Prestige pricing involves setting prices at a high level, with no discounting. By doing so, the seller is conveying the impression of high quality. Prestige pricing only works when the product is actually of high quality and is supported by adequate branding expenditures. This is a niche selling strategy, since it is only targeted at those who value high quality and can afford to pay for it. Close attention to branding is essential, so that consumers will pay extra in order to be associated with the company’s brand.
A business typically needs to start out with the prestige pricing strategy, rather than switching to it later on, in order to avoid having to surmount the stigma of its earlier strategy. Examples of markets in which prestige pricing is used are watches, perfumes, and luxury automobiles.