110-years, of luxury and quality.
How do they price their watches?
The price must be “right”
How do they price their watches?
The price must be “right”
Pricing
plays a unique roll and is very important for a business. The price must be
“right,” that is the consumer must be willing to pay the stated amount while
the business simultaneously generates enough sales dollars to cover its
expenses like development, marketing and production. The business aims
to not only cover its expenses but generate a profit. The
price of a product will influence a consumers’ view of both quality
and value. Often times, a higher price is correlated to a higher quality. A
consumer will judge the worth of the product relative to substitutes that
satisfy the same need. If a product is perceived as having more value at the
higher price compared to the others, then the consumer is willing to pay
the price…So how does a company like Rolex price their products?
Prestige Pricing
Rolex is a
luxury brand that sells watches that are quality and aim to give the
consumer a specific social status. For this reason, there pricing strategy is
pretty unique. Prestige pricing is what Rolex uses, it means setting
a high price so that quality will be perceived and attracted customers to buy
it. Rolex watches are a luxury item and therefore sell at a very high price.
They are exclusive and Rolex differentiates its watches from others on the
market by its high price. These watches attract status-conscious
consumers looking to set themselves apart from others. It is seen as a reward
for success. Owning a watch like this shows others that you have "made
it." The quality of a product can be associated to things like
craftsmanship, parts, safety and time. A Rolex watch offers a unique look and
craftsmanship that people want and are willing to pay for. These watches
support the feeling of self-worth and status. The product's main attribute of exclusivity appeals to customers.
Cited:
One side note, prestige pricing should not be
confused with ‘skimming.' With prestige pricing, the price is
always set high throughout the life span of the product while skimming would
entail a new product set at a high price that is eventually lowered. With a
luxury item, lowering its price or offering discounting would actually have a
negative impact. Overall, this would lower sales long-term and risk the
reputation of the brand name. The credit and quality associated would
disappear.
“Rolex is not in the watch business. We are in the luxury business."
-Heiniger (former CEO)
How do they reinforce their image of prestige and uniqueness?
Rolex
has many promotional tactics that reinforce its image. For example,
Rolex appeared in nine of the James Bond movies. These movies are a
perfect promotion for Rolex, showing its exclusivity. James Bond is portrayed
as someone who uses only the best and highest quality. In
addition, Roger Federer also wears and endorses the brand. He often puts the
watch on when receiving awards after a match. Roger is not only associated with
his amazing tennis skills but also with his class, polished look and prestige. The watches of Rolex are easily recognizable and have
been relatively unchanged throughout its years. By Rolex portraying its image
through advertisement and its long history, it has been continuously successful
with prestige pricing. Not all companies can exceed with a pricing
strategy like this but Rolex has found its place in the market
this way. Rolex has developed a customer base that is willing to pay
the price of these watches, as they believe they receive not only a
quality watch but an increased self-image.
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