Premium Pricing – Merits and Demerits

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Premium pricing can be defined as the method of fixing a price which is higher than the market price thereby, hoping that the customers will buy a certain product driven by the idea that the product must be of high quality. A certain group of customers nurture the idea that a product costing a whopping amount is a high quality one. So, it can be said that premium pricing utilizes this idea and with this utilization, many sellers succeed in achieving high profits. This article will offer a brief overview of premium pricing, including its advantages and disadvantages. Take a look at the following.

What are the Benefits of Premium Pricing?

Prevents competition – Premium pricing can help in thwarting competition. When a company chooses to invest a lot in its top brands, it is actually a wise planning on its part to obstruct the entry of competitors. The company does not need to spend a lot in marketing and promotional campaigns and at the same time; it can hamper the launch of competing products at the same price.

Helps in attaining high profit margin – This pricing strategy can help a company achieve a great profit margin by preventing competition and utilizing the common belief of consumers already mentioned in the introductory paragraph. But, it is worth mentioning that if you are considering premium pricing, you must have adequate resources to cope up with the high marketing costs related to this pricing strategy.

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