A premium watch company recently raised the price of its signature watch, the Timekeeper. The price increase raised the price of the Timekeeper above

Question

A premium watch company recently raised the price of its signature watch, the Timekeeper. The price increase raised the price of the Timekeeper above that of its nearest competitor. The Timekeeper is of equal quality as the competitor’s watch, and it has the same features. After the price increase, the watch company found that sales of the Timekeeper increased.
Which of the following, if true, helps explain the above discrepancy?
A. Most consumers that own Timekeeper watches have no preference for any particular brand of watch
B. The competitor’s watch has fiercely loyal buyers that will not consider another watch
C. Some premium watch buyers seek out the most expensive watch, regardless of the features
D. Consumers will always buy the brand that offers the best value for the lowest price
E. The Timekeeper does a poor job at keeping the time

Answer 1

C. Some premium watch buyers seek out the most expensive watch, regardless of the features

 

It's a well-known business fact that people's perception of value is related to price. For example, the automaker Packard produced luxury cars that competed with Cadillac and Lincoln. In the 1940s they came out with an economy model. Sales of all Packards fell, and eventually the company went bankrupt. Perceived value is important. Charge a high price and you may increase the perceived value of your product. 

 

However, remember Abe Lincoln's adage: "You can fool some of the people some of the time. You can fool all of the people some of the time, but you can't fool all of the people all of the time." If your product ONLY has a high price to give people the impression of value, most people will eventually catch on.