Online Pricing Strategies: Implications for Luxury Consumers

Abstract

For most products, price is the marketing variable customers react to more than any other. While this may be less so for luxury products, marketers of luxury brands still have to set a price. Most managers emphasize costs and competition when setting price. However, the third component of price, customer value or what a customer is willing to pay, is considered less often and is, in fact, much more important than costs and competition for luxury goods. Today, in this era of digital marketing, marketers have a greater ability to understand customer value and set a price accordingly. In this paper, new approaches to digital pricing that incorporate customer value are described and shown how they impact luxury good pricing.

Keywords:

• pricing
• customer value
• digital marketing

Notes

1. Although price discrimination and dynamic pricing are often used synonymously, in this article, I distinguish them by defining the former as charging different prices to different consumers at a single point in time versus the latter where consumers may pay different prices for the same product over time. Dynamic pricing issues are covered in the next section.

2. I thank a reviewer for pointing this out.

3. 62 percent of the people who downloaded In Rainbows paid only the handling fee.

Additional information

Notes on contributors

Russell S. Winer

Russell S. Winer is the William Joyce Professor of Marketing at the Stern School of Business, New York University. He has authored over 80 papers and 4 books in marketing on a variety of topics including consumer choice, marketing research methodology, marketing planning, advertising, and pricing. He is a past Executive Director of the Marketing Science Institute in Cambridge, Massachusetts. Professor Winer is a founding Fellow of both the INFORMS Society for Marketing Science and the American Marketing Association and is the 2011 recipient of the American Marketing Association/Irwin/McGraw-Hill Distinguished Marketing Educator award.

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