Prestige Pricing Guide: Examples, Strategy, and Definition

Prestige pricing is a pricing strategy that uses higher prices to suggest quality and exclusivity. This practice is commonly seen among luxury ... Wejustlaunchedengagementdata! product blog Guides SubscriptionStatistics ReducingChurn PricingOptimization FreemiumStrategy Shows PricingPageTeardown ProfitWellReport ProtecttheHustle Tradeoffs RecurNow aboutus Login MostRecent PricingPageTeardown recurnow profitwellreport protectthehustle AllBlogPosts   PrestigePricingGuide:Examples,Strategy,andDefinition TuckerDawson UpdatedOn:November01,2021 No Iusedtopaytopdollarforsneakers.IfNikeputoutalimitedrunofhitopDunksinanattractivecolorwayIwasalloverit,andmorelikelythannottheamountIpaidjusttogetmyhandsonthemwasfarbeyondwhattheywereworth.Asimilarpairofsneakersbyalesserknownbrandmightcost$30less(Ineverpitchedatentinfrontofboutiqueshoestoresjusttowaitallnightforsuperexpensivekicks),butIhadtohavethatinstantlyrecognizableNikeswooshonthesideofmyshoesorIwouldn’tfeelsatisfied. photocredit:kikfoto SohowcouldIshelloutsomuchcashforpremiumsneakers?Afterall,theydidn’tevenfitmyhumongousfeet(size13wide,it’sacurse).MyonlyexplanationisthatIvaluedtheNikebrandmorethantheactualfunctionalityorqualityoftheproduct,anditdidn’tmatterhowexpensivetheshoeswere.InfactI’mnotsureIwouldhavebeenquiteasinterestedifthepricewaslower. Nikeisaperfectexampleofacompanythateffectivelyusesprestigepricing,whichisapricingstrategywherepricesaresethigherthannormalbecauselowerpriceswillactuallyhurtsales.Ifcustomersvaluetheimageofyourbrandandthefeaturesofyourproductoverthoseofyourcompetitors,thenprestigepricing(alsoknownasimagepricing)canhelpyoucapturevaluedespitetheproductioncostsorqualityoftheproduct. Whatisprestigepricing? Prestigepricingisapricingstrategythatuseshigherpricestosuggestqualityandexclusivity.Thispracticeiscommonlyseenamongluxurybrandsandfinerestaurants. Whileestablishingahigherpriceforyourproductcanmakeitseemmoreexclusiveandhighquality,ifyoudon’thaveanythingspecialoruniqueaboutyourproductthenthiscanbackfirebyattractingfewercustomers. Doesprestigepricingwork? Thetheoryisthatcustomerswillpayhigherpricesfortherightimageandwon’tinvestigatewhetherthepriceaccuratelyreflectsthevalue.InNike’scasethebrandiswhatcommunicatesvalue,notthespecificnatureoftheproduct.Prestigepricinghastheabilitytogivecompaniesapsychologicalmarketingadvantagebyconvincingcustomersthereisaddedvalueforthecost,andittakesadvantageofthebuyer’sassumptionthatonebrand’sproductisofahigherqualitythanthecompetitorsbecauseitcostsmore. Therearemanyexamplesofcompaniesandbrandsthatuseprestigepricingtoleveragetheirproducts.Luxurycarcompaniesarenotoriousforjackinguppricesonhighendvehicles.AToyotaCamryoraHondaCivicwillgetyoufrompointAtopointBjustaswellasaBentleyoraBMW,butcustomerswhovaluedrivingaroundinfancyautomobilesprobablywouldn’ttoleratedrivinganentrylevelsedanastheirmainmodeoftransportation. ARolexwatchcancostwellovertengranddependingontheamountofembeddedbling,butyoucanpurchaseaTimexwatchwithtwiceasmanyfeaturesforaround$28orless.Theybothtellthetime,butit’sobviousthattheRolexisastatussymbolthatappealstotheircustomersbecauseitdisplaystheirfinancialsuccessinadditiontothecorrecttime.Thevalueisinthebrand,notthefunctionalityoftheproduct,andyoucan’tblamecompaniesforsettinghighpricestoreinforcetheperceivedvaluetheyoffertheircustomers. photocredit:YoussefAbdelaal Great,buthowcanIprestigepricing? Don’tworry,Iknowmostofyouaren’tmarketingorsellinghotkicks.Prestigepricingisusedbybusinessesofalltypestoappealtocustomers’senseofvalueandincreaseprofits,andyoudon’thavetobetheproprietorofalegendarybrandtousethisstrategyeffectively.Therearegreatwaystousehighpricesasaguidetowardsmorerealisticsalesaswellasamethodforcommunicatingvalue.Let’stakealookatafewofthetricks. 1.Createanenterprisetier(whetheryouhaveanenterpriseproductornot) Onewayyourbusinesscanuseprestigepricingistocreateanexpensiveenterprisetieronyourpricingpage,evenifitisn’treal!Erichasdiscussedthisstrategyofpriceanchoringbefore,andit’saneffectivewaytoincreasetheperceivedvalueofyourofferingandyourrevenuestream. photocredit:ChrisDevers Forexample,ifyou’resellingaSaaSproductthatcosts$50permonth,youcancreateanenterprisetierthatcosts$300permonthwithafewadditionalfeatureslikemorestorageorunlimitedusers.Theenterprisetierwillbeoutofreachformostofyourpotentialbuyers,butitwillserveasananchorthatguidesthemtothe$50product.Justremembertoincludetherightfeaturesinthetargetproductsothatit’sanidealpurchaseforyourcustomersaswellasyourbusiness.Inthiscase,theenterprisetieristheretopersuadecustomersthe$50tierisagreatdeal,andshouldn’tbearanysuperiorfeaturesthatyourprospectswillbeattractedtobutunabletoafford. 2.Createprestigiousimageforyourbrand(andtherightenvironment) Acrucialfactorinreinforcinghigherpricesiscreatingaprestigiousimageforyourcompanyfromthegroundup.Ifyoucanimprovethecustomerexperiencewiththerightenvironmentandconsistent,greatservice,thenyourcompanywillconveyanimagethatprovesyourproductisagreatvalueatahigherpricethanyourcompetitors. photocredit:PaulStevenson Thekeyistobeconsistentwithwhatyoupromisetoyourcustomers.Charginghigherrateswon’tsucceedunlessyoudeliverthegoodsbasedonyourcorevaluepropositionandaclearmessage.Thatbeingsaid,itdoesn’thurttolookthepartifyourtargetcustomersarehighrollers,andifyourofficehasupscalefurnitureandaswankyconferenceroom(maybeanicebartoo),yourclientswillleavewithalastingimpressionofluxuryandsophistication.Yourwebsiteteamphotoscanincorporatethesametactics.Ifeveryteammemberisdressedinfinesuits,eitherforindividualorgroupphotos,yourcompanywilllookprofessionalandexperiencedtopotentialcustomers.Thiscanalsoworkespeciallywellifyouhaveanoutboundsalesteampushinghighendproductstovendorsanddistributors.Combinethisapparentluxuryimagewithgreatcustomerservice,andjustifyingthoseprestigepriceswillbethatmucheasier. 3.Giveyourpricetherightimage Theactualappearanceofyourpublishedpricescanhavesubconsciouseffectsonyourpotentialcustomersthatincreasesales.Insomecases,smallerdetailslikeendingyourpricesin0’sor5’sandavoidingdecimalpricingcanjustifyahigherpricebypresentinganimageofhigherquality.Thistypeofpsychologicalpricingstrategyisusedinhighendrestaurantsallthetime,andyourarelyseeapricelike“8.99”foramealunlessyou’reinachainorfranchiseestablishment.Pricesendingin9aremeanttopersuadeconsumersthey’regettingabargain,butpricesconsistingofroundnumbers(nocents,nodecimals)cansubliminallyconvincecustomersthatyourcompanyhasintegrityandyourproductissophisticated.Inotherwords,it’sworththehighpricetheypay. Thedesignofyourpricingpagecanalsocreatetherightimageforyourpricesandincreaseperceivedvalue.OnecompanythatoptimizedtheirpricinginthiswayisSurveyMonkey,whichoffersacomprehensivesoftwaresurveytool. Theirpricingpageadvertisesthe$25permonthGoldtierasthemostpopular,andusedcolordifferentiationandaslightlylargerpricingbracketforaddedemphasis(seeourpostonpricingpagedesigntactics).TheSelecttierbelowithasallbutoneofthefeaturesincludedinGold,butit’spriced$8lessat$17permonth.Despitethelackoffeaturedifferentiation,customersarenonethelessattractedtothemoreexpensiveGoldversionbecauseitlookslikethebestoption.TheGoldbracket’sperceivedvalueisfurtherincreasedbya$65permonthoptionpositionedtoitsrightthatservesasapriceanchor.MostcustomerswouldprobablybesatisfiedwiththeSelectoption,butthekeydesignelementsandthepriceanchorhelpSurveyMonkeypersuadecustomerstogoforGold. Thekeyistobeconsistent Prestigepricingmethodsaren’texclusivetothebigbrands,butthatdoesn’tmeanyoushouldjackupyourrateseither.We’vesaidittimeandtimeagain,butitonlytakesa1%increaseinpricetoincreaseprofitsbyanaverageof11%.Pickapricethatreinforcesthequalityoftheservicetotherightaudienceandfocusonboostingthevalueofyourproduct.Ifyoucancommunicatevalueeffectivelyyoucanbuildyourbrand,reducechurnandkeepcustomerscomingback. Thekeystomaintainingbothcredibilityandhighermarginsarethesame:beconsistentandavoiddiscountsthathurtthebottomline.Thesoftwarespaceisnoplaceforslashingpricestomakequickconversions;doingsowillleadtoanundervaluedproductandpoorfuturesales.(Formoreondiscounts,seeourpostHowDiscountingisKillingYourPricingStrategy).Buildtrustandforgecustomerrelationshipswithoptimalpricesthatreflecttheworkyou’veputintothebusiness,andyou’llsoonoverwhelmthecompetition. Tolearnmoreaboutpricingspecifics, checkoutour PricingStrategy ebook,our PricingPage Bootcamp,orlearnmoreaboutour priceoptimization software.We'reheretohelp! Tags: pricingstrategy JoinOver50kSubscriptionOperatorsGettingTheseInsightsWeekly SubscribeforMoreInsightsLikeThis Recommendedforyou   Guide:Howtooptimizeyourpricingstrategywithdata ThecompleteguidetoSaaS&subscriptionstatistics WebreakdownthepricingpagesofZoom,Netflix,Slack,andmore TheAnatomyofPricingStrategy Anin-depthguidetounderstandingandoptimizingyourrecurringrevenuepricingstrategy GETYOURFREEBOOK