Prestige Pricing: Definition, Advantages & Disadvantages

Prestige Pricing: Definition, Advantages & Disadvantages

November 15, 2018

Do you wonder why a pair of Nikes are more expensive than Reebok sneakers? Is it the quality? You’re not really sure, right? Well, most of us aren’t, and yet, we’re still willing to pay more for Nikes.

We feel so because of Nike’s pricing strategy. The decision-makers in the company pursue prestige pricing which is a strategy that allows you to appear as though you’re a premium brand selling premium products.

In some cases, brands that pursue this strategy are truly superior to their competitors. Usually, however, the level of the quality difference between the premium brands and the others doesn’t reflect the difference in their prices. Rather, even if the products are similar, prestige prices are significantly higher than the market average.

Not for all, but prestige pricing might be the best strategy for at least some of your products.

That’s why in this post, you’ll learn what prestige pricing is, how you can implement it into your e-commerce store and how to make sure it works with you rather than against you.

Let’s go!

What is prestige pricing?

Prestige pricing is a strategy where marketers set the price of a product much higher than the market average.

An everyday example is the designer brands. Look at the product below.

Cute name for a brand, right? Unfortunately, this handbag is made of real lizard leather and it is sold for $1595. Hopefully not, but some of you might think that since it has a durable material, it deserves the money. Then, what about this one?

These boots might be high-quality, but they are 5 times more expensive than regular boots. And they are 100% vegan, so we can’t assume that the price is a result of rare material. Then, what’s the rationale behind the prestige price?

Why prestige pricing is effective

Research suggests that the consumption of luxury products has intangible benefits which can be identified as emotional value. That’s why shoppers are willing to pay a lot more for high-end products, even if the quality difference doesn’t match the price difference. But then, what makes them high-end products in the first place?

Instead of product quality, we must direct our attention to the brand image.

Brand literature claims that brand image dominates the quality of the products under it. Prestige pricing is all about brand perception and how your customers view the image of your company.

If your customer thinks your brand has some innate value, they’ll be happy to pay a premium (prestige) price.

Think about it, if you’re prepared to buy an Apple product, you rarely look around to see if you can find a cheaper alternative. You already know you can, but what you’re buying is the value of Apple.

Consumers attribute high prices to quality. Interestingly, scholars argue that they also perceive high prices as a positive indicator of prestige. Meaning, merely setting higher prices also improves the brand image.

Prestige pricing use-cases

When your store is first opening or you’re launching a new product

If you’re launching a new store or product, implement prestige pricing to generate a certain degree of hype around it. It can generate a feeling of exclusivity and prestige. People are keen to get their hands on the latest and greatest things.

When there is a limited amount of the item

If a supplier has launched a limited number of a new product, and you managed to get your hands on that limited stock, you should apply prestige pricing. Think about trainers.

Many trainer companies release limited edition trainers where they’ll only create a set amount of trainers.

BVG Adidas Special Serie Shoes

These trainers, made in partnership with Adidas and the Berliner Verkehrsbetriebe (BVG) public transport system were super exclusive.

Only 500 pairs of shoes were made and they were only stocked in two Berlin stores.

According to local newspapers, people queued up for up to four days before the launch to grab themselves a pair.

The trainers only cost 180€ but could generate up to 3,500€ in resales. This is all down to the prestige value of the items.


Improved profit margins

Needless to say, if you increase the sale price of a product, you’ll obtain higher profit margins. Even if fewer people can afford to buy iPhones than a Xiaomi phone, Apple’s smartphone profits are four times larger than its closest follower, Samsung. Meaning, you can make more profit with fewer people.

It improves brand value

As mentioned above, brand value and prestige price have a mutual relationship. While a high brand value allows a brand to implement prestige pricing, in turn, prestige prices improve a brand’s value.


High marketing costs

Remember, as a prestige brand, you need to make it seem like your products are high quality and that means marketing your products in the same manner. Brands like Nike or Adidas will spend millions per year on marketing and advertising. The thing is though, it works.

Limited customer base

So although, with prestige pricing you lower the number of people you can target, you increase the number of adoring fans you have. Dedicated fans who will (in some cases) only wear or use your brand. Furthermore, they promote your brand without any expectations.


If you’re wanting to market your product as prestige or premium, you should have the prices to go with that.

In general, people assume high prices are synonymous with high-quality.

Because of this, brands are able to charge a premium for their products.

Why not see if your brand could increase profits using a prestige pricing strategy!


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