What's up brand builder Stephen Houraghan here at brandmasteracademy.com and in this video you're
going to learn how premium pricing strategy works with pros cons and top examples so you can better
understand this powerful pricing strategy to build your reputation as a prestige brand
now if you're new to the channel and you want to build brands that go beyond the visuals and
the logo using strategy psychology and creative thinking then you're in the right place hit that
subscribe button and the notification bell if you want to fast track your results make sure
you grab the pro brand strategy blueprint it's a free download and the link is in the
description now launching a product or service into the market requires many considerations
and towards the top of that list is the pricing strategy now this strategic decision
should consider factors such as the target market the positioning strategy and the brand's
perception one brand may choose to lead with a low price strategy for early market penetration
while another brand might choose a premium pricing strategy for more enhanced brand reputation and a
long-term advantage this video puts a spotlight on the premium pricing strategy you'll learn what it
is how it works the pros and cons of this approach and some of the best premium pricing examples in
the market so what is premium pricing well premium pricing or prestige pricing as it's also known
as a pricing strategy used by businesses and brands to elevate the perception of the brand
and increase their profit margins by pricing their products higher than the competition higher prices
are associated with higher quality and when this message is amplified through integrated marketing
it helps to shape the perception and the reputation of the brand as a premium choice
so why use a premium pricing strategy well there are many reasons a business might choose to use
a premium pricing strategy when setting their prices in the market now one of the most obvious
is the association with quality now as people we are very primitive and many of our buying
decisions are made in the subconscious so how the premium pricing strategy works illustrates
our primitive nature which you'll understand through your own buying experiences as well
now generally speaking when we see higher priced products we associate those products with higher
quality now in reality this isn't always true but our brains have been making shortcuts for millions
of years to help us with survival and this is an ingrained shortcut that we're all hardwired with
now of course the closer we get to that buying decision the more we'll use our neocortex part of
our brain to analyze other aspects of the buying decisions though the high price point instantly
aligns the brand with higher quality this also comes with plenty of emotional benefits as well
including peace of mind excitement through experience and a sense of elevated status
and we create this image based among other things on the price tag attached now the premium price
and strategy has many advantages but it's not a silver bullet there are plenty of drawbacks too
making the strategy difficult or even impossible for some brands so let's take a look at the
advantages and disadvantages in a bit more detail but before we do if you do have any questions
drop a comment below and of course if you like this video hit the like and subscribe and the
notification bell will let you know when i have new videos just like this now premium price brands
generally tend to be more desirable than most but there are other major advantages too the first is
higher profit margins now pricing your products at a premium injects the business with the holy
grail of marketing and branding and business in general and that is increased profitability
per unit sold although the cost of production will provide the business
with a pricing benchmark they don't restrict the business from price and products as high as they
want relatively speaking the higher the profit margin the more the business banks per sale the
next advantage is enhanced brand perception now how a brand is perceived in the market
influences customers willing to purchase and to purchase at a premium so by leveraging a premium
pricing strategy the brand is instantly associated with a sense of superior quality service
and overall experience provided they can back it up that perception can become reputation next up
is enhanced competitive advantage so higher pricing as a strategy keeps competitors at
an arm's length by comparison their perception in the market will often be inferior and their lower
price point puts them under pressure to sell more units to match profitability this advantage also
gives premium price brands more flexibility within their decision making now as i mentioned earlier
premium pricing is no silver bullet and there are plenty of disadvantages to this pricing approach
that should also be considered the first is higher marketing costs now the path to purchase for
premium price products tends to be longer meaning higher marketing costs to generate brand awareness
to earn trust and to move them along the customer journey another disadvantage is smaller target
market segments now by nature premium pricing prices many market segments out of consideration
in other words much of the market won't be prepared to pay or won't be able to afford
the premium pricing meaning the target market segment contains a smaller pool of potential
customers and of course another disadvantage is that the brand is open for undercutting so brands
and businesses with comparatively similar products in terms of quality functionality and benefits may
undercut the premium price brand or take more of an aggressive strategy and position against it
this puts the premium pricing position under pressure from the broader market now premium
pricing examples are all around us from the top shelf at the grocery store to the glass panel
windows on the high street so let's take a look at some of the best premium price strategy example
now the most iconic example of a brand that consistently leverages the premium pricing
strategy is apple now there are countless tech brands operating in the market providing
desktop computers laptops tablets and phones yet iphones are priced up to three times more than
their competitors the macbook pro is up to three times more than their competitors does this mean
that their products are three times better in terms of quality the answer is no yes apple's
quality stands alone in my personal opinion but the willingness of the customers to queue in the
streets for hours or even days to get their next release while they could walk into another store
and get the next best option and keep at least half of their money in their pocket tells you
everything that you need to know about how masterfully apple have executed on their premium
price and strategy and more importantly their position in the market it's not just the quality
of their products it's the entire experience from the beautiful designs to their in-store experience
to their support so everything about apple speaks to their premium position nespresso is another
excellent example of a brand that leverages the premium price and strategy to great effect now
nespresso made the most of their first mover advantage in the coffee capsule and machine
category and like apple their sleek designs and their end-to-end experience aligns more with high
street fashion stores than it does mass grocery stores which is where you'll find most coffees
sold the limited distribution channels keeps the nespresso brand off the supermarket shelves while
the licensing of their capsule design to brands with a supermarket presence gives them the best of
both worlds the premium brand equity is protected allowing them premium pricing and exclusivity
through their nespresso subscription model and their shop front experience but their license
instructor gives them that slice of the broader market now of course the brand you're building is
no apple or nespresso but regardless every market has segments who are more prepared or more client
to look for premium options than others the questions you should be asking yourself
as a brand builder are who am i targeting what do they want and can i deliver on a premium
promise now if you want to learn more about how to establish premium pricing in the market then my
next video will help you out until next time brand like a master and I'll see you in the next video