Price Premium

The concept of price premium refers to the practice of charging a higher price for a product or service than the market average. It is a popular pricing strategy among businesses, and it can be used to increase profits, strengthen brand positioning, and improve the overall value proposition of a company. In this post, we will explore the importance of price premium and answer some of the most popular questions that arise around this pricing strategy.

What is Price Premium?

Price premium is the difference between the price that a company charges for its products or services and what is considered the market average. It reflects the added value that a product or service provides to its customers, which justifies paying more than what they would pay for similar offerings from competitors.

Why is Price Premium Important?

Price premium plays a critical role in a company's pricing strategy as it directly impacts profitability. A successful price premium strategy can help businesses to increase their revenue, maximize profits, and differentiate themselves from competitors. Furthermore, it can also improve brand positioning by creating an image of exclusivity, luxury, or quality.

How to Achieve Price Premium?

To achieve price premium, it is essential to create a value proposition that differentiates your products or services from those of your competitors. This can be done through brand positioning, competitive advantage, or by changing consumer perceptions about your offerings. Companies can also use pricing strategies like bundling or skimming to achieve price premium.

What are the Benefits of Price Premium?

The benefits of price premium are numerous. Companies that succeed in implementing this pricing strategy can enjoy increased revenue and profitability while improving brand perception and customer loyalty. Achieving price premium also allows companies to invest in research and development to continuously improve their offerings.

What are the Risks of Price Premium?

While there are many benefits to achieving price premium, there are also risks involved. Companies need to ensure that they are delivering a superior value proposition to justify charging more than competitors. If customers feel that they are not getting additional value for the higher price, they may turn to competitors. Additionally, companies need to be aware of the potential backlash from customers who see price premium as unfair or unreasonable.

How to Measure Price Premium?

Measuring price premium involves comparing the price of a company's products or services to those of competitors or market averages. This can be done using market research, customer surveys, or industry reports. It is also essential to track sales volume and revenue to determine the impact of the pricing strategy on overall profitability.

To sum up, implementing a successful price premium strategy requires careful consideration of a company's value proposition, brand positioning, competitive advantage, and consumer perception. By achieving price premium, businesses can increase their profitability while strengthening their brand and improving customer loyalty.


  1. "The Price Advantage" by Walter L. Baker, Michael V. Marn, and Craig C. Zawada
  2. "Pricing Strategy: Setting Price Levels, Managing Price Discounts and Establishing Price Structures" by Tim Smith
  3. "The Strategy and Tactics of Pricing" by Thomas Nagle and John Hogan
  4. "Value-based Pricing: Drive Sales and Boost Your Bottom Line by Creating, Communicating and Capturing Customer Value" by Harry Macdivitt and Mike Wilkinson
  5. "Priceless: The Myth of Fair Value (and How to Take Advantage of It)" by William Poundstone
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