Campaign Strategy :: The Price Premium Play

For homogeneous products or services, careful consideration should be paid to your pricing strategy. It can often be the turning point for your small business.

As a pricing strategy, a Price Premium is the careful increase of your average price of your products or services. The level of price increase can often be determined by your place in the market. After all, when you ask yourself what something is worth, the answer is, "whatever someone will pay for it."

Besides the obvious potentially increased cash flow, a price premium positions your product or service in the minds of your prospects as superior to less expensive direct competitors.  Additionally, it allows you to off-set increasing operating costs and allows you to offer a price discount without impacting traditional sales figures.

At JDM, we recommend finding the increased figure that is not so high as to ward off too many potential customers but high enough that it puts you in a slightly higher class than your average competition.

In order not to lose your current clients, we recommend leaving them at the initial price point, but notifying them of the change.  This both elevates the perceived value of your services as well as provides an incentive for them to continue doing business with you.

It seems a little counter-intuitive that increasing the price would actually win you more business rather than less. Take, for example, a homogeneous market like Vodka.

All Vodka is essentially the same, however the price ranges all over the place. Some people are so Brand loyal, they will pay outrageous prices for their Vodka of choice. This is striking to some given that during a blind taste test, very few people actually pick their beloved label by taste.

To a marketer this is exactly what the Price Premium Play is designed to do. Position the product as "super-premium" with little more than a nice-looking bottle and a 500%
markup.

Given a homogeneous market, there is little to inform the buyer about which is a superior or inferior product. That is, except for the price.

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