You’re launching your company’s first product? However, you should know that the SaaS industry is extremely competitive. Seeking a sales plan that will allow your product to generate more income than similar solutions offered by your competitors. One simple approach to accomplish this is to charge more for your product, which is known as premium pricing. In SaaS, product quality and appearance are king. In a competitive market, an outstanding product priced at a premium can offer current and new customers a positive image of your company’s dedication to excellent quality. Premium pricing is a demanding pricing model that is not suitable for every SaaS business. If you can pull it off, you can get unbelievable market advantages, recognition of your product’s quality, and massive profit margins.
What is premium pricing?
Premium pricing is a strategic pricing technique where your company’s product is priced higher than its immediate competitors. The goal of selling your products at an additional cost is to create the impression that your product is of higher quality than the competition. Premium pricing has a close connection to the price skimming strategy. Unlike skimming, premium pricing requires setting high rates and maintaining them. Luxury brands frequently use premium pricing, but this strategy can also be used in SaaS.
What are the advantages of premium pricing?
Premium pricing is a beneficial pricing strategy and can be difficult to implement like every other marketing strategy. Evaluate your company’s position and growth goals by understanding what it takes to implement a successful premium pricing plan. Here are some of the advantages of implementing premium pricing for your organization.
Higher profit margins – If your company succeeds, premium pricing will undoubtedly result in increased profits. It’s simple math: a higher price per unit leads to a bigger profit per unit sold.
Improves brand image and value – Premium pricing also boosts brand value and the image of your organization. A premium-priced product not only earns its own superior reputation but also boosts the impression of your other part of the product.
Create a protective barrier around your brand – If a premium pricing approach is successful, it can also bring obstacles to your business. Other companies will offer comparable product quality and pricing. Make your product unique so they are unable to compete with your product. Make a well-executed premium pricing plan to gain a significant market advantage quickly.
What are the disadvantages of premium pricing?
Whenever applying a premium pricing strategy, you should keep some things in mind. Everything comes with advantages and disadvantages. So here are some disadvantages of the premium pricing strategy:
Depending on how fixed prices are: If you want to charge a higher price for your product, you need to have a price that can fulfil customer demand. You should have a strong USP(unique selling price). If you don’t have a strong USP, you won’t be able to explain higher prices to your customers. That means that if you’re charging more than other brands.
Limits the chance to sell: You can’t sell a lot of products if you charge a lot for them. It’s not as big of a deal for SaaS companies.
Makes prices less competitive: When you set a higher price, competitors will try to beat you, especially if there are a lot of other companies in the same field. If another company comes along and sells the same thing for less money, your higher price could ruin your business.
Top 5 brands selling products with premium pricing
A premium pricing plan is a powerful mix of many things, with marketing being one of the most important. Here are 10 strategies that have worked well for big brands in the past:
1. Apple
Apple is a popular smartphone brand today. Their products are creative and easily identifiable designs. They are the brand that can justify their higher prices, as their product consistently receives high marks in performance, dependability, and safety testing.
As a result, Apple can charge higher rates than its competitors and maintain a devoted consumer base. Many people buy an iPhone, even if they don’t truly need one. This shows the impact of premium pricing and serves as a clear example of this strategy.
2. Tiffany & Co.
Tiffany & Co. is the world’s most expensive jewelry brand and has a small number of unique items, performing as the pinnacle of exclusivity. This exclusivity allows the brand to charge higher prices than its competitors in the industry and also maintain large profit margins. Tiffany & Co. surpassed other jewelry businesses such as Cartier and Harry Winston. Many other brands, like Tiffany & Co., sell limited edition products as part of their premium pricing strategy.
3. Nike
Nike is known as the world’s most successful brand. Over the years, they have continuously found methods to differentiate themselves from their competitors and stay ahead of the market. The utilization of premium pricing techniques is one of Nike’s key success factors. They frequently select the best sportsmen or teams in every field to represent their brand. It is evident that, in addition to providing a high-quality product, they also want to stay closer to their customers.
4. Tesla
Rather than mass-producing low-cost electric vehicles (EVs), Tesla focused on developing an appealing luxury electric vehicle with cutting-edge technology and design. The company developed touch features, partial self-driving capabilities, and a more simple, modern in-car experience, which are unique from other EVs. Tesla’s all-electric vehicles have become green energy favourites, although they are more expensive than hybrid and regular vehicles.
According to research, Tesla increased demand for electric vehicles in the automotive industry. Today’s buyers are willing to pay a premium for cars with elegant designs, new technologies, and high performance.
5. Rolex
Rolex frequently uses premium pricing methods to appeal to a distinguished customer. Rolex can draw elite consumers who love to spend their money on premium products. They offer them watches made of high-end materials and unique features. Rolex is more than simply a watch. However, it represents prestige, which makes people pay for that rather than quality.
Conclusion
Price monitoring is an important tool for establishing a premium pricing plan and keeping customers engaged. The data gathered from price monitoring will allow you to conduct price analysis and adjust the offer or even cut or raise the price of a product in order to keep or regain the desired market position.
You can use Rubick.ai to help you with this. Our team of professionals will assist you in monitoring the prices of your items and recommending the best strategy to increase profits using various pricing methods. Want to know about this strategy? Contact us today to receive a free demo.
