Price and Value

The luxury industry is based on the relationship between perceived value and price. Charge $10000 for a designer handbag and the owner perceives it’s worth that obscene price. If you put the exact same bag (minus the brand) in a walmart with a red tag that says $50, you assume that’s what it’s worth – even though it’s the same product!

That’s why you’ll never find that luxury handbag on sale. As soon as it’s seen at a lower price, that’s the new value that’ll stick in a consumer’s mind and they’d never pay the higher price.

In this way, the luxury industry can move a tiny amount of product yet still generate huge profits. Next time you’re thinking of pricing low to increase volume, consider doing the opposite to increase profit instead…

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