To Get a Premium Price Exceed What Your Customer Expects
A consumer makes you answer some difficult questions about your product and your pricing strategy. More importantly, she makes you spell out the uniqueness of your products and services. She is the one who spends more on your products and services – even when they're priced higher than those of your competitors. So, why does she buy Nike when any other shoe with a similar make can serve the purpose? What really pushes the "I want this" button?
A variety of reasons.
Consumers spend on a brand because they like the brand. Consumers decide they love a brand after physically or psychologically evaluating its products on numerous, non-standard criteria. They like the brand "parent," the company that owns the brand, and therefore endorse all the products of the particular company. Consumers around the world are more aware of the lineage of the brand they like. There is a "connect" due to which they don't mind paying more for these companies' products.
They are sure of getting value in return that justifies every dollar spent on the product. Consumers buy products from companies that hold themselves to higher standards and deliver value.
Consumers stick to a brand because they are resistant to change; they like the design the product they presently use or the specific set of functionalities it gives them. People happy with the functionalities of Windows 7 that are done away with on Windows 10 don't upgrade. (Start button and DVDs, anyone?)
Consumers go for simplicity. They tend to buy a product or service without worrying about the price because it simplifies their life; it becomes a habit, a default choice. It takes a brand years to become a part of consumer's life. Sometimes, consumers try out a brand because the product or service they really want isn't available to them due to geographic or other limitations. They are forced to buy the "second best" option at a price for which it's available.
How Apple gives them value.
When a consumer purchases a brand's product, she buys into the whole world that is populated by the brand. It is like buying a membership in a club or being a part of a religion.
Apple is a good example. The sheer range of Apple products from Macs to iPhones and the iOS app store – with hundreds of apps added to the store everyday – has made Apple a cult, an iconic brand. It is a premium brand for which customers willingly pay more because they are sure the Apple product will be a mind-blowing experience.
When you opt for any of Apple's products or services a whole, new interconnected world full of possibilities opens up to you. This means consumers don't mind paying for associated services. To illustrate my point, bookPress is an app that allows you to create and edit books on your iPad anywhere you go. Consumers prefer to download such apps and achieve their objectives without leaving the ecosystem of device on hand (iPad) as opposed to using extraneous ebook-creation applications or book binding, illustration and printing services.
Consumers do not "buy" Apple's products, they "invest" in them. In return they get a great design, value, prestige, simplicity and consistency.
How you can do it too.
A brand can only justify a price premium if it is seen by its customers to be meaningfully different from the alternatives. Lack of meaning is what creates a market full of commodities where people have no emotional connect with their purchase. Consumers pay for product experience. It is important for the brand to know its consumers and their expectations before it can provide the right shopping experience, increase its conversions, and foster brand loyalty.
Defining a customer's persona while sitting in a boardroom is tricky. If you think all your premium customers are rich – you could be mistaken. If you think people who buy Ferraris are all beautiful and glamorous – you could be wrong again. Most people save up to buy good products. They have normal bodies and ordinary intellect. Alienating the majority is always a big mistake. A "premium customer" is anyone who pays you top dollar – and then is justified in expecting top-notch product quality, speedy delivery and outstanding customer service. The challenge for premium brands then, is to sustain that feeling of being meaningfully different from others.
If you believe in the product, if the packaging is novel, and it's promoted the right way, in the right place, at the right time, to the right people, you can arguably sell it at a price of your higher-than-rational choice.
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