Selling Status: A Different Approach to Pricing

There’s an old saying: “You get what you pay for.” In the 1960s, this was especially true for credit cards. Carrying a Diner’s Club or American Express card wasn’t just about convenience; it was a status symbol, a piece of cachet that signaled a certain standing. The card companies made their money from annual fees.

But as the market got crowded, competition drove those fees down to almost nothing. Cards became a commodity. Between 1997 and 2005, the average number of cards per person jumped from 1.8 to 2.5. To survive, most providers changed their business model, making money from interest and other fees. But a few companies did something surprising—they went in the complete opposite direction. They made their cards expensive again, transforming generic plastic back into a symbol of exclusivity.

From Cash to Cachet

The most famous example is the American Express Centurion, or the “black card.” It was launched in 1999, playing on an urban legend of a mythical, no-limit card for the super-rich. With a $5,000 initiation fee and a $2,500 annual fee, it was—and is—decidedly exclusive. For the 17,000 people who carry one, the benefits like airline upgrades are nice, but the real product is the intangible feeling of specialness. As one cardholder put it, he enjoys the “star treatment” it brings.

Other companies quickly followed. Coutts & Co., a private British bank, launched a purple card for its high-net-worth clients. In 2008, Visa introduced its own $495 “Black Card,” made of carbon graphite and marketed as “the ultimate buying tool.”

This premium pricing strategy works even without a tangible product. In the financial world, wealthy investors often pay more for services that don’t necessarily perform better. Separately managed accounts (SMAs), for instance, have grown in popularity despite many performing no better than a low-cost index fund. While there can be tax advantages, much of the appeal seems to be what behavioral economist Meir Statman calls “expressive benefits.” Owning an SMA gives you a sense of status, power, and control. It’s a key principle for building one of the that thrive on perception.

The Allure of Exclusivity

Hedge funds are another prime example. When considering , many are drawn to the mystique of hedge funds. Although few consistently outperform the market, they are masters of high fees—typically 2% of assets and 20% of profits annually. This fee structure isn't just a cost; it’s part of the allure. The high price tag adds to the status and mystery, which are essential selling points given their variable performance. This is a powerful lesson for any that is service-based.

This isn't a new phenomenon. When Alfred Winslow Jones invented the first hedge fund in 1948, he intentionally built in exclusivity. He copied the 20% fee structure from legendary investor Benjamin Graham and cultivated a low profile, making partnership feel like joining a highly desirable club. This turned his into an exclusive circle for those in the know. Those same tools—high fees and an air of mystery—are still driving what is now a $2 trillion industry.

Why would someone pay so much for returns they could get elsewhere for a fraction of the cost? Statman argues that financial services, like other products, offer a way to express our values and social class. When you're a client of an exclusive fund, you're not just ; you're buying membership into a select group.

When Price Is the Product

This idea extends beyond finance. When Donald Trump developed Trump Tower in 1983, he gambled on selling apartments at prices far above the market. His theory was that for the ultra-wealthy, price isn’t about value—it’s a velvet rope. It screens who can get in and creates an aura of specialness. The bet paid off when celebrities like Liberace and Johnny Carson bought in, and the Trump real estate brand was born.

Price can also create a powerful placebo effect. A high price for cosmetics can make it easier to believe in a “miracle in a jar.” Studies have shown this effect in action. When people were given an energy drink they were told was expensive, they solved more puzzles than those who drank the same drink at a discount. In another study, brain scans confirmed that people experienced more pleasure drinking wine they believed was expensive, even when it was the exact same wine as a cheaper-labeled bottle. For anyone running a , understanding that price shapes perception is fundamental.

The Risk of Going Cheap

A high price can also be a reassuring signal of quality. Apple has long positioned itself as the BMW or Mercedes of computing, using premium pricing to maintain its high-end niche. This is a core strategy for building that last. To protect this perceived value, smart high-end companies avoid discounting. BMW, for instance, won't haggle, and American Girl discontinues less popular dolls rather than putting them on sale.

Conversely, discounting can destroy a premium brand. American luxury car brands like Cadillac lost their prestige by competing on price. The once-iconic Motorola Razr phone became just another cheap phone after heavy discounting. This shows the danger of chasing short-term sales at the expense of long-term brand value.

The Other Side of the Coin: When Less Is More

But a high price isn’t the only way to add value. In some cases, a very low price can be just as powerful. Charles Schwab became a giant in the financial industry by offering discount stock commissions. His caught the high-margin brokerage houses off guard and built a loyal following by offering a simple, low-cost alternative. His model for a became one of the dominant designs in the industry.

Netflix did something similar in the movie rental space. Its simple, low-priced subscription with no late fees transformed the industry. It made watching movies feel practically free, changing the habits of millions. Sometimes the most effective approach for a is to simplify and reduce friction.

Even in a city of extremes like New York, some restaurants use low prices and no-reservation policies to build intense loyalty. The long lines outside become a form of social proof, signaling that what’s inside is worth waiting for. A similar logic applies to concert promoters who underprice tickets to generate buzz and ensure a passionate, high-energy crowd. For many of the , creating a devoted community is more valuable than maximizing the price of every transaction.

Ultimately, price is part of the story you tell. Whether it’s extraordinarily high or surprisingly low, it does more than just generate revenue. It screens customers, signals value, and shapes the entire experience. Whatever your , thinking about in your brand's perception can make all the difference.