Did you know that 60% of buyers think about pricing as the first benchmark of a purchasing decision? You might think that the lowest price wins the race. But with a premium pricing strategy, you can charge more and still draw interest.

Your pricing decides more than the profit margin. It can also make or break your sales appeal. Premium pricing can drive buzz around your product and increase revenue

This guide covers the premium pricing strategy, including:

  • What is it?
  • When should you use it?
  • How can you create one for your business?

See also: What is psychology pricing in marketing?

What is a premium pricing strategy?

Premium pricing is when you intentionally price your products or services higher than the market value, or the average price point of similar products. 

Businesses will often do this to suggest they produce higher quality products or services or develop a luxury brand

For example, say you sell handmade cards. Typical greeting cards go for about £1.50 to £3. But, since you make your cards on premium card stock and hand-paint them, you may charge £5. That’s a premium price.

What does the price say? 

This pricing can reflect the extra time, quality materials, and unique elements of what you sell. Though your products or services might look similar to other products, the pricing sets it apart and catches people’s attention

Premium pricing makes people wonder: 

  • Why does it cost this much? 
  • What will paying this price give me? 
  • How is the product better than the rest? 

If you choose to use this approach, you’ll need to show customers that paying this price is worth it

When should you use the premium pricing strategy? 

Premium pricing may not work for all businesses. If you’re not the right fit, it can hurt your profitability rather than help it. When people can’t rationalise the price, they’ll look elsewhere, decreasing your sales. 

So, when should you use this strategy?

The best opportunities for premium pricing 

The pricing can appeal to luxury consumers or people with larger budgets. So, ensure your target audience aligns with these characteristics

You could succeed with a premium pricing strategy if: 

  • Your product or service is of higher make and quality, which is its main appeal. 
  • Your product is unique, patented, or difficult to reproduce
  • Your product or service sits in a market with high demand and little to no competition

How to determine if it’s right for you 

How do you know if you fit into one of these categories? You’ll need to determine if it’s worth investing in your products or services, and identify why.

Here are a few things to consider: 

  • Special techniques or rare materials you use.
  • A movement or value that you represent. 
  • If you’re in a relatively new market that’s growing.
  • If you invented something or redesigned it in a fresh way. 
  • How interested people are in what you offer.  

How can you create a premium pricing strategy? 

If you determine premium pricing is the right path for you, we can help you create a strategy that makes it effective

Determine market value

To decide how much you want to charge, first look at the market value so you can set your price around it. Market value is the typical price that people expect to pay for something. 

For a rough idea of your products or services market value, start by assessing:

  • The size and demand of the industry.
  • How many businesses are involved in the market. 
  • Similar product listings and their price points. 

Look at examples

If you want to develop a realistic premium strategy, it’s important to see how others handle it. So, let’s examine a few examples.  

Gucci herbarium mug 

Most high fashion or luxury brands use premium prices to make their business more elite and enticing. This Gucci mug is no exception. Though it may look like a typical floral mug that you can find for £12 or less, it costs £180

Maison de Fleur long life singular rose 

The Maison de Fleur Long Life Singular Preserved Rose, at £105, is another great premium example. 

This rose, which lasts for a year, offers buyers something unique that represents undying love. Many people will justify this price as a special gift for their loved ones. 

Yeezy hoodie 

Though you could get a yellow hoodie from H&M for £17.99, Kanye West’s brand Yeezy sells them for £265 instead. Here, name recognition and exclusivity likely drive the price.

To get a general idea of what you might charge for premium pricing, consider looking at relevant products that attempt this strategy

Decide on a price point 

Once you do your research, you can create realistic and compelling prices

Compare the average and premium examples you uncovered to give you a starting point. Then, you might ask the public what they think of your pricing. To do this, you could send out a survey or hold a focus group.   

Brand and promote the products or services 

For your pricing strategy to succeed, you’ll need to promote it wisely. First, build brand awareness that reflects your pricing. You might develop a luxury brand or focus on your values or quality that makes sense of the price

Then, find the right promotional outlets that can reach people who will pay these prices. You might market yourself to higher-income consumers or advertise on platforms these people frequent. 

For example, if you sell professional marketing services, you might market yourself on LinkedIn. This way, you can add your credentials and experiences to your profile to show your expert standing and explain your premium pricing. 

Hold your business to a premium 

As you set your pricing at a premium, you can increase revenue per sale and enhance your brand image. Just be sure you: 

  • Determine premium pricing for you.
  • Compare your products to good examples. 
  • Promote your business in a way that makes the price realistic. 

As you earn more for your business with this pricing, it’s essential to keep up with your finances. This is much easier with a tool like Countingup. 

Countingup is the business current account and accounting software in one app. It automates time-consuming bookkeeping admin for thousands of self-employed people across the UK. 

Get started for free.