Price premium, or relative price, is the percentage by which your selling price exceeds (or falls short of) a reference price. Sellers monitor price premiums as early indicators of changes in competitive pricing strategies. Changes in price premiums can also be signs of product shortages, excess inventories or other changes in supply/demand relationships.
Price Premium: The percentage by which the price charged for a specified brand exceeds (or falls short of) an established reference price for a similar product or basket of products. The price premium is also known as relative price.
The general formula for price premium is as follows:
Price Premium= Your brand's price - Competitor's price (benchmark price) / Competitor's price (benchmark price) x 100.
Example:
Cost of your product or service: $100.
Competitor Cost: $90.
The price premium percentage is: ($100 - $90)/ $90 = .11 = .11 x 100 = 11%.
In this example your product has a premium of 11%.
The Sales Glossary is a compendium of all the most commonly used terminology in sales strategy. Many of the concepts listed here are used when implementing a CRM system or a digital sales funnel, no matter if they are legacy systems or an online CRM. See also our blog that deals with sales techniques, marketing and sales culture.