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Premium Pricing

Strategies, Advantages, and Disadvantages

Thanks to premium pricing strategies, brands and companies position their goods and services in the high-involvement segment. Compared to competitors, higher prices provide consumers with an emotional brand enhancement. Quality and additional product benefits are perceived as exclusive, but only if this promise remains plausible over a long period of time.

A pricing policy in the premium segment is based on positioning the offer as superior in terms of quality, function or value and thus justifies the higher price. Consumers understand these advantages and are thus willing to pay a premium. 

In this article we explain how premium pricing affects sales revenue, what KPIs can be measured and how a tailored premium pricing strategy should be planned in the global market.

What is premium pricing?

Premium pricing refers to the practice of setting a higher price for a product or service compared to similar offerings of other competitors in the market. This strategy is often employed by companies that position themselves as providers of high-quality, unique, or luxury products. By pricing their products above the average market price, these companies aim to convey a sense of exclusivity and differentiate themselves from competitors.

Consumers with a need for exclusivity and a high demand for quality value the additional product benefits over and above the primary basic benefits. The appropriate addressees of premium pricing strategies include buyer personas who value social significance and prestige. But these target groups will never be reached if the additional benefit exists independently of the basic benefit. Therefore, companies must not only focus on exclusivity, but above all on consistent, premium quality.

How do companies use premium pricing strategies to increase sales?

With premium pricing strategies, companies want to attract customers who are willing to pay for higher quality and outstanding product features. One of the most important aspects of premium pricing is the emotional impact on the customer. A higher price with exclusive quality promises, provides the user with an upgrade in social status. However, when customers pay a higher price, they permanently expect products and services that exceed their expectations. 

Conversely, for companies pursuing premium price strategies, this means a strong investment in quality management and marketing and branding measures. After all, first-class brand image and premium price positioning do go hand in hand.

Role of premium pricing for international brands and considerations for implementation

Premium pricing plays an important role for international brands that want to establish themselves as market leaders in their respective industries. International companies adopt premium pricing strategies to address offers to affluent and demanding customers. In doing so, it is important to understand the cultural and economic dynamics of the target market. Price sensitivity, local purchasing power and the competitive environment vary from country to country and influence the success of premium pricing.

International companies use the potential of premium pricing to secure - and expand - market share globally. To determine the feasibility and potential success of a premium pricing strategy in a given international market, fundamental market research is essential. This is complemented by deep insight into consumer behavior and competitive analysis. In all areas, and beyond, GfK offers you important figures and reporting for the development of a premium pricing strategy, individually for your company.

Measuring the success of premium pricing strategies and recommended KPIs

Measuring the success of premium pricing strategies involves tracking several key performance indicators (KPIs) to evaluate the effectiveness of the pricing strategy. Some recommended KPIs include:

  • a) Price premium: The price premium is the difference between the premium price charged and the average market price for similar products or services. Monitoring the price premium helps assess the willingness of customers to pay more for the perceived value.
  • b) Customer satisfaction: Customer satisfaction surveys and feedback provide insights into how well the premium-priced offering meets customer expectations. High customer satisfaction indicates that the premium price is justified.
  • c) Market share: Monitoring the market share helps gauge the acceptance of the premium-priced offering among target customers and the competitiveness of the strategy compared to rivals.
  • d) Profitability: Assessing the impact of premium pricing on overall profitability is crucial. Companies need to evaluate whether the higher margins obtained from premium pricing offset any potential decrease in sales volume.

Tailor-made premium pricing strategies with GfK

GfK offers tailored solutions to assist companies in developing effective premium pricing strategies. The GfK Consumer Price Lab provides insights into customer behavior, competitive pricing strategy and analysis, and market dynamics to optimize pricing decisions. By leveraging data-driven approaches, companies can identify the right price points, assess the willingness to pay, and understand the impact of premium pricing on market positioning.

The GfK Daily Pricing Monitor enables real-time monitoring of competitors' pricing strategies, allowing businesses to stay informed about market trends and adjust their premium pricing strategies accordingly. These tools, combined with GfK's expertise in market research and consumer insights, help companies navigate the complexities of premium pricing and maximize their chances of success.

Conclusion

Premium pricing is a strategic approach used by B2B enterprises to position their products or services as superior and exclusive, justifying a higher price point. It appeals to customers' desire for quality, status, and emotional fulfillment. However, implementing a successful premium pricing strategy requires a deep understanding of target markets, competition, and customer preferences. With the right pricing models, market insights, and analytical tools like those offered by GfK, companies can develop and optimize tailored premium pricing strategies to drive sales, profitability, and brand positioning.

To get essential data for optimizing your pricing strategy, find all the insights you need in the GfK Consumer Price Lab. Visit  for comprehensive insights into current market trends. This will help you select exactly the right pricing strategy for your business.

With real-time information from GfK Daily Pricing Monitors, you can stay competitive and improve sales.