Which pricing method is associated with the belief that higher prices indicate better quality?

Prestige pricing is a strategy that leverages the perception that higher prices often correlate with superior quality and exclusivity. This method is common in luxury goods markets, where brands intentionally set higher prices to create an aura of prestige and appeal to consumers who associate higher costs with higher value. By doing so, companies aim to attract customers who equate premium pricing with enhanced quality, status, or luxury.

This approach not only helps in positioning the product within a market that values quality and exclusivity but also reinforces brand identity. The concept is based on the psychological theory that consumers may perceive price as an indicator of quality; thus, when a brand sets its price high, it sends a signal to the market that the product is of exceptional quality.

In contrast, other pricing strategies, such as penetration pricing, aim to attract customers with lower prices to gain market share rather than to signal higher quality. Price lining refers to offering products at various price points, while psychological pricing can involve tactics that appeal to a consumer’s emotional response but doesn’t specifically relate to quality perception tied to higher prices.