In a recent video titled "When Should You Charge More Than Your Competitors" from the "AI, SaaS & Agentic Pricing with Monetizely" channel, pricing strategy expert Akhil provides valuable insights on premium pricing for SaaS products. The video tackles one of the most persistent questions that SaaS executives struggle with: whether they should price their offerings higher than competitors.
The Premium Pricing Dilemma
"Should I charge a premium over my competitors?" This question keeps many SaaS leaders up at night. As Akhil clearly states in the video, "The answer is not as simple as yes or no. Pricing cannot be set without positioning being clearly thought through."
This fundamental insight establishes the critical relationship between positioning and pricing. Your ability to command premium prices isn't arbitrary—it's directly tied to how effectively you've positioned your solution in your buyers' minds.
Three Key Justifications for Premium Pricing
According to Akhil, there are three essential elements that can justify charging more than your competitors:
1. Quality Differentiation
"Does your product demonstrably outperform competitors in reliability, performance, or outcomes? If customers perceive superior quality, they'll often pay more."
Quality isn't just about having a better product on paper—it's about demonstrable performance advantages that customers can recognize and value. This perceived quality difference creates a willingness to pay premium prices, as buyers associate higher costs with better results.
2. Feature Differentiation
"Do you offer unique capabilities that solve critical pain points your competitors don't address? These differentiators must deliver tangible value and not just be nice-to-have bells and whistles."
This point emphasizes that premium pricing requires substantive differentiation. Features that genuinely solve problems in ways competitors can't will support higher pricing, while superficial differences won't. Customers are willing to pay more for solutions that address their specific pain points in unique ways.
3. Brand Strength
"Have you built a reputation for excellence that reduces perceived risk? Strong brands can command price premiums because they represent consistency and reliability."
Brand reputation acts as an implicit guarantee that reduces the buyer's perceived risk. When customers trust your brand, they're often willing to pay more for the peace of mind and confidence that comes with choosing an established, reputable provider.
How Market Type Influences Pricing Power
The video also highlights how different market types affect your ability to charge premium prices:
Blue Ocean Markets
In markets with limited direct competition, you have greater flexibility to set prices based on value delivery rather than competitive benchmarks. These environments provide the most freedom for premium pricing strategies.
Monopolistic Markets
"In a monopolistic market dominated by established players, pricing is often anchored to what the dominant player charges. Here, your premium must be explicitly justified against that anchor."
When a dominant player has set market expectations, your premium pricing must be clearly justified in relation to that established price point. Customers will naturally compare your higher price to the market leader's offering.
Renaissance Markets
"In a Renaissance market with many emerging players with no clear leader, pricing agility becomes more important than fixed premium positioning."
In fragmented markets with numerous competitors but no established leader, flexibility in pricing may be more strategic than rigid premium positioning. These dynamic environments require adaptive pricing approaches.
Strategic Priorities: Market Share vs. Margins
Your pricing strategy ultimately reflects your business priorities:
"Are you optimizing for market share, which might suggest competitive or even below-market pricing? Or are you focusing on margin optimization, where premium pricing makes more sense?"
This question frames premium pricing as a strategic choice aligned with specific business objectives, not just a tactical decision. Companies pursuing rapid growth and market share might choose competitive pricing, while those focused on profitability may lean toward premium approaches.
The Premium Promise
Akhil offers an important caution: "Premium pricing signals premium quality. If you charge more, customers will expect more. In product performance, customer service, and overall experience, you must be prepared to deliver on these heightened expectations."
This insight highlights that premium pricing creates a promise to your customers—one that must be fulfilled through superior product quality, exceptional service, and an outstanding overall customer experience.
Real-World Applications
The video references case studies from Akhil's book, "Price to Scale," mentioning how companies like DocuSign, GitLab, and Pushpay have successfully positioned themselves to justify premium pricing strategies.
The Bottom Line
"Charging a premium is not about arbitrary pricing increases. It's about aligning your pricing with the unique value you deliver to your customers. When your differentiation is clear and your positioning is strong, premium pricing becomes not just possible but profitable."
This closing insight encapsulates the essence of strategic premium pricing—it must be earned through clear differentiation and strong positioning that communicates unique value to customers.
Premium pricing isn't simply about charging more; it's about creating, delivering, and communicating value in ways that justify higher prices. When done right, it becomes a reflection of your product's true worth in the market and a driver of sustainable profitability.