Prestige Pricing Strategies, Advantages, and Disadvantages

Prestige or image pricing is a branding and marketing strategy that uses premium pricing to suggest superior quality. In other words, a company will set an intentionally high price to attract potential customers interested in associating themselves with a luxury brand.

A prestige pricing strategy can have numerous benefits for a company rolling out a new product or trying to increase the perceived value of their products in the marketplace.

• Better brand perception: Marketing your product at a higher price point is usually part of a more extensive marketing campaign that stresses your position as a luxury brand creating high-end products. Consumers won’t be willing to shell out big bucks for low-quality products, but they might reconsider if you can justify the price tag with a corresponding brand image. Get luxury fashion designer Diane von Furstenberg’s tips on brand identity design.
• Higher share of market revenue: By opting for higher prices over lower prices, a merchant can make a higher profit without necessarily capturing a greater market share.
• Larger customer base: Certain affluent consumers seek out luxury brands that align with their self-image. In other words, by increasing your brand value overall, you can reach an entirely new set of target customers looking for better-quality products.

The primary disadvantage of prestige pricing is that it’s essentially gambling that your target audience will buy into the image you’ve created. The bottom line is that prestige pricing works only as part of a holistic brand image campaign, not simply as a way to sell people expensive products and increase net profit margins. Ideally, you need to back up the price tag with a well-constructed brand image and a high-quality product. Otherwise, it’s easy to see how a prestige pricing strategy could backfire quickly.

These kinds of pricing strategies can take numerous forms depending on how you want to get across the added value of your company’s products:

1. 1. High-end marketing: Associations with other luxury brands or endorsements from figures perceived as classy or high-end themselves can go far in helping people perceive your company as a member of an elite class. Learn more about developing a marketing strategy that works.
2. 2. Psychological pricing: This type of pricing involves establishing a price point that people naturally associate with a premium product. For example, prices ending in the number nine create the impression of a bargain, whereas prices ending in zero suggest luxury.
3. 3. Supply controls: While it may seem counterintuitive, constricting the supply of your product in the market can lead to more sales over the long term. One example of prestige pricing is releasing limited-edition products at a premium price. Since these releases can create the impression of scarcity, when paired with a desirable brand image, they can generate a wave of anticipation whenever you next announce a product. Popular streetwear fashion brands use this phenomenon to generate “hype” surrounding each limited-edition “drop” of merchandise.

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