Premium price – average product: Paying too much for too little

Everything has been a bit expensive lately, hasn’t it? Everything we pay for has a premium price; everything has a high cost, but low value.

Those products that we used to consider a second class or that we didn’t buy at all are now expensive. Services that were affordable and of relatively daily consumption now represent a considerable cost in our lives. What happened then?

This is a bifacial phenomenon that I call “premium price – average products”. In other words, many products have an unjustified value dictated by various uncontrolled capital market rules. In this article, I define very briefly what this problem is. I also propose some ways to fight it.

What do I call “premium price – average product”?

As the dichotomy puts it: it is paying a lot for something average. It is a slow, silent market strategy in which companies (especially corporations that sell products and services to consumers) count on predatory pricing to make more profit.

But it’s not just about paying too much and getting too little. It’s about l devaluing in an exponential sense the quality of a product and selling it at the same (or even more expensive) lifetime premium.

Here are some examples:

• Aun auto nuevo en los 50, como un Chevrolet Bel Air 1957 o un Ford Fairlane 1955,  tenían un valor de $2,200 – 2,500 USD, con autos de chassis y cubierta completamente de metal. Hoy un auto nuevo del mismo tipo puede oscilar entre $28,000 – 30,000 teniendo varias piezas ensambladas con plástico.
• Netflix cuando salió al mercado y comenzó a masificar su oferta, presentaba un servicio de acceso a series y películas con contenido casi ilimitado, sin interrupciones, sin anuncios, al alcance del consumidor, por un precio a $15.95. Hoy ese precio se mantiene para servicios con calidad de imagen limitada y cierto contenido sin estar al alcance de los usuarios, requiriendo para una mejora un pago de cuenta Premium de $22.99 USD.
• A new car in the 1950s, such as a 1957 Chevrolet Bel Air or a 1955 Ford Fairlane, had a value of $2,200 – 2,500 USD, with an all-metal chassis and body shell. Today a new car can range from $28,000 – 30,000 having several parts assembled with plastic.
• Netflix, when it came out and began to massify its offer, presented a service of access to series and movies with almost unlimited content, without interruptions, without ads, within reach of the consumer, for a price of $15.95. Today that price is maintained for services with limited image quality and certain content not available to users, requiring a $22.99 USD premium account payment for an upgrade.

We see this same problem not only in buying and selling cars or subscriptions to our favorite digital services. It is a stampede of overwhelming devaluation of quality. It applies to the food we eat, the airlines we depend on, education, appliances, cosmetics, everything.

How can we detect the “premium price – average product” problem?

The origin of this problem, many times, is not even covering production costs or devaluation. It is ambition and abuse in the full sense. There are several strategies of questionable ethics that, if we pay attention, we will be able to detect. Some uses of the “premium price – average product” are:

• Shrinkflation / Downsizing. It is the reduction of a product (or its content). This allows maintaining the price, but getting less. For example, a bag of potato chips with less content could cost the same.
• Cheap ingredients / parts. To save production costs, some ingredients are swapped for others (or one part for another) to spend less and charge more. For example, the natural ingredients in candy or ice cream are replaced by organic fat. Parts for computers are replaced by cheaper alternatives. They may affect quality, but never the price.
• Quality control clippings. Fewer people are monitoring the quality of a product. Also, processes for creating and launching a product are simplified. What are the consequences? There are more risks of poor quality or defective products coming to market.
• Deceptive rebrandings. Relaunch of products with supposed improvements, being the same service with a new price and new conditions detrimental to the user’s pocket. For example, some companies offering digital content creation services, which used to be able to buy software, now have to subscribe.
• Misleading advertising. Some brands use advertisements and commercials to introduce new products that tend to be the same. This generates a psychological reaction of dependence and need. For example, video game or computer companies promote functions in their equipment that do not exist or that it is necessary to pay extra to obtain them (without being clear in their information).
• Loss of ownership. Companies changing their product acquisition format. Before it was a purchase (where we owned what we bought) and now we just rent their services. For example, game passes in video games or all existing streaming services.

Do we have a way to fight it?

Unfortunately, the “premium price – average product” phenomenon is not practiced by one or two companies. It has become a market norm for large corporations. However, there are still some companies that know how to compete by following, as far as possible, an ethical strategy. 

Some offer us ownership. Some prefer to raise their prices but be honest with what they sell, or even be straightforward with their customers.

So how do we fight against this?

• Do not buy what is misleading. When we see misleading promotions, advertisements, or prices, let’s doubt them. They can come with serious problems of Shrinkflation / Downsizing or quality control cuts.
• Let’s consume responsibly. Let’s not buy the first thing we see on the internet. Let’s not buy the next trendy phone; let’s not change our video game console for the same one (with minimal improvements). Let’s be sensible and objective.
• Let’s denounce bad practices. Today we are no longer isolated enough to speak our minds. Publish your thoughts on social media, in a blog, in an information channel, in a chat, or a forum. You may receive a lot of criticism (even censorship) but there will be people who will listen to you. By doing so, you will help to raise awareness.
• Let’s change our consumption habits. If we see that our favorite brands are falling into these bad practices, let’s minimize our consumption. Or, directly, let’s go to the competition. We don’t have to put up with these abuses if, somehow, we have a way to counteract them.

At RPB Marketing we believe that the basis of B2B, B2C, or any other level of sales and business, depends on clear information. We prefer to be direct with our clients and justify our prices on a basis. Any misinformation strategy that only speculates and harms the consumer is considered for us a bad practice in the marketing world.