Premium pricing
From Wikipedia, the free encyclopedia
Premium pricing is the practice of keeping the price of a product or service artificially high in order to encourage favorable perceptions among buyers, based solely on the price.[1] The practice is intended to exploit the (not necessarily justifiable) tendency for buyers to assume that expensive items enjoy an exceptional reputation or represent exceptional quality and distinction.
[edit] Strategic considerations
The use of premium pricing as either a marketing strategy or a competitive practice depends on certain factors that influence its profitability and sustainability.
Such factors include:
- Information asymmetry (e.g., when buyers have no independent basis to test claims of "exceptional quality" for a particular product or service -- assuming the concept is well-defined to begin with);
- Market status as a Luxury good or a Superior good; and
- Market dynamics such as the level of competition and entry barriers.[2]
[edit] Notes and references
- ^ Gittings, Christopher (2002). The Advertising Handbook. New York: Routledge. ISBN 0415243912.
- ^ Smith, Gordon (1997). Trademark Valuation. New York: Wiley. ISBN 0471141127.
