PREMIUM PRICING

PREMIUM PRICING

Premium pricing is used when the product has one or more unique characteristics. This uniqueness differentiates the product greatly from competition and creates a significant competitive advantage.

This strategy demands a high-quality item to merit the high price. Because of the extremely high price, premiums pricing generally is a short term strategy as competitors are attracted to markets with high-margin items.

The length of time you can charge customers a premium price depends on the sustainability of the competitive advantage – the greater the sustainability, the longer time premium pricing is a viable option.

A premium ‘pricing strategy yields the highest product prices of the strategies available.

It is best to use premiums pricing when there are no substitutes for your product, substantial barriers to enter the market exist, and your potential customers are price incentive because they value the benefits provided by the product.

Also, economies of scale are not necessary for this strategy to work. The most important detail to remember is that you cannot use premium pricing when facing competition.

Competition would undercut your price, leaving you with an ineffective pricing strategy and poor product sales.