How To Charge Premium Prices By Reinventing Your Product

Posted by Sant Qiu in : Marketing Maneuvers on January 27, 2008 , trackback

One of the first things I help my clients do is increase their prices while at the same time increasing their customers. This happens with almost all of the clients that I’ve worked with. There are several reasons why I use this as one of my main strategies when doing an overhaul of their marketing system.

Products/services that command premium prices are typically perceived by consumers as having higher quality and value.
Increasing the price of the product/service gives you more flexibility to pile on ‘value-added’ or ‘free’ gifts that can often close the deal.
Most of the time business owners tend to under-price their product/service because they mistakenly think it is the only ‘marketing’ edge they have over their competitors. (This is especially if they are newcomers in the industry.)

When I was interviewing one of Singapore’s celebrity chefs, Chef Milind Sovani of The Song Of India, for my upcoming book ‘Secrets To Dominate Your Niche’ (that I’m co-authoring with a multimillionaire entrepreneur), he shared his thoughts on charging premium prices. He said, “If you want to be the best, then you’ll either have to exist at the top or at the bottom. This is because there is too much competition in the middle, and there are too many people existing in the middle who can do everything.”

As a successful chef and restaurant owner who has changed the face of Indian food with his premium, fine dining Indian restaurant concept, Chef Milind certainly knows what he’s talking about.

If you’ve been under pricing your product or service, here are a few ways you can reinvent it so you can start to charge premium prices and compete on your own level.

Create your own standards of comparison: You’ve heard of the saying “You can’t compare apples to oranges.” But if you want to succeed in marketing your product/service at a premium price, then that’s exactly what you need to do. You can’t compete in a market where your product can be compared with every other similar product. That’s comparing apples with apples. Instead of blindly competing on the same level, create your own standards of comparison.

That’s one of the usual techniques seminar leaders use when they sell their packaged information in CD/DVD sets. Instead of comparing their package with their competitors’ packages, they compare it with the price people have to fork out to attend the live seminar itself (which usually cost much more). In that sense their CD/DVD package is ‘heavily discounted’ while still delivering the critical information prospects are interested in.

Itemize the ‘work’ that goes into your product/service: The luxury market is good at creating ‘perceived’ premium value for its highly priced products and services.

Be frank now… would you be willing to pay US$325 or more for a 90 x 90 cm piece of cloth? Well, millions of people would and have for the legendary Hermès silk scarf. Why? Because other than the brand name, Hermès has created an elaborate and often repeated story around the creation of a Hermès scarf. The media and consumers have all lapped up all the details that the company had revealed about the process and work that goes into the making of a Hermès scarf.

Whenever an article is written about the Hermès scarf, some or all of these facts invariably get mentioned as well:

It takes about 2 years to complete a Hermès scarf from design concept, engraving and printing to the hand finishing process.
Hermès scarf designers would spend years composing new prints, which are then individually screen-printed with vegetable dye.
Hermès artisans would choose from a palette of over 200,000 colours including a palette of 50,000 colours used exclusively by Hermès.
It takes about forty minutes per scarf just to hand-roll and hem the edges to complete the entire process of producing one scarf.

Now that you are also privy to these facts, does it change the way you ‘value’ a Hermès scarf?

Pile on a highly attractive free gift: This gimmick is often used in the skincare and cosmetics industry, especially during the festive season. Marketers of big brand beauty products understand the principle of packaging an attractive free gift to sell a higher value product or a set of products. To get women to splurge an extra $80 or $100, they include a designer-like makeup pouch or handbag as a gift if they spend above a certain amount or buy the promotional product or package of the month.

The key to applying this strategy successfully is to choose a free gift that is highly desirable in nature and something that is perceived to be of premium value that one cannot purchase anywhere else.

I hope some of these strategies have inspired you to take a new look at your pricing and make some changes to the way you package your product/service. Remember: it takes about the same amount of time and money to sell a cheap product compared to a premium product. So use your time and effort wisely!

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