Imagine a world where you could charge more for your product’s than your competitors. Imagine a world where the perceived value of your product is so high, customers are happy to pay a higher cost. This is the case when you start implementing premium pricing.
Prestige pricing is a strategy used by e-commerce vendors who want to establish themselves as a high-end company with stellar brand identity.
It allows them to charge significantly more than their competitors and skim the top of the market where people are happy to pay a premium.
But implementing it isn’t simple.
In this post, you’re going to learn:
- What is premium pricing?
- Why you need to base your price on the value to the customer
- How to think more about the luxuriousness of your products
- Why you need to put an emphasis on uniqueness and quality
- How important it is to use your brand to tell a story
What is premium pricing?
Premium pricing is a pricing strategy used by e-commerce vendors that want to establish their products as luxury as well as charging a higher price.
Premium pricing is effective as you’re able to maximize your overall profits for your items.
Think about it.
If you’re able to manufacture your products for $5 and sell them for $500, that’s a huge profit.
But in order to make premium pricing work, your brand needs to have a premium feel to it, too.
Alternatively, if you’re entering a market where there is demand for your product, but no current competitors, you can adopt a premium pricing strategy. This is because customers are happy to pay more for products when no other options exist.
Let’s now look at the ways you can start utilizing premium pricing and the changes you’ll need to make to your brand and marketing efforts.
Base your pricing on the value to the customer
When it comes to premium pricing, the value is everything. But understanding value involves understanding who your ideal customer is.
How much an item is worth to one person might vary from how much it’s worth to another.
Consider this wine. It costs £13.49 and one of the special features is that it’s vegan.
Now if you were vegan, this wine would hold more value to you than a non-vegan wine as you’re unable to drink that.
Compare it, then, to this wine which is only £6.29
This store is able to charge more for the vegan wine, as for vegans, the wine holds more value.
A non-vegan would find less value in the more expensive wine as they don’t need to consider vegan-friendly options in their buying criteria.
Premium pricing is all about luxury
You might be surprised to know that any product can be considered premium.
Take this t-shirt for example.
It costs £280.
Now compare it to this t-shirt which (from appearances only) seems very similar. This second t-shirt would only cost you £12.50.
Would you pay for the first t-shirt? Maybe, maybe not. But some people would. However, do you think those people would pay for this t-shirt if they knew it would rip within three months?
That’s the thing. The first t-shirt has a sense of luxury about it. This concept of luxury is what brands use to charge higher prices for their products.
But luxury involves more than simply adding the word “luxurious” to your product descriptions. It needs to feel luxurious.
The best way to do this is through effective copywriting. When you use your words to describe a product, you’re able to help people understand how it might feel to own the product and use the product.
How unique is your product
When you’re the only one selling a specific item, it goes without saying that you can charge more.
It’s why sellers on the marketplace Etsy are able to charge more for their items.
Consider these two products
The product on Etsy is unique. When you buy this product, you’ll own an unique item. However, when you compare that to the other, when you buy this product, you’ll be the owner of an item loads of other people have as well.
It’s important to note, that not every product warrants uniqueness.
Take Apple for example.
They’re able to charge a premium for their products, but there isn’t anything particularly unique about them.
These Airpods look very similar to these from Amazon but that doesn’t mean they can’t charge a premium.
After all, Apple has adhered to the first strategy and ensured their products feel luxurious and priced based on their customer’s perceived value.
Do you tell a story?
Stories are an effective marketing tool you can use to support your premium pricing strategy. However, succeeding with storytelling is difficult.
If you have the budget, you might want to work with an expert copywriter who will be able to help you craft your story and implement it throughout all your marketing materials.
Some key points when it comes to crafting your product or brand story:
- Explain what makes your product different. If you’re going to pay $4 for a bottle of water instead of $1, you want to know what makes the $4 water different.
- Show (don’t tell) your customers how they’ll feel when they own your product. Your customers need to feel your passion for your business and part of that involves showing (not telling) why your products are awesome.
- Be transparent. Transparency is key. If you source your materials ethically, talk about this. If you only hire local workers, talk about this. If you use your profits to give back to the community, talk about this. The more open you are with your business and process, the more open your customers will be with their money.
- Be consistent. Above all else, when you’ve decided on the narrative of your story, you need to be consistent. This means your story should be told across all mediums. Whether that be your product descriptions, blog posts, social media. Customers and potential customers should feel your story wherever they are and whenever they decide to buy.
For example, TOMS, have an entire section of their website dedicated to telling the story of how they give back as a brand.
Let’s wrap it up
Now you have an idea of what premium pricing actually is, it’s time to start implementing.
But before you dive right in, make sure you’ve really considered whether your products or business warrants a higher price.
Your customers will pay more if they believe there is significant value in your products, or that your products have an air of luxury about them.
Once you’ve established what makes your products different, it’s time to increase your prices.
You might want to let your customers know about your price increases by explaining the reasons.
For example, you might tell them that you’re now using stronger, more robust materials which means the price increases but so does the lifespan of the product.
The world of premium pricing is just waiting for your products, what are you waiting for?