Pricing Luxury Goods – What to Consider
Silk Italian suits, dusty bottles of vintage wines from estate cellars, moisturizers made from crushed pearls, yacht holidays to Monaco and cashmere shawls from Hermes, these goods come oozing with luxury and for the privilege of ownership we expect to pay top price. Luxury goods feed desire and want and the more consumers long for them, the higher price tag they can find. Some may argue that luxury can be an illusion, that the higher the hype, the tighter the exclusivity and the bigger the demand regardless of the real value of the good. Of course all products, luxury or not have two different value systems – the real value and the perceived value and there is an age old saying that something is only worth as much as someone is prepared to pay.
The Art and Science of Perfect Pricing
When pricing Veblen goods it is therefore essential to up the stakes and hike the price tag so that the item already ticks the box when it comes to being perceived as part of the luxury market. The next consensus is to ensure that someone, somewhere is willing to pay the price and thus set the wheels in motion for better brand recognition and a name in the luxury bible. Of course there is a danger that comes with throwing the first price you think of at your good and hoping it will stick and this is where a little application of the art and science of pricing comes into play.
Basic Structures Still Matter
Companies do need to take the basic structure of pricing into consideration covering aspects such as costs, competitors and consumer demand. The cost of making the product, the cost of overheads and how much you need to get back on something are always the springboard for starting with pricing. There needs to be analytical data collected and pens put to paper so the Intrinsic Value Dependency can be etched out. Pay fierce attention to what your competitors are doing with their price tags as it can help you to figure out where your goods will land on the spectrum. The more your own product moves up the ladder and away from the dull and dreary label of a commodity the more it will be sought after and the more value it will gain.
Good Analytics are Worth Their Weight
Good analytics are worth their weight in gold when it comes to structuring a price for a product and this doesn’t mean you need to start from scratch. Your company, if you have done your marketing right, will already be sitting on a trove of information. You will be able to check what consumers are paying for other similar products, the current economic trends, and which external features have an impact on sales. Micro marketing and targeted exclusive offers can also be used to grab hold of data for which you can then go on to use for pattern finding analysis. Once you have all this data its best to set up an automated key analyses so all the information can be ran through a program quickly and efficiently
Elevating the Right Experience
Consumers will judge a products luxury merit on several factors which is why it’s essential to build the right environment around your brand. Luxury goods and luxury stores are often in wealthy or affluent areas of cities, have chic and opulent interiors and upmarket, expensive packaging that adds to the social status. The buyers experience needs to match their expectations for the product and deliver a feeling that they have effectively elevated their position in the world by making the purchase. The more you are able to give this, the easier it will be to secure the right price for your product.