Pricing strategies for products or services encompass three main ways to improve profits. The business owner can cut costs or sell more, or find more profit with a better pricing strategy. When costs are already at their lowest and sales are hard to find, adopting a better pricing strategy is a key option to stay viable.
Premium Pricing
Premium pricing is the practice of keeping the price of a product or service artificially high in order to encourage favorable perceptions among buyers, based solely on the price. The practice is intended to exploit the (not necessarily justifiable) tendency for buyers to assume that expensive items enjoy an exceptional reputation or represent exceptional quality and distinction . A premium pricing strategy involves setting the price of a product higher than similar products . This strategy is sometimes also called skim pricing because it is an attempt to "skim the cream" off the top of the market. It is used to maximize profit in areas where customers are happy to pay more, where there are no substitutes for the product, where there are barriers to entering the market, or when the seller cannot save on costs by producing at a high volume. It is also called image pricing or prestige pricing.
Premium-Priced Good
Gold mined from different sources demand different premiums.
Mercedes Benz SLR McLaren
Mercedes Benz executes a premium pricing strategy.
Luxury has a psychological association with price premium pricing. The implication for marketing is that consumers are willing to pay more for certain goods and not for others. To the marketer, it means creating a brand equity or value for which the consumer is willing to pay extra. Marketers view luxury as the main factor diļ¬erentiating a brand in a product category.