The premium pricing strategy is based on setting prices that are above the average market value for products considered to be valuable or luxury. The objective for those eCommerce businesses that use premium pricing is to position certain items as higher quality or unique, appealing to their customers’ emotions. Their effectiveness is based on the perception that users have of the brand or product. We can find the clearest examples of this in electronics, jewellery, and sports clothing or footwear. Here, at Minderest, we’ll explain the necessary steps to put this pricing strategy in place and when it can be used.
Which products should premium prices be applied to?
Although premium or prestige prices usually generate higher profits for the brand, due to the high market prices of its products, there is a risk that your target audience will be smaller. Therefore, it’s important to know which moments and contexts are the most favourable for implementing this strategy.
In general, premium prices can be applied to original products or those that are unique in their market, items that are difficult to find in any competitor’s eCommerce. Products that stand out due to their materials or manufacturing process are also good candidates, like jewellery. To these situations, we can add:
Launching new products
Like Apple does with its smartphone and computers, launching a new product on the market can be linked to a premium price. Its success is based on the fact that customers will be eager to learn about its new features. The main drawback is that this strategy requires ample investment in omnichannel marketing to generate excitement in users and project an image of quality that convinces them to purchase.
Creating exclusive collections with limited units
Launching exclusive collections generates a greater sense of urgency in users so that they purchase those items. At a psychological level, you send the message that only a privileged few will be able to enjoy your collection. This perception of prestige allows eCommerce businesses to raise their prices. This strategy must be accompanied by highly segmented campaigns directed at your buyer persona, not at a heterogeneous group of customers.
The ultimate goal is to build an image of luxury and quality around your products to generate more revenue.
Requirements for implementing a premium pricing strategy
- Knowing your target audience’s characteristics and interests.
- Building a brand image that’s in line with higher prices.
- Distancing yourself from low-quality competitors.
- Including emotional messaging in your marketing campaigns.
- Offering the best shopping experience to your customers, from the moment they access your eCommerce website to the moment they receive their package.
Finally, it’s important to constantly monitor the prices of your competitors, those who also offer prestige pricing, to be able to anticipate their movements. While customer loyalty tends to be higher with luxury products, the high competitiveness within the online sector has made it necessary to use tracking tools that keep the pricing team up to date with any changes in supply and demand.