How we change what others think, feel, believe and do
Set your prices high and position your product up-market or as an essential fashion item.
Ensure the high price does not put off your target market (so ensure beforehand they can afford it). Market the product strongly as exclusive, elegant and otherwise so desirable that the price is hardly noticed.
A phone manufacturer put a lot of effort into elegant design. Even though the functionality is not the highest, the beauty of the phone lets the manufacturer price high and promote it as a design icon.
A beauty product marketer positions a persistent lipstick as a no-smudge luxury product with glitzy packaging, and prices accordingly higher.
According to the price-quality heuristic, we tend to equate price with quality, assuming that a higher price means that the product is of higher quality. This helps people see a higher-priced item as automatically worth it. There is a lesson here also for low pricing, where a too-low price can result in fewer than expected sales as people expect commensurately low quality.
Note that some goods lend themselves better to premium pricing, although it can be surprising how many can be premium priced. For example bread may seem like a commodity staple, yet use of novel wheats, seeds and so on can create a luxury category even within this simple market.
Premium pricing can lift your product above those of competitors. It can also move you into another market where there are different competitors. Be sure you can beat these new alternatives.
Premium pricing needs a strong brand. If you have an unknown brand, then you will need to do some serious marketing in order to build that brand value.
Premium Pricing is also called Image Pricing or Prestige Pricing. It is sometimes called Skim Pricing as it skims off the top of the market.