Price signalling: does it ever work?

Abstract

Examines the phenomenon of price signalling whereby consumer goods manufacturers attempt to signal higher quality via a higher price when objective product quality is, in fact, not demonstrably higher. Shows that higher price alone does not succeed in signalling higher quality, but that higher price accompanied by premium‐quality signals in the other elements of the marketing mix does succeed. Concludes that a premium pricing strategy cannot be successful if price is the only marketing variable emphasised and brand managers should think in terms of premium quality positioning that requires the right marketing mix.

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