Premium Pricing Strategy: Above Competition Strategy
Have you dreamed of having the highest prices in town and the largest market share? Of course, you have! And why not? There’s something to be said for being the go-to one-stop shop that has the best quality merchandise while raking in a healthy profit. But how do you pull it off?
Today’s consumer has access to pricing information at the swipe of a finger. Comparing prices is simply part of the purchasing game, and consumers want to make sure they’re not getting taken for a ride. So, how can you price your merchandise in a way that commands big bucks? Let’s take a look at premium pricing and see how it stacks up against your existing strategy.
- Premium Pricing Exudes Prestige – One of the most obvious examples of premium pricing can be found in the luxury goods market. Be it cars, handbags, or a platinum watch, premium items come with equally high price tags. Take Tiffany & Co., for example. You can buy a white gold chain and diamond pendant from just about any jeweler for $249, but stamp the Tiffany name on it, and you’ll pay five times the price (and often more). Is there any real difference between the no-name brand and the designer necklace? Not really. But consumers equate luxury pricing with high caliber merchandise … and they’re often willing to shell out more Benjamins for the perceived excellence of a premium priced product.
- Bulk Up Your Bottom Line – Pricing items higher than your competitor can definitely increase your profit margin … if handled correctly. Premium pricing often requires additional marketing, so be sure your budget can tolerate the increased expense of advertising. If you’re the only cannabis retailer in town, then you’ll still need to spread the word about your premium goods in order to reach your desired customer base.
- The Newer the Shop, the Greater the Risk – Even if you’ve researched your competitors and built marketing expenses into your budget, it may still be tough to reach new high-end customers. Advertising can be expensive, and a lot of times, it takes multiple approaches to create that buzz. While you may want to utilize above competition pricing, you need to consider all the costs involved before you attempt to implement this approach. Remember: high priced inventory will cost you more initially, and if it doesn’t move, you’ll be running in the red.
- Competition Will Undermine Your Efforts – In a perfect world, yours would be the only cannabis shop for as far as the eye could see. Sadly, this just isn’t the case in most cities, and your competitors will be vying for the same customers (and their dollars). If your premium products really aren’t worth the price, then consumers won’t be wooed. In fact, they may even perceive that you’re simply overpricing merchandise that sells for less elsewhere. And the result – less traffic, less profit, and less word of mouth advertising.
Before you pick a single strategy, review your market position and big picture plan. You can easily implement various strategies to reach different markets if you prepare accordingly. One-size-definitely-does-not-fit-all in retail, but if your strategies are aligned with your long- and short-term goals, you’ll find success along the way.
Need More Guidance?
If you’re interested in learning about other pricing strategies and how to further set yourself apart from the competition, download “How to Price Your Products: A Guide for Marijuana Retailers.”