One of the most complicated tasks when you have an e-commerce is to establish the sale prices of your products. In order to decide how much you want to charge for something there are several things you should consider. The basic ones are: production costs, labor costs and advertising costs. With this information you can decide the profit margin and with the sum of everything obtain an ideal sale price. It is at this point that you can decide to implement a prestige pricing strategy.
What is a prestige pricing strategy?
A prestige pricing strategy is based on one idea, price equals quality (or so the buyer thinks). Prestige pricing is when a company decides to increase the price of its product to obtain a higher profit margin. This increase in price is justified by the prestige of the brand, its image before the public. This means that a consumer chooses to buy the most expensive item because it relates to quality and luxury and is therefore willing to pay more for it.
When can you go for a prestige pricing strategy?
There are times when having premium or prestige prices is more recommended, such as:
- New launches: When you are going to introduce a new product into the market, it can be a good opportunity to promote a prestige pricing strategy. However, if you are going to bet on high prices, you also have to bet on creating a premium image of your brand.
- Unique offer: When you are the only company that is selling the product, you can offer it at a premium price since your product is exclusive.
- Limited edition: When you have a limited edition or a very small production of your product, it takes on prestige by itself since it is an article that will not be on the market for long and if the consumer wants it, they will have few opportunities to obtain it.
For your prestige pricing strategy to work, you have to take several things into account:
- Your brand image
- The market in which you are introducing your products
- What the consumer of the sector considers important and the bonus they will get when buying your product
Remember that in order to sell your products as premium, your consumer must relate your brand to a prestigious one. What really matters the most is the perception that the buyer has of you. One that is good enough so that they are willing to pay more for your products even if they cover the same need as those of your competition.