How do manufacturers benefit from prestige pricing?
What will be an ideal response?
ANSWER: Prestige pricing is charging a high price to help promote a high-quality image. A successful prestige pricing strategy requires a retail price that is reasonably consistent with consumers' expectations. When a purchase decision involves uncertainty, consumers tend to rely on a high price as a predictor of good quality. Reliance on price as an indicator of quality seems to occur for all products, but it reveals itself more strongly for some items than for others.In general, when perceived higher- and lower-quality products are offered in settings where consumers have difficulty making comparisons, then price promotions have an equal effect on sales. Comparisons are more difficult in end-of-aisle displays, feature advertising, and the like. Knowledgeable merchants take these consumer attitudes into account when devising their pricing strategies.
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