Why Expensive Feels Better

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Why Higher Prices Increase Demand

Ever noticed how a higher price tag makes something feel more valuable—even when it’s the same product? That’s the Veblen Effect in action. From premium wines to designer bags, elevated prices don’t scare buyers away—they attract them. Here’s why.

How Pricing Shapes Perception

1️⃣ The Psychological Trick of Pricing: Researchers tested two identical painkillers. When participants were told one cost 10 cents, only 61% said it worked. But when the same pill was labeled $2.50, 85% reported relief. The lesson? Price changes experience. If a product feels expensive, we assume it’s better.

2️⃣ Luxury Isn’t Just About Quality—It’s About Status: Thorstein Veblen, an economist, discovered that some products defy the basic rule of supply and demand. Instead of reducing sales, higher prices actually increase desire because they act as status symbols.

How to Apply This in Marketing

🔹 eCommerce – Position your product as an exclusive, must-have solution. De Beers transformed diamonds from a common gem into a luxury symbol of love—allowing them to charge massive premiums.

🔹 Luxury Brands – Create exclusivity in the buying experience. Hermès makes customers wait years for a Birkin bag, turning scarcity into demand.

🔹 Advertising – Sell more than just a product—sell an identity. Rolex doesn’t market watches for their time-keeping ability. Instead, their ads focus on prestige, status, and success.

The Takeaway

You don’t need to be the cheapest option to win. High prices, when positioned correctly, increase demand. The key? Make your product feel valuable—because perception is reality.

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