Difference in middle to luxury Price

Difference in middle to luxury price is when we speak of luxury products,  the natural response  is, “ It must be expensive.”  Well why not? When any country is considered, affordability, utility , product type, right audience is to be considered.  One-many propositions  are considered, the immense competition is also eventually included. When cost is low many people can easily buy them, not once but also often. It generates a daily or interval  recurring business. The type of interval recurring business depends on the pricing.

Models mid price products

Companies, before setting the price, often take many scenarios and timeline into consideration. For starters, they are modes of entering the market. Bootstrapping the process, loss of approximation, bigger budget for long sustenance and much more. If bootstrapping is considered, the process of scalability and profit assumption of the future is slow. As the company will wait for the money invested to return, then go ahead with the newer investment . The issue invited in this process is that, mostly, the problems at the start are more than the middle game. Once the company waits for money to be returned, in the process the company identifies a new problem, the new solution in return gives hope and again comes to new problems and so on. Many times, it can also be a reason for a company to distract itself from their goal.

The goal itself is solving a problem. The early profit or smooth running or the ability to aim higher sooner is sacrificed. A time-consuming process. The benefit is simple, you get a recurring customer base. If the company decides to settle at that level for a longer duration, then it becomes easy to conquer the price  and build the trust. Later, the same company, after saving enough and getting adequate knowledge of the market, can move forward on the journey.

Approximation Model for mid price product

When loss of approximation model is considered, the company at the start of entering the market goes in to loss on purpose to get to the target customer base in a limited time, make the product habitual in daily use  and then get back to regular market price. A company does this by keeping the product price to a minimum, or sometimes free for a longer time. It attracts most of the crowd, WOM (Word of mouth ) is the best tool to get and reach the target easier. It also benefits by destroying a weaker competition that might be in huge number. The only competition that remains is the one with good cash flow and a loyal customer base.

A company, in this mode, calculates the approximate loss they are going to incur and the customer base they might create and then the profit they might generate. As it is a risky model to start on, it often comes with a bigger investment backing up. Many companies that tried to start with this model have suffered a heavy loss and found it difficult to get back in the game, majority have backed out and very few have succeeded in doing so.

The luxury price and the target

The above mentioned  few of the models are to conquer the middle class customers, middle class customers being in the majority is a sensible decision to take. The customers being less is also a benefit at times. A company can always focus more deeply and cater to the needs in less time. Where problem solving is considered, the means and sources are also available.  The customer usually buys luxury when quality and durability is a deal breaker.

Product quality is good and its reselling price very rarely drops down to half. The strategy utilized in luxury product selling is not on affordability but on the mindset of the buyer.  “You are not buying the product, you are investing in the future.” It always catches the mind of the buyer and gives a sense of investing. The line might be true, but it also comes with its own disadvantages. As the person who is looking at a product with a mindset of investing is also going to be looking at the future falls, the probability of a customer selling it back is also high.

 

As many people might have observed, even the tiniest of things can affect a big or luxury selling company. Benefits, advertisement at a bigger level, continuous approach and long patience and many more things are necessary to be taken into account while setting the price.

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