A Veblen good is a product whose appeal to certain customers is determined by a a particularly high pricemay rise. In this context, the price is perceived not only as a cost factor, but also as a symbol of exclusivity, prestige and social status.
A Veblen good therefore deviates from typical demand behaviour. Normally, demand falls when a product becomes more expensive. In the case of a Veblen good, however, a higher price can actually make it more desirable to status-conscious buyers.
Typical examples might include:
- Luxury watches
- Designer fashion
- exclusive cars
- Jewellery
- limited-edition artworks
- premium spirits
- particularly expensive properties
- exclusive holidays or services
Not every high-priced product is automatically a Veblen good. The key factor is that the high price itself constitutes part of the perceived utility.
Typical characteristics of a Veblen good are:
- a strong association with prestige and social status
- visible use or public ownership
- limited availability
- high brand awareness
- exclusive positioning
- an emotional rather than a purely functional purchasing decision
- a clear distinction from cheaper alternatives
Perceived value is often the result of several factors:
| factor | Meaning |
| Exclusivity | Only a limited number of customers can or should own the product. |
| Effect on status | The product conveys a sense of affluence, success or belonging. |
| Brand | A well-known luxury brand enhances the perceived value. |
| Shortage | Limited stock or long waiting lists make the product more sought-after. |
| Visibility | Other people may be able to tell who owns or uses it. |
| Price | The high price itself serves as an indicator of quality and status. |
A simplified example:
A luxury brand is selling a bag for 2,000 euros. If the price were significantly reduced, the product might lose some of its exclusivity for certain customers. Whilst the lower price would reach new target groups, it could at the same time reduce its appeal to status-conscious buyers.
Companies can enhance this effect through the following measures, amongst others:
- limited-edition collections
- exclusive outlets
- Waiting lists
- high entry-level prices
- Selective distribution partners
- special customer experiences
- powerful brand storytelling
- artificially or genuinely limited availability
A Veblen strategy can help companies to:
- to achieve high profit margins
- to establish an exclusive brand positioning
- to set itself apart from price competition
- to appeal to a particularly loyal group of customers
- Increasing desirability through scarcity
At the same time, there are risks:
- a very limited target audience
- strong dependence on brand image
- high standards of quality and service
- potential loss of credibility due to frequent discounts
- Risk of an artificially created shortage
- rapid changes in trends and status symbols
A common mistake is simply to raise the price and thereby automatically expect demand to increase. A high price alone does not make a product a Veblen good. The product must credibly represent exclusivity, quality or social status.
Veblen goods should also not be confused with Giffen goods:
| Veblen-Gut | Giffen Estate |
| Demand is rising due to prestige and the status it confers. | Demand may rise as a result of particular economic conditions. |
| often luxury products | usually relevant in theory when it comes to basic consumer goods |
| psychological and social impact | income- and replacement-related effect |
| The high price is part of its appeal | A higher price restricts the purchase of other goods |
This concept may be relevant for start-ups if they are developing products in the premium or luxury segment. However, this requires a clearly defined target audience, a credible brand identity and a value proposition that goes beyond mere functionality.
innoWerft helps start-up founders to better understand their target audiences and their motivations for purchasing, to review pricing and positioning strategies, and to determine whether a premium or exclusivity approach is suitable for the product and the market.