Prestige products

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.

Advantages of Prestige products

Prestige products offer several advantages to both the producer and consumer. These include:

• Higher profits for the producer - As the consumer is willing to pay more for a product they perceive as being of higher quality, the producer can charge a higher price and thus make more money.
• Higher perceived value - Prestige products allow the consumer to feel they are getting a higher quality product, even if the actual quality may not be any different from a lesser-known brand.
• Increased demand - As consumers are willing to pay more for prestige products, there is often increased demand for them, which can help to drive sales.
• Improved reputation - A successful line of prestige products can help a company to build a good reputation in the market, which in turn can lead to increased sales.
• More loyalty - Consumers who purchase prestige products are often more loyal to the brand, as they have a higher perceived value for the product and are likely to continue buying it.

Limitations of Prestige products

A key limitation of prestige products is that they are often limited in supply due to their status and desirability. This can lead to higher prices, which can be prohibitive for some potential consumers. Other limitations of prestige products include:

• Limited target market - Prestige products are typically designed for a smaller, more affluent market, which limits the potential customer base.
• High cost of production - Prestige products often require the use of higher quality materials and labour, which can lead to increased production costs.
• High competition - Prestige products often face a high level of competition from existing brands and new entrants in the market, which can make it difficult for the product to stand out.
• High marketing costs - To remain competitive, producers of prestige products must often invest heavily in marketing, which can be expensive.
• Dependence on consumer trends - Prestige products are often dependent on consumer trends, which can be unpredictable and can lead to decreased sales if the trend changes.

Other approaches related to Prestige products

Introduction: Prestige products are not only found in tangible goods, but there are also many intangible services that can be considered prestige products.

• Luxury services such as health and wellness, exotic tourism, hospitality, and restaurant services can all be seen as prestige products. These services often involve additional elements such as exclusivity and quality, which can be seen as part of their prestige.
• Membership in exclusive clubs or societies can also be considered a prestige product. These memberships often come with benefits such as access to exclusive events, discounts, and exclusive networking opportunities.
• High-end fashion and accessories can also be considered prestige products. These items can often be quite expensive and come with exclusive branding or labels that signify their quality and prestige.
• Professional services such as consulting and legal services can also be seen as prestige products. These services are often seen as a way to demonstrate one's professional success and expertise.

Summary: Prestige products can take many forms beyond just tangible goods, with luxury services, exclusive memberships, high-end fashion and accessories, and professional services all representing prestigious offerings.

Prestige products — recommended articles

Veblen effect — Substitute goods — Consumer markets — Skimming pricing strategy — Joint demand — Augmented product — Mass Merchandising — Optional product pricing — Threat of substitutes

References

• Francis, J. E., Burgess, L., & Lu, M. (2015). Hip to be cool: A Gen Y view of counterfeit luxury products. Journal of Brand Management, 22(7).
• Kim, J. C., Park, B., & Dubois, D. (2018). How Consumers' Political Ideology and Status-Maintenance Goals Interact to Shape Their Desire for Luxury Goods. Journal of Marketing.
• Liu, L. (2003). The products of minds as well as of hands: Production of prestige goods in the Neolithic and early state periods of China. Asian Perspectives, 1-40.
• Pettinger, T. (2017). Veblen Goods Economics Help
• Vigneron, F., & Johnson, L. W. (1999). A review and a conceptual framework of prestige-seeking consumer behavior. Academy of Marketing Science Review, 1(1), p. 3.
• Yang, W., & Mattila, A. S. (2017). The impact of status seeking on consumers’ word of mouth and product preference—A comparison between luxury hospitality services and luxury goods. Journal of Hospitality & Tourism Research, 41(1).

Author: Artur Kopera