Premium Pricing - Strategic Considerations

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.

The disadvantages of this pricing strategy includes:

  • not possible with commodity goods

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