Hello, this is Hall T. Martin with the Startup Funding Espresso — your daily shot of startup funding and investing.
Premium pricing sets the price well above the competition for a product.
Use this pricing model to signal luxury.
It’s the counter strategy to value pricing which offers the most product features for the least amount of money.
Premium pricing positions the product as the best on the market to be used by the elite.
To use this pricing you must create a brand that exudes luxury, exclusivity, and prestige.
The price must have a high quality factor although it doesn’t have to be the best.
This strategy works when products can be differentiated with features and is not a commodity product where all the products have the same features.
The higher price burnishes the brand and provides higher margins for the company.
The target audience is a segment of the overall market.
Typically the premium brand attracts higher end customers who have the money to pay for the product and don’t need financing or other support to buy it.
The premium price reinforces the customer perception of the product and their position.
Premium pricing is similar to skimming pricing which sets the price high and then lowers it to skim customers at each pricing level.
Skimming captures the most revenue from the market.
Premium is different in that it doesn’t lower the price to capture non-premium customers.
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Hall T Martin is the director of Investor Connect, which is a 501(c)(3) nonprofit dedicated to the education of investors for early-stage funding. All opinions expressed by Hall and podcast guests are solely their own opinions and do not reflect the opinion of Investor Connect. This podcast is for informational purposes only and should not be relied upon for the basis of investment decisions.