I’ve made a career out of this topic and teach other pricing professionals about it, but I won’t bore you with too much pricing theory.
In a nutshell, they charge what they charge because that’s what people are willing to pay for it. Or put in academic terms, the perceived value of the product is greater than or roughly equal to the price.
So, the question is then, Why? Well, that will be different for every person. But here are a handful of possible value drivers that come to mind:
- They’ve always wanted one
- They are buying it as an investment
- Their favorite musician has one and they want to be like them
- They offer a unique color that they highly desire
- They believe it will make them a better player
- They want the history that comes with it
- They value the Fender brand
- They know what they are getting will be what they expect
- They want others to be impressed
- They believe the quality will be higher
And the list goes on…
Lets use some other examples here. Why do people buy an Apple phone at a premium? Prada handbag? And why one model over another? Why do some people care about storage space in a computer and others don’t? Why do some people like tacos and others don’t? See where I am going with this? We are all unique in what we value AND by how much value we attribute to those elements.
There are methods to extract the average perceived value out of consumers. Pricing relative to this is the most sensible thing to do. It tells you the value of your brand alone for example. One method is a conjoint analysis, for those that are intrigued, but I won’t go into the intricacies of that here.
But, it all goes back to where I started. They charge what they charge, because people pay it. They pay it, because they value it greater than the price charged. Will it always make sense to you why people pay a premium for something? Nope. Will others always understand why you buy the things you do? Nope.
If we all valued things the same, this would be a very boring world… and I’d need a different career. 