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The Power Of Premium Products

When the subject of premium products comes up most people think they only relate to exclusive product sectors and top end businesses but that’s not the case.

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Premium products can be found in all  types of businesses.

Now in some instances they may be dressed up with exclusive sounding titles such as “Platinum service”,” Gold Standard” “Premier Club” etc but the fact is that premium products can be found in the most everyday sorts of businesses but they can have a remarkable impact on sales and more importantly on margin. The great thing is they often entail no extra effort.

So what is a premium product?

Quite simply it is your standard product which you’ve added value to in some way. It may be that the packaging and presentation of the product has been upgraded, you may have upgraded the functionality in some way or perhaps it has more high quality ingredients in it.

A good example of premium products is currently being demonstrated by the supermarkets. They all have premium ranges these days. Sainsbury’s call it “Taste The Difference”, Tesco call their range “Finest” while Asda call their’s “Extra Special”.

Or take a typical restaurant. Everybody has a specials menu and the items on the specials menu are always more expensive. The ingredients may be a bit more fancy but the price will be a lot more fancy.

Now I can’t claim to know the figures but while the cost price will be a little bit more, the margin will be significantly higher than on the standard dishes.

Now considering that we’ve been going through tough economic times for the last few years, you might think that there is no place for premium products.

But you’d be wrong.

The fact is that something like 20% of consumers will regularly pay more for what they perceive to be a superior product. All you have to do is work out how you can add value to and upgrade your standard product so that you can offer it as a premium product.

A little while back I was working with a removals company.

Now you might think that there’s no scope for a premium product in the removals business but there is. We created the “Reassurance Plus” product by using more robust packing cases, by having a more comprehensive insurance plan and by enhancing the unpacking service in the new house. The price of “Reassurance Plus” is around 26% more than the standard product and the margin nearly  40% more. And yes somewhere in the region of 20% of customers take it up.

My wife is a chiropractor. Chiropractors have recently twigged that they can charge more for appointments at certain times of the day. Early morning, lunch time and in the evening are outside of the standard opening hours but are more convenient for people who work during the day. While the service is exactly the same, a premium price can be charged for these times of day.

The other thing about premium products is that it’s not a hard sell. You simply make the customer aware that you have a premium product and the difference between it and the standard product and then leave them to choose.

Another useful technique is to create three levels of service –  gold, silver and bronze versions of your product. The thing here is to make sure that your existing product is the bronze level. Human nature being what it is the majority of people when faced with a choice between three options will go for the middle or silver option. So if your existing product is the bronze level you will get a massive uplift as the majority opt for the silver version and a few will actually go the whole way and buy the gold version.

So look closely at your own business and decide how you can add value to your product or service and offer gold and silver versions.

Every time someone buys anything other than the basic version, you’re making more money. You may well be very surprised at the difference it makes to your turnover and more importantly your profit.