The Value of Price - the Camel Hypothesis

It is a well-known fact that price itself is a trigger of value. Exposing oneself with expensive clothes, watches, cars, etc., offers a valuable addition to anyone’s social identity, consequently increases the buyer’s readiness to pay a higher price. The snag is, however, that the value of price is not linear to its character. Starting from the centre, the mainstream price level does not make any contribution to the social identity (status) of most individuals, but a moderate rise to the premium price level means an evident addition. Moving further to the luxury level apparently has the desired effect in some circles, but means, in general, an obvious risk of being regarded as ostentatious, which, again, reduces the level of social identity value. A slight reduction of the price to the smart buy level may on the other hand indicate the intelligent, calculated choice of something less expensive to a sensible quality. Further reduction to the bottom level, basic, would however be negative to the social identity, merely exposing a lack of money as well as taste.

The two-hump Camel Hypothesis is a widely used model since it was first published in 1990. Read more of the General Theory of Marketing.