Premium pricing or prestige pricing is aimed at a very specific sector of customers with a greater willingness to pay. But why? Why are they willing to pay more for certain items? You’ll find the answer in the users’ perception of these products and the corporate image of the sellers. So, prestige pricing uses higher prices, which tend to be applied to products that are considered a luxury, that symbolise the personal interests of the users and demonstrate their social position. This is one type of pricing strategy that you can only implement with certain items in your catalogue.
The success of prestige pricing is based on the positioning of the selling brand. If a potential customer considers the brand to be authentic and to have an innate value, they’ll be willing to pay more for its products, even though in many cases the quality isn’t better than that of the competition. The ultimate goal of this type of pricing strategy is to increase the value of the brand. To achieve this, along with setting prestige prices, a solid corporate image is also usually built in which key messages are highlighted, such as the origin of the brand, its history, the production process for different items, or even the celebrities that own them. This applies equally to pieces of jewellery, top brands of footwear, smartphones, and technology.
Among the main advantages of prestige pricing, are:
- a wide profit margin: by increasing the price of a product, your profit margin will also increase, without negatively affecting demand. Thanks to brand positioning, regular buyers will remain loyal to your products. The clearest example of this is Apple. Despite the prices of its smartphones, its earnings are four times higher than Samsung, its direct competitor.
- customers that are loyal to the brand: as we said, the customer base for prestige brands is very stable. These tend to be users with greater purchasing power and which aren’t affected by fluctuations in the economy or periods of recession. At the same time, when dealing with a limited target audience, brands can clearly identify their buyers and carry out personalised marketing campaigns with a higher conversion rate.
When to use prestige pricing
Even if your brand is positioned as a leader in its sector, it’s not advisable to apply higher prices to the entire product catalogue. Instead, design a strategy that can get the most out of them. You can apply prestige prices to your most popular products at specific time, like when opening a new store or launching a new product. These actions will generate a stir and gain the attention of a greater number of potential clients attracted by the update.
Prestige pricing is also an excellent selling point when launching a special or limited edition version of a product. Users will positively value the exclusivity of the collection and will be willing to pay a higher price. We see this in the exclusive sales of trainers, whose special editions are priced higher than the regular items.
Transparency and customer service are essential to your success
For a prestige pricing strategy to work, the brand must meet a series of requirements. Among these is offering your customers truthful information about your products, framed as a marketing campaign, and often as corporate social responsibility campaigns that improve the brand’s image. The junction point will always be found in being consistent with what you promise customers. A lack of honesty or transparency can generate a reputational crisis that reduces the number of sales, as happened in the beginning of 2020 with the jewellery from the Tous Group.
Likewise, the customer experience must be the best possible. This includes detailed after-sales care. Offering buyers consistent, quality service increases their perception of the company as involved and having high standards. But, be careful with deals and discounts. Unlike what happens with other types of products and brands, offering discounts – beyond those special dates like sales or Black Friday – can harm sales and negatively impact the company’s image.