In order to price your product with what your market is willing to pay, you’ll want to consider what it costs you to provide your products and services, plus all the other costs of doing business that come along with it. Learn what your competitors are charging for similar services or products. Pay attention to how your product or service is priced in other marketplaces as well, and learn about who makes those purchases. Having this information will help you determine if you should do premium, penetration, or economy pricing.
With this strategy, you keep your price artificially high so you can promote an image of having a premium product. This is one way that some luxury companies try to differentiate themselves from the competition. While this strategy can make your brand seem more valuable, you risk alienating customers and driving them to your competitors. What you gain in brand perception, you lose in market share. For example, Porsche sells its Cayenne sports car starting at roughly $67,000, but Porsche itself only has less than 1% of the entire share of the automobile market.