At what point is something overpriced versus just expensive? At what point are you no longer “getting what you pay for” and just plain getting ripped off?
You may not care about price, and that is fine – sometimes you just want what you want. When you are paying for a name BECAUSE you want that name, then the value is something that you can determine for yourself. But if you’re a penny pincher like me, that is almost never an option. I’ll buy nothing new I can get used, and I steadfastly refuse to over pay for any item I don’t think is worth it. I’ve also taught myself to catch on to pricing tricks that companies use.
Are you ready for a personal example? I’m a huge guitar nut. I’ve had over 30 electrics at this point. I’ve sold them, bought them, and built them – all brands, all styles. So, by now I’ve got a pretty good idea of their values. There is one guitar that has eluded me, however….The Gibson SG Standard. When I was in my teens, it was priced around $800 (way too much for someone making $6 an hour at a shoe store). Several years later it was up to $1099 (even with more in the bank account, that gets hard to justify). Then a couple years ago it jumped up to $1629. At this rate I’ll never get one! But then a few months after that it went back down to $1199. Wait a second! What that tells me is that even after a $430 price reduction, there’s still enough room for profit. How much is this thing actually worth?! I don’t think I’ll ever buy a new one solely because I don’t like the pricing games. No matter how you boil it down, The Gibson SG Standard is still a chunk of wood with strings on it (a really nice chunk, but a chunk nonetheless).
While Gibson’s pricing strategy has driven me away, it has had the opposite effect on a lot of people. If it costs more it must be better, right? This theory is commonly known as perceived value. It can mean a variety of things, but in this case it means that the price point has made many people believe that Gibson’s products are superior to almost everything else out there, when in reality, they are very comparable to many other brands.
VERY effective marketing….if you can get away with it. Just charging more for something usually doesn’t pay off, but it pays off big when it does. Just think of all the HUGE names out there: Gibson, Bentley, Prada, Dolce & Gabbana, Armani, Louis Vuitton…they built their names from the ground up and now their perceived value is extraordinarily high, and they can charge WAY more than the actual product is worth.
If the name is worth it to you, by all means go for it! But if you’re like me, it’s not (usually – I do love my Air Jordans). I swear by generics in almost every situation that makes sense to me. If a name brand is significantly more expensive than its generic counterpart, then you can rest assured the majority of your money is going to their name recognition and advertising costs. I also look for lesser-known competitors. My favorite guitar company is ESP, which makes many guitars similar to Gibson, with the same if not BETTER quality for a fraction of the cost. They even have a SG type guitar….
SIDENOTE: I highly DISCOURAGE the buying of counterfeit items, however. Cashing in on someone else’s name is an entirely different situation than buying something clearly generic!
What are your thoughts on perceived value? Are you willing to pay more for name brands or are savings more important to you?