Posted in Marketing and Strategy Terms, Total Reads: 2015
Definition: Image Pricing
Also known as ‘premium pricing’, image pricing is a widely practiced marketing strategy where in the prices are set higher because it’s believed that a premium price would also increase consumer desire. Customers are often willing to pay higher prices for branded items because of the image associated with them. They would not investigate if the price accurately reflects the value.
Premium pricing leverages the psychological marketing advantage by influencing consumers and convincing them that the product carries more value than the lower priced competitor products. Consumers would pay more for the same shoes if they had Nike or Adidas written over them. Image pricing is seen more often in products with high ‘observability’ like accessories, clothing, cars etc. and is not possible with commodity products. It is also possible to charge a premium when there’s information asymmetry and consumers have no reference point for judging the value of a product.
Imagine a luxury item like a Louis Vuitton bag available in the Rs. 1000-2000 range. Although sales for that particular bag might be high because it would be affordable for a lot more people, such a gimmick would have its consequences. What is important to a consumer of luxury products is the exclusivity that comes with them! A complex combination of gratification, social assertion and the propensity to ‘make statements’ (or define oneself through consumption) drives the purchase decisions to this segment. A Louis Vuitton bag is considered a statement of fashion, but more than that a statement of indulgence. Even if it was possible to create the same bag with equal quality and functionality at lower costs, Louis Vuitton would still set the price higher to maintain consumer interest and desire.