Compromise pricing in luxury
Parguel, Béatrice; Macé, Sandrine; Fraccaro, Annalisa (2021), Compromise pricing in luxury, The Journal of Product and Brand Management. 10.1108/JPBM-10-2020-3157
TypeArticle accepté pour publication ou publié
Journal nameThe Journal of Product and Brand Management
MetadataShow full item record
Dauphine Recherches en Management [DRM]
Toulouse Business School [TBS]
Abstract (EN)Going beyond odd and even prices, this paper aims to explore the rationale behind the widespread practice of setting prices ending in “50” or “80” in the luxury industry. The authors argue that when they set such prices, managers agree to reduce their profit margin to limit the anticipated guilt luxury consumers associate with luxury shopping while also protecting their brand luxury. The authors label these prices compromise prices and formally define compromise pricing as the practice of choosing a price’s ending so that the price falls below (but not just below) a round number to boost sales without damaging brand luxury.Following the observation of the overrepresentation of prices ending in “50” and “80” in the luxury clothing category, an experiment explores the impact of compromise prices on anticipated guilt and brand luxury in the luxury watch category. Then, to identify when luxury pricing managers typically favor compromise prices, multinomial regressions investigate prices collected on two online luxury fashion retailers for the luxury clothing and handbag categories.Compromise prices reduce the anticipated guilt luxury consumers associate with luxury shopping compared with even prices while enhancing brand luxury compared with odd prices and interestingly, with even prices also. This finding gives rationale to luxury managers’ preference for compromise prices in the ninth hundred (i.e. €X950, €X980), especially for higher-priced products, i.e. when the potential for price underestimation and/or the risk of damaging brand luxury are more important.This research contributes to the field of luxury pricing by providing evidence to an original price-ending practice, coined compromise pricing, which consists in agreeing to a slight reduction in prices and unit margin to protect brand luxury.
Subjects / KeywordsCompromise pricing; Price endings; Anticipated guilt; Brand luxury; Luxury sector; Pricing practice
Showing items related by title and author.
Coping with copies: The influence of risk perceptions in luxury counterfeit consumption in GCC countries Pueschel, Julia; Chamaret, Cécile; Parguel, Béatrice (2017) Article accepté pour publication ou publié
Coping with copies! A study of risks perception and coping strategies in luxury counterfeit consumption among affluent consumers Chamaret, Cécile; Pueschel, Julia; Parguel, Béatrice (2016) Communication / Conférence
Coping with copies! A study of risks perception and coping strategies in luxury counterfeit consumption among affluent consumers Pueschel, Julia; Chamaret, Cécile; Parguel, Béatrice (2016) Communication / Conférence