How To Charge a Premium Price

Posted by Philip Huthwaite on July 20, 2023
Philip Huthwaite
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How to charge a premium price: pricing is a key factor in the marketing of any product, and getting it wrong can have a serious impact on sales. In this blog you will learn how to charge a premium price.

A premium pricing strategy, also referred to as prestige pricing, involves setting the price of a product higher than similar products. This strategy is sometimes also called skim pricing because it is an attempt to “skim the cream” off the top of the market. It can be a brave strategy to follow, and should only be adopted if the value can be articulated to your customers in at least one of the following ways:



1. Competitor Research

Do your research on your competitors, and get to know their products. This is especially important if there are subtle differences that is hard for a customer to see, and you're being beaten on price. Make this research available to everyone, so that the next time you're challenged on price, your sales staff are armed with the rationale, and can demonstrate the return on investment for buying from you. This may be anything from poorer customer service, to cheaper materials being used by a competitor in the manufacturing process.


2. Go the Extra Mile

This goes beyond simply having friendly employees, and rather aiming to anticipate customer need before they are aware of it. I heard one business traveler's tale about a trip to a London hotel. A member of the housekeeping staff at the hotel saw the individual approaching the lift 70 feet away. They pressed the button and held it open until the businessman arrived. The simple act of doing something extra made such an impression and supported positive hotel praise to all their business associates.

Read resources available to you such as the FREE Ultimate Guide to Retail Pricing.


3. Project Financial Stability

How often have you purchased even the same product or service at a higher price, because you felt the company with the higher price had better financial stability to support your future needs. An example I heard recently about a boiler installation from a new local supplier versus using a well established brand. The well establish brand was 15% more expensive, yet even with both companies offering a 5 year warranty, it was felt it was less risky to go with the bigger player.


4. You can serve a niche

As a rule of thumb, specialists can always charge more than generalists. If you are a marketing consultant handling any client that you can get, you will have lots of competition, and the ability to command a premium fee will be extremely difficult. On the other hand, if you can specialise in the field of marketing, to say solicitors, solicitors will pay a premium to get your advice because you know their sector, and your experience applies directly to them with the likelihood they will then get a better ROI.


5. Restrict Supply

Economics dictates, that the greater the demand for something, and the more limited the supply, the more the seller can charge and get paid for it. Since you're not OPEC, it is likely that you cannot control the supply, but you can look to create a perception of massive demand for what you have to offer.


6. The power of the brand

Branding plays perhaps one of the largest influencers on price perception. You only have to look at the fashion industry to see the power of branding. Ultimately a raincoat from GAP could be considered to be the same as a raincoat from Burberry. They both are functional, and designed well, yet one can demand a £1000 price tag and the other a £50 price tag. Whilst I admit there are likely to be deep routed differences in how for example they are manufactured, which takes us full circle to point 1, but surely not £950 difference? The power of the brand that Burberry has developed ensures it can maintain an exclusive price tag.

Fundamentally the true measure of a premium provider, is a company that focuses more on delivering value to its own customers, instead of worrying about what the competition does or doesn't do.


Further Reading

7 Proven Ways To Increase Revenue

Effective Revenue Management Strategies You Can Use Today



Topics: Prestige Pricing, Premium Pricing

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