Intro to premium pricing
Selling at high profits is the dream, isn’t it? It is a lot easier to handle 12 instead of 12,000 customers; the chances for complaints are way lower; customer service doesn’t require this much effort; the process is less time-consuming.
No, no, and no. This assumption is as far from reality as it can be.
Charging premium pricing means that you’re offering a premium product which comes with (drumroll – wait for it) premium service expectation. And as you know from personal experience, there’s nothing quite as soul-crushing as not having your expectations met. From the perspective of the customer, it means dealing with returns, waiting for a refund, and restarting the search for the right product all over again. We’ve all been there.
But there’s nothing wrong with charging premium prices. As a matter of fact, that is perhaps the best business approach ever. As long as it is paired with a premium product or service, having high prices has the magical effect of placing businesses in their own category – a place where competition is just noise.
So, how to convert to a premium pricing strategy?
There are two ways to go about a premium product. You will need either:
- money, or
Whichever you opt for, you will also need:
- a gentleman approach;
- a collaboration mindset;
- a soul uninfluenced by greed;
- and the ability to turn a deaf ear to the world.
Each business will require its very own approach to premium pricing, which is why I will not be delving in the specifics. Instead, I will share a quick review of a couple of high-cost brands that are going strong, uninterrupted by worldly events.
The best ever marketing example, let’s give it up for (drumroll):
Instead of reviewing the company’s entire history, I will start by recommending a fascinating book (Steve Jobs Biography by Walter Isaacson – https://amzn.to/2IqwseU). This amazing, beautifully written and structured book is a relatively light read which anyone can enjoy.
Let’s review Apple’s premium pricing strategy against the criteria we set above.
Jobs’ insistence on ensuring that each product released by Apple is as user-friendly as possible is legendary. Some claim he was mean; others say he was a perfectionist. Nevertheless, not a single Apple product ever touched a shelf without being thoroughly tested and polished to the best of current technological standards. In the technical aspect, what makes Apple’s product unique is the fact that hardware and software are created to work in perfect unison, giving them an unparalleled advantage. Current Apple’s CEO Tim Cook follows the same vision, albeit with a much milder management style.
A gentleman approach
Reliability is a rare quality these days, which is precisely what makes Apple’s approach so distinctive. From knowing when the next product release will drop to ensuring that you can have your device fixed by an actual in-house professional, they are the definition of a gentlemen approach in the tech world.
The desire to collaborate
“If you want to go fast, go alone. If you want to go far, go together” – says an old African proverb. For Steve Jobs himself, this translated to the collaboration with Steve Wozniak. For Apple, it was the collaboration with NVidia. Even today, you can see the brand collaborating with Nike and Hermes, Verizon, and others; names that complement the firm’s standing in this world.
Could Apple release 12 iPhone models a year and resell them practically anywhere just as its competitive brands do? Yes, of course. But they choose not to. You may like or dislike the high prices they charge, but you can’t argue that with the company’s scale and abilities they could be making and selling a hell of a lot more.
The deaf ear phenomenon
In an interview a long time ago, Steve Jobs was challenged about not being the first to release a personal computer. His answer was “They did it first, we did it right” (quote not precise – can’t find my source). In a world full of critics and opinions, the brand continuously ignores what anyone else is doing and carries on following its course without ever being bothered. Some will define it as having a vision. I say – it’s the ability to have found your true North.
Yes, you’re probably thinking. It is easy to charge premium pricing when you have the money to invest in premium products. And I agree! Let’s have a look at…
In 2017 the streetwear brand received a whopping investment of $500 million, and the world was buzzing for months. Naturally, every wannabe journalist or blogger wrote about Supreme’s overnight success. But was it overnight? Erm, hell to the no! Supreme was founded in 1994, so their “overnight” success took 23 years.
Let’s match them against our burning criteria above.
Although Supreme’s quality is mediocre at best (this is merely a personal opinion), they chose an approach that allowed them to remain unique – scarcity. In a nutshell, the concept is: the better it sells, the less we make of it. And they’ve stuck to that approach for 26 years! Let this sink it: the company has not changed its strategy in nearly three decades. And modern psychology has the audacity to claim that one should change his career every seven years. Yeah, right!
A gentleman approach
Supreme’s fans know two things for sure:
a) there’s going to be a new product drop every Thursday; and
b) the item they buy will instantly increase its value.
Regularity is key. If you can’t stick to a schedule, you can’t build trust, and this is valid everywhere in life (can you imagine an employee coming to work every now and then at whatever time he pleases?).
As for point b), value increase is the logical result of a scarce product. Ask any economist. Supreme hasn’t reinvented the wheel; they simply support the natural (in this case the natural for the economy) turn of events by not making it harder for their clients to buy in bulk and then flip the products. It’s ingeniously simple – just like every genius thing is.
The desire to collaborate
Supreme started as a New York-based streetwear brand for skaters. A few years later, the brand owner spotted a peculiar phenomenon – fashion-obsessed New Yorkers enjoyed mixing a simple Supreme tee with high-end brands such as Luis Vuitton. Naturally, a collaboration with a high-end label would take time, so they started smaller. Their first collab was with the LA-based brand Sarcastic back in 1998.
Can you imagine the temptation to sell more of what is gone within 10 minutes from your online store? I can. And every single person I have ever worked with can imagine it, too (I’ve seen dollar signs in people’s eyes, I swear). But not Supreme. Even today, after 26 years of successful business operations, they still follow their strategy, and you can find a T-shirt on their website for as little as $38-45.
The deaf ear phenomenon
The amount of times people have begged Supreme to re-introduce a product that’s disappeared too quickly is perhaps equal to the prayers said in some religions. But guess what – they never do. I guess the ability to continue ignoring your customers is as strong as quality as perseverance 😉