April 17, 2021 | Sean Foo
From an $800 Hoodie to a $30,000 watch, people are willing to drop stacks of cash on a product and even queue overnight in anticipation of its release!
But what makes these products so desirable when there are similar alternatives that cost much less? Why am I paying more?
While we can all argue that the product is of superior quality to justify our purchase, it often isn’t the case, despite the big price tag.
It is because we value the brand and crave the identity it confers to us so much that we agree with its prestige pricing. A pricing strategy where prices are marked up to help increase sales by creating the perception of an exclusive and high-quality branded product.
Wearing a $100 Casio watch? You must be either frugal or practical.
Spotted with a $50,000 Rolex on your wrist? You suddenly seem to be someone successful who achieved a certain level of status.
In fact, if a Rolex watch was priced at just a few hundred dollars, we might very well no longer desire it!
Prestige pricing (also known as image pricing), is a strategy where a brand sets the price of its products and services at a higher price point.
Through its higher price, the goal is to get the customer to associate the product with exclusivity, superior quality, and value.
Prestige pricing is utilized on the assumption that a higher price will help encourage more sales, whereas a lower price point will only devalue the product in the eyes of the customer who will then not desire it.
For many companies, the price of their product is directly connected to their brand image. It is a differentiating factor that makes them stand out from the rest of the market and their competitors.
Reality doesn’t always affect perception. Value is subjective.
For example, if I were to present a modern art painting to a group of people, the reactions I get might be totally contrasting.
Some might find it amateurish and something that they themselves can paint while a few might find it a true work of art and are ready to pay tens of thousands of dollars to own it.
Similarly, If the same burger was served in a fast-food chain versus a 5-star restaurant, you’d likely perceive the one served in the restaurant as being more premium and worthy of a higher price tag.
While focusing on the quality of our offerings can help to make them objectively more valuable, their subjective value is in the eyes of the beholder.
Pricing allows you to control how your customers view your brand, it gives you an opportunity to influence how people feel. This is powerful especially if you are operating in a saturated market.
Prestige pricing is a versatile psychological weapon you can use to your advantage to close more sales and more importantly, attract the type of customers you want.
Customers that view your product as the premium option and are happy to pay more!
Take Ferrari for example. Much like a Honda or a Ford, it is essentially a vehicle that gets you from point A to point B.
However, to own one, you’ll have to pay anywhere from $300,000 to over $1 million.
While manufacturing a Ferrari supercar utilizes the finest materials and highly skilled workers, its prestige pricing is one of the main factors that drive its demand amongst the aspirational rich and the elite.
It is a status symbol that displays the financial success of the owner.
A Ferrari can be used as a conversation starter and increases the status of the owner both in everyday life and the business world. It adds value to the lives of their customers that goes beyond just simple transportation.
By setting their prices astronomically high, Ferrari protects and reinforces their luxury brand image – reminding their customers of the immense value and prestige of owning one of their sports cars.
With prestige pricing, Ferrari keeps away the mass-market consumer and only focuses on the privileged and the rich, further building a feedback loop of luxury of exclusivity.
While prestige pricing definitely works for luxury brands, it is a strategy that many businesses can utilize to increase not just their bottom-line, but the perceived value of their products and brand.
Here’s how to do it.
Whether you are selling a SaaS product or a consulting service, you can use prestige pricing to increase the perceived value of your products to your customers and enhance your brand image.
However, there are three guiding principles to follow if you want your prestige pricing efforts to be authentic and not just seen as just a cash grab.
Prestige pricing is powerful. It allows you to enjoy a bigger profit margin and attract customers with thicker wallets – but does your product or service allow you to even implement prestige pricing?
If you are selling something basic, aka a commodity good, it will be a big challenge to slap a premium price tag on it.
Whether you are selling design services, loaves of bread, or bottled water – these are normally commodity goods.
However, not all is lost!
If you are selling logo design services, why not integrate in a strategy session together with 3-D modeling and turn it into a full solution.
Running a tour guide agency? Start creating themed experiences such as a fine dining trip that visits restaurants run by Gordon Ramsay and Salt Bae!
By shifting your offerings towards solutions & experiences, you give your business a fighting chance of successfully implementing prestige pricing.
While perception doesn’t always mean value for money – to reach the ranks of prestige pricing, there has to be a high base of value, both intrinsic and extrinsic.
What do we mean by this?
Take Apple, for example, we all know their iPhones are priced much higher than their competitors and arguably packs the same or even slightly fewer features.
However, the iPhone still has solid intrinsic value – such as the polished iOS, solid build, powerful cameras, and ecosystem of apps…
…as well as the extrinsic value is shown by its beautiful marketing presentation both in-store and on their digital marketing platforms.
To justify your prestige pricing for the long-term you’ll need to ensure you deliver value both internally and externally.
Your customers aren’t stupid, they will recognize value when they see it. You want to build a brand that stands the test of time right?
Whether you are an established brand or a new business looking to hop on the prestige pricing bandwagon, enhancing your brand is an essential step to take.
One great way to do this is to develop a story that shines the best light on your brand and product.
Compared to many email marketing platforms, MailChimp has a rather premium pricing on their services that is multiples of what their competitors are charging.
But their customers still happily pay and MailChimp is still the biggest email marketing provider out there.
While much can be attributed to their platform’s ease of use and awesome features, MailChimp has a powerful brand story that adds intangible value to their offerings – a story of struggle, fighting for small business owners, and incredible inclusive culture.
Now that we understand what is essential for prestige pricing, let’s dive deep into the actual implementation of this pricing strategy.
Successfully implementing prestige pricing requires you to take measured steps – you can’t just jack up your price or rates ten-fold!
Here are six effective ways to integrate prestige pricing into your business offerings for the long haul.
If you are in SaaS (software as a service), you are probably familiar with the concept of three-tier pricing, where you give your prospects options on how much value they desire out of your solution.
To integrate in prestige pricing, you can create (or transform an existing tier) a new exclusive tier that costs more but is packed full of features and premium services that the other tiers lack.
Now here is the kicker – it doesn’t matter if that tier doesn’t really sell. By just having a prestige pricing tier, you can increase the perceived value of your entire offerings – every single tier will suddenly look more value for money.
The customer will be thinking “Well, I can’t afford the premium tier, but the standard tier looks almost as good but much cheaper!”.
That’s the power of prestige pricing, it doesn’t just help you profit more, it can help increase the total revenue of all your offerings but raising their perceived value.
Even Costco, one of America’s biggest retail stores, has a prestige tier when it comes to their membership.
For double the price, they amp up the benefits of their prestige tier ‘Gold Star Executive’ to make it worthwhile, and in this case, it makes perfect sense for big spenders to go premium
p.s. When it comes to creating prestige tiers for your offerings, try to give it an awesome-sounding name to amp up the perceived value. Gold tier, diamond tier, executive tier – you get the picture!
One of the best ways to implement prestige pricing is by creating a highly personalized or bespoke experience for your customers.
The rich flying first-class are given the VIP experience of a concierge service that normally includes a limousine ride to and from the airport and tickets and access to all the hottest and latest events in the city.
You can also do the same for your customers – and charge high for such attention.
This is exactly what Caya, CEO of Slidebean, did as a prestige pricing option for their most dedicated clients who want to go beyond just their mass product (an AI-powered Pitch Deck Builder).
He offers his own time to founders (at a rate of over $600/hr) to help with their pitch deck creation and fundraising efforts.
Consider getting involved personally or tailoring an experience directly to the client.
Create made-to-order items that are unique and exclusively tailored to your customer.
While the rest of your products might be mass-produced, having this bespoke option helps you to access the power of prestige pricing while elevating your brand as a whole.
The time-tested tactic of a limited edition product never fails – especially if it is genuine and executed correctly.
In essence, the less of an item there is, the more demand you can drive, the more you can charge.
Scarcity marketing is a powerful way to implement the prestige pricing strategy, however, here are three things to keep in mind before you try this:
The Perth Mint does a fantastic job when it comes to selling their limited mintage gold diamond bar featuring the Pink Panther.
With only 300 that will ever be created, they created scarcity and reinforced how spectacular the product is by highlighting what else it comes with – a certificate of authenticity and premium packaging.
Known for their bright and trendy watches for street and youth culture, G-Shock uses the power of scarcity to use the prestige pricing strategy.
While an average G-Shock watch retails around $200, their MR-G SHOUGEKI-MARU limited edition Samurai-inspired watch is selling for over $9000!
To justify such a big price tag, they kept the product truly limited-edition with only 400 pieces being made and released.
Oh yea, they have an amazing backstory, showcase video, and compelling landing page of the watch’s features too!
Similar to creating scarcity, launching your new product under a priority access or waiting list is an effective way to get interested parties hooked and nurture their desire to buy – especially once the premium price tag is out!
One great example is Marie Forleo’s The Copy Cure online program which costs over $1,500 – that’s pretty pricey for an online course.
By launching it (or relaunching it in this case) through a waiting list sign-up, the business can slowly nurture interested prospects through email marketing – feeding them stories, testimonials and sales copy to build desire for the product once it’s out.
How you present your prestige pricing is just as important as the product itself.
A big part of this pricing strategy is based on perception – that means you’ll need to carefully craft the presentation focusing on:
Apple does this spectacularly on each of their pricing pages. They use sleek and masterful copy that highlights the benefits while presenting their product in the best light possible.
Noticed their price tag of $599? Using the numbers ‘9’ for the ending digits of your price is a time-tested psychological pricing tactic that allows you to make your product seem more affordable despite its overall big price tag.
A powerful way to increase your brand’s perception and your product’s perceived value is by association with celebrities and influencers.
But not just any testimonial from a random famous person will do, the person has to:
Rolex does this superbly with their ‘Every Rolex Tells A Story’ series that goes beyond just showing a celebrity wearing their watches.
They get their brand ambassadors, from Roger Federer to Michael Buble, to talk about their successes, failures, struggles, and what Rolex meant to them at key points in their life.
This powerful association imbues life and spirit into their brand. Buyers of their watches will now feel that they aren’t just wearing a watch, but a prestigious timepiece trusted and chosen by the world’s best.
The watch now has a powerful identity that passes on to the wearer – making its prestige pricing more than worth it.
While prestige pricing seems to be flexible enough for many businesses to implement, there is one scenario that you should stay away from prestige pricing.
It is when your entire brand (and by extension, product, and service) centers around bargains and saving money.
It’s when you are in a business where your target customers are just so used to low pricing and you are earning those razor-thin margins through volume.
Prestige pricing here will alienate your customer base away and even cause your revenue to drop!
One great example of where prestige pricing won’t work is the budget airline industry. Customers here are just looking for one thing – the lowest prices and any bundled experiences you try to sell them has to entail a discount.
The prestige pricing strategy needs to match your customer persona or it will backfire.
But if you’re not in the budget business, then prestige pricing is something you can implement.
Establishing your prestige pricing is a great step towards better (and more profitable) products for your business.
The six ways of implementing it as we discussed above are just a start, here are some inspirational examples from brands to take it even further.
From Air Jordans to Kanye West’s Yeezys, Nike are masters of using promo to build hype for their new launches.
Part of their prestige pricing strategy is to build up a powerful image of the influencers they are partnering with through impactful promos.
Take their upcoming Califa collection, a range of apparel, and Air Jordan shoes to empower women.
Nike creates promos that tell captivating stories around the product, their designer (who is also the influencer), and a feature page for the collection.
Building ample hype around your new launch is important not only to drive attention but also to increase your audience’s perception of your product’s value.
This will help your prestige pricing stand on more solid ground.
Long known to be arguably the best piano manufacturers in the world, each of their pianos is expensive, well deserving of the prestige pricing label.
But besides awesome craftsmanship, how do they elevate their brand in the eyes of their audience.
One of the most understated ways they accomplish this (that you can easily learn from) is their masterful website copy that adds depth, quality, and unparalleled credibility to their brand.
Through meticulous copywriting, they effectively illustrate the history of the brand, the quality of their instruments, and how trusted their products are by the world’s best concert pianists (as seen by the testimonial by Rachmaninoff, a historic pianist, and composer).
Much of your brand perception can be controlled by the copy you write. When it comes to the prestige pricing strategy, your writing has to:
Part of the psychology of prestige pricing is making the customer feel special and enticing the prospect to desire to join your tribe.
Your product shouldn’t just be an inanimate object or a one-and-done service, it should be a total experience that lasts.
Arch Motorcycle (founded by Keanu Reeves) understands this intimately and plays up the idea of ‘Ownership’. People who buy their motorcycles are no longer customers, but owners.
To cement this idea and elevate the experience and their brand, they give each ARCH owner their very own Owner’s Case that is personalized and filled with limited edition memorabilia about their purchase and the brand.
This helps to reinforce the premium image and makes it that much easier for prospects to justify the prestige pricing and customers to spread the word.
It’s easy for bespoke services and products to have a prestige price tag – it’s because they make their customers feel special and exclusive.
You can also do the same in your business. Ask yourself, what can I do to make my customers feel part of my tribe? Your existing customers will love you while your overall brand perception will be elevated in the eyes of your prospects.
A win-win scenario.
Also called the ‘Ace Of Spades’ Champagne, Armand De Brignac is a perfect example of a product and brand that has reached prestige level and they did this through the power of celebrity.
Owned by billionaire businessman and rapper Jay Z, the champagne benefits from the immense amount of exposure tied to Jay-Z’s own personal brand.
While it isn’t technically the “best” champagne out there and critics have hit back on its price tag, it is still a widely popular and well-established brand.
Before you rush to Instagram to find that next influencer endorsement deal, using the power of celebrity has to be a measured approach for that social proof.
Do not blindly seek to amp up your brand perception by partnering (be it cash or equity deals) with any random influencer with a big following.
They have to:
If you have these bases covered, the celebrity power of influencers will be able to elevate your brand and products to a whole new level – one where your prestige pricing just works.
In 2017, Supreme partnered with Louis Vuitton across the world, launching collaborative products in pop-up stores causing a sudden craze from Singapore to London to the reception of sweeping crowds and long winding overnight queues.
While Louis Vuitton has already reached a luxury status, Supreme was primarily a limited street brand, definitely distinctive but not prestigious enough.
Known for under-producing products to the demand, Supreme created a powerful resale market with crazy mark-ups, but it was this partnership with Louis Vuitton that amped up its brand perception to the next level.
Sometimes, there might be a ceiling to how prestigious your brand can become (and by association, how much you can price your products).
However, you can break out of this with partnerships with prestigious and quality brands out there and associate your business and products with them. Much like influencer marketing, only this time it’s creating collaborative exclusive products to stand out.
Implementing prestige pricing doesn’t have to be difficult, all you need to do is to take baby steps towards your end goal.
Improve the quality of your products, consider creating a bespoke service or create limited-edition launches – just be sure to ensure your prestige pricing isn’t too ridiculous and doesn’t deliver enough value to your customers.
Developing a premium brand perception is important, but so is the underlying value you are selling!
For more pricing strategies, especially if you are in the SaaS space, be sure to check out the comparison between tiered & volume pricing here.
Let me know what you think about prestige pricing or any challenges you are facing in the comments below.
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