Prestige pricing is a marketing and sales tactic in which businesses attribute high prices to products to increase their perceived quality.
In order to make a profit, businesses must price their products and services strategically. Prestige pricing is one strategy, which involves pricing a product high to create an air of sophistication, quality, and exclusivity. The idea is that customers are generally willing to pay more for the branded, premium products they feel represent luxury.
A good example of prestige pricing is designer bags or purses. Many designers price their purses at significantly high prices, knowing that customers pay for the exclusivity of the product. The brands might sell fewer bags overall, but they ultimately make much more profit because of the high markup. Other examples include premium sneakers, luxury cars, or up-scale food.
For prestige pricing to work, businesses need to fully understand the needs and demands of their consumer base. If they sell marked-up luxury items to customers looking for affordable items, they might end up losing money.