Prestige pricing is a pricing strategy through which brand image of a product is enhanced by the price fixed for it. This pricing strategy is also termed as psychological strategy as the consumers feel that since the price of a product is higher than its other competitive products in the market, it might be superior in quality. They don’t even try to find out whether there is any difference in the ingredients or construction of the higher and lower priced product or not. Due to this pricing strategy, the top brands enjoy higher share in the market even when their products are priced 30%to 40%higher than a similar product with no brand value.
Cosmetics, drugs, apparels etc. enjoy more market share if they have big brand image. Prestige pricing can also be termed as a non-pricing strategy because there is no need for the advertising to mention price at all. Instead, in the advertising of these products more focus is paid on service and quality. The lesser a customer knows about the quality of a product the better are chances of him to get lured by the advertising of the product. If the product has a good brand value, the customer is fully confident about its quality and don’t even look at its advertising from a point of view of getting assured of its quality.
Advertising choices for prestige priced products are immense because the producer has enough money to splurge upon advertisements. Hence he can afford the best advertising options. If he is advertising in print medium he chooses the best life style magazines because its glossy pages speak volumes about the product even without any product information.
He has the option of paying the high profile celebrities to endorse the brand. Just the image of the celebrity along with the product is enough to grab the attention of the consumers. If the producer does not apply the prestige pricing strategy, his advertising choices get limited. The more the price, the better are the advertising options. Karlof and Lovingsson (2005, p. 286) have rightly observed the following effects of the interrelation between prestige pricing and advertising choices:
“ competition is low
demand exceeds supply
a company enjoys the position of virtual monopoly”
In the words of Griffiths and Wall (2004, p.163) “If manufacturers can create an association in consumers’ mind that premium prices mean higher quality and exclusiveness, then they can engage in prestige pricing.” This can be done none other than advertising. Advertising choices and prestige pricing are interrelated. So the practice of psychologically influencing the consumers’ choices is evident from the sophisticated advertising campaigns of all the high priced products in the market.
The money spent on producing a product is cost while the price is the money the consumer spends to buy that product. In the prestige pricing strategy the price is not related to the value of the product but the consumers are made to feel that way. This is not possible without the range of advertising choices available in this kind of strategy. So it can be concluded that prestige pricing and advertising choices go hand in glove.
Word count: 535
Arens, W.F. and Bovee, C.L. (5 Ed.). (1994). Contemporary Advertising. USA: IRWIN
Griffiths, A. and Ison, S. (2002). Business Economics. UK: Heinemann.
Griffiths, A. and Wall, S. (Ed.). (10 Ed.). (2004). Applied Economics. England: Pearson
Karlof, B. and Lovingsson, F. (2005)The A-Z of Management Concepts And Models.
London: Thorogood Publishing.
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