Prestigious price strategy
| Prestigious price strategy |
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In this strategy during product life cycle it is constantly perceived by customers as a product of high quality and luxury. The high price is an important stimulus to buy.
Buyers of luxury car brands, cameras, perfume or clothing, attain a high satisfaction with the prestige, which gives them the use and possession of these articles. Often cutting the prices of prestigious products of caused the drop in their sales. In such cases, the increase in sales as a result of lower prices do not usually balances loss of sales in client groups with higher income and social status.
Lower price for such customers have the same effect as to deprive the prestigious product image, which acts as an instrument for the purchase of specific brands. In the case of these products lower price perhaps inhibit the sale rather than increase it.
Role of prestige in motivation to buy
In recent times the quality and prestige have become two major motivating factors, which is reflected in most ads and promotion. Prestige is and will be seen in the future through the prism of purchases, but prestigious price strategy can provide qualitatively new way of price formation. This concept allows customer binding by satisfaction with the product and accompanying price structure. It focuses on how the product can satisfy his needs and expectations.
Benefits and limitations of prestigious price strategy
A prestigious price strategy refers to setting a high price for a product or service in order to convey a sense of exclusivity and luxury. This strategy can have several benefits and limitations.
Benefits of a prestigious price strategy include:
- Higher profit margins: Setting a high price for a product or service can lead to higher profit margins, as companies can charge more for their products and services.
- Conveys exclusivity: A prestigious price can convey a sense of exclusivity and luxury, which can appeal to certain consumers and increase demand for the product or service.
- Establishes brand image: A prestigious price can help establish a brand image of quality and luxury, which can increase brand loyalty and customer loyalty.
- Increased perceived value: A prestigious price can increase the perceived value of a product or service, as consumers may associate high prices with high quality.
Limitations of a prestigious price strategy include:
- Reduced market size: Setting a high price can limit the market size, as many consumers may not be willing or able to pay the high price.
- Not suitable for all products: Some products or services may not be suitable for a prestigious price strategy, as consumers may not perceive them as luxury or exclusive.
- Increased competition: A prestigious price can attract competitors, who may be able to offer similar products or services at a lower price.
- Limited to high-income customers: Prestigious price strategy is mainly limited to high-income customers who can afford the high prices, which can lead to a narrow target market.
- Limited to specific geographic regions: Some geographic regions may not be able to support a prestigious pricing strategy, as the cost of living and purchasing power may be different.
References
- Utaka, A. (2015). High Price Strategy and Quality Signalling. Japanese Economic Review, 66(3), 408-420.
