Premium Pricing

Premium pricing means a retailer is consistently pricing their product higher due to competitive advantage.

It is mostly used when a company has such a strong brand. In cases that premium pricing is also heavily used is when investment into marketing is needed to justify the higher pricing.


The premium pricing technique is used for pricing high-end products that people buy for reasons other than being cheap. These are usually unique products with a strong brand image and lots of innovative features. Think about brands like Apple, Rolex, etc.

What makes this pricing technique so powerful is the fact that it can increase the profit margin of a product without having to sell more of it. You make more money by selling the same number of products to the same number of people.

Despite being such a promising pricing technique, premium pricing isn’t right for all products. Companies that can get away with setting such high-profit margins are the ones selling products with a high perceived value. People know these products and are willing to pay top dollar to get them.

If you sell a product that people buy mainly because it’s cheaper than the competition, using the premium pricing technique can have a negative impact on your bottom line. If you want to make the most out of this pricing techniques, there are a few things that you should know.

Important Considerations

The following are the most important considerations that you should keep in mind when using the premium pricing technique. If utilized properly, you can boost your profit margins and build a sustainable business.

Using premium pricing requires a well-established brand

Premium pricing is one of the biggest advantages of being a well-established brand. Once you hit a certain reputation level and perceived value, you can charge much more than your competitors and still sell lots of your products.

Once again, a clear example of this is Apple. Having this iconic brand status, they now charge $1000 for their newest iPhone models. Their biggest competitor, Samsung, charges $700 for their flagship phone.

Apple doesn’t charge 40% more because their products are that much better, this charge this much because that’s what people are willing to pay for their them. That’s what a well-established brand and the premium pricing method can do together.

Premium pricing doesn’t work in all industries

Premium pricing is a great way to increase your profit margins. You might be planning on investing heavily in marketing and building your brand, so you can use this pricing method once your brand image allows it.

Unfortunately, this isn’t possible in all industries. In some cases, no matter how much you put into marketing your brand and building its image, you’ll never be able to use the premium pricing methods for your products.

This is usually the case in consumer items, where people rarely care. No matter how much you promote your detergent, nothing will ever justify it being 40% more expensive than the competition. Before you start paving the way for a premium pricing strategy, make sure that it can be applied to the products that you are selling.

Premium Pricing: Advantages and Disadvantages

The following are the main advantage and disadvantage that are associated with the premium pricing method. Knowing these will help you decide whether it’s right for your business or not.

Strong barrier to entry

One of the strongest advantages that are associated with the premium pricing method is the fact that it creates a strong barrier to entry. After spending enough time in the market and establishing a strong brand name with premium-priced products, you make it increasingly hard for new companies to compete with you.

Imagine a new luxury watch company that’s new to the market and trying to compete with established companies like Rolex and Patek Philippe. Reaching such a reputable status is something that requires years of dedication and lots of money being directed to marketing. The more you stay on top as a premium company, the harder it is for new companies to compete

Requires dedicating lots of money to marketing

If you want to establish a brand that can price its products using the premium pricing method, you’ll need to invest lots of money in marketing. Your reputation and the perceived value of your product are an essential factor is getting people to pay such high prices for your products.

As you’ve probably guessed, good marketing is the best way to make this happen. The more you invest in quality marketing, the faster you’ll be able to establish the brand reputation you’re after.

This is a major downside of this pricing method as you’ll have to keep marketing your brand if you want to continue using the premium pricing method. This can hinder your company’s growth, as lots of your resources are dedicated to marketing.

How can Sniffie help?

For some products, premium pricing is a great way to increase profit margins. To make the most out of this pricing technique though, you must do a thorough analysis of the market you’re in. Knowing what your competitors are offering is essential if you want to outperform them.

Instead of doing all this extensive research manually, you can use a tool like Sniffie to save lots of time and effort. Check out Sniffie’s features and our service page to find out how it can make this process easier.

Want to learn more about pricing?

Are you keen to learn more about pricing? Head to our Pricing Academy, from there you can find our latest articles about pricing and other free resources related to pricing, be sure to check them out!

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