Lowering prices of products is supposed to make more money for the company. But the writer of an article I just stumbled into on Facebook seems to disagree. Citing Calvin Klein as an example, he says that while the brand was supposed to be "luxury", when they lowered their prices, they lost their customers who I assume are snobs. The moment they [their customers] started seeing their favorite brand in discount stores they lost faith in the brand. Could it explain why Apple overprices their products?
Apple still has brand value. That's why they have refused to go down the low-value end of what is an increasingly commoditized space. And why would they need to at the moment? There are enough people in China wanting to buy the brand at a premium, so you don't start pricing lower. If you do you just devalue your brand and start looking for a different type of customer.
Some companies in many industries have made huge fortunes by selling high volume, low margin. Others have done the same with low volume and huge margin. There's a million different ways to skin a cat.
Ah, so you must stick with your business model lest you lose the customers who've been used to the pricing of your products. I always thought the one way to draw more customers is lower prices. Guess I was wrong.
It depends on the type of product. If it is a common product like laundry detergent or toilet paper, lowering prices can increase sales. If it is a brand item which has a scarcity value, then lowering the price will decrease its scarcitiy value. Diamonds and Gold only has value because they are scarce, if everyone has lots of gold and diamonds they would have virtually no value. Many things have value because they are kept scarce by high prices, expensive wine is another good example.
Well yes of course it depends on the brand and item in question. If a Ferrari sports car would cost as much as a regular Nissan... well Ferrari would sell a lot more cars but would they still have the "luxury" factor? Some yes, but probably far from what we see nowadays. Some items are pricy because they are pricy. Art is another good example: paintings have ridiculous prices based on who made them. Doesn't really matter what it looks like, if it's made by a famous painter then it's going to be expensive.
A lot of people like to buy premium products... And there's really nothing wrong about it. If a company presents their product as the premier version, it's hard to suddenly make it more affordable without breaking that perception. Maybe they end up making more money, but some other company, with some other product, will take the space of the premier manufacturer. And I think that's exactly what Apple does by overpricing their products.
Pricing is a strategy. Based on the example, it seems that Calvin Klein has saturated their HIGHER CLASS customers and diversifying by introducing lower priced product to cater the Middle and the Lower class customers. I do not think the company loses their customers, I would like to believe that they have widen their reach by doing such changes in their prices. On another thought, CK is a worldwide brand and expect that counterfeits are everywhere - to counter this, and before it destroy the brand CK has made for itself, it offers their products at a lower prices to people in any class would prefer buying the original rather than the counterfeits. I don't know really, just a thought.
