. Audi as premium one is shearing technical solutions from listed, cheaper brands, but often have earlier access for them and have some reserved equipment. Higher positioned, VW AG luxury brands, Porsche and Bentley are also using technic from cheaper brands, Audi and Volkswagen, but in limited range to avoid degradation of their prestige.


Author: Artur Kopera