First published by Contagious
Europe has been struggling and so too
has the consumer. As wages have stagnated and the cost of living
has risen, people now approach retail with a different state of
They want to buy less but they want to
make sure that what they do buy is better. The result has been the
rise of premium in most unexpected places, notably the grocery
sector. But as with anything new, the arrival of premium into the
mainstream-shopping basket has also created misconceptions about
what it is and what it delivers for brands.
With strong competition and reduced
consumer purchasing power, all brands want to differentiate
themselves by offering the consumer a better experience. But the
desire to become premium is no substitute for understanding of the
evolution of this important sector.
Our Go Premium research study
highlighted five key misconceptions around what premium is and what
consumers want from it.
Misconception #1: Premium is
for wealthier consumers
Perhaps the most common misconception is that premium is a label
that only attracts the wealthier consumers. In fact our
representative panel of more than 600 18-65-year-olds found just
three percentage points difference between the upper and the lower
class consumer groups when it came to buying premium products.
The gap increased as the goods in
question became more expensive for richer groups. Thus upper class
were more likely to buy automotive but in sectors such as high-tech
goods and food, the gap was just three points.
Misconception #2: Premium is
not a volume strategy
Misconception number two is that premium is not a volume strategy.
This is ironic when 90% of our panel's premium goods were purchased
at supermarkets. Even high-end brands such as
Fauchon, France's famous delicatessen brand, are
now sold in supermarkets.
The fact that Fauchon is sold in
supermarkets does not affect the brand's image, as it came out as
the No. 2 premium brand for the French, right after
Misconception #3: Premium brands should never talk about
The third misconception about premium brands is that they should
never talk about price. That's mistaking Luxury for Premium. While
luxury is always silent (if you need to ask you shouldn't be here),
premium can shout about their price because value is what drives
In fact, the price was mentioned as a
key motivator by 55% of our panel. You can discount premium
products because the most important factor is the value that
consumers assign to your brand (and that's defined by them).
Misconception #4: Premium
extensions are the answer to a shrinking market
The fourth misconception is that launching premium extensions are
the answer to a shrinking market. That's not the case because as
we've seen premium purchasers are seeking to buy less but better
quality. That's reflected in the size of our panel's shopping
baskets in recent years. 30% had shrunk their average spend over
the last three years while just 18% had increased
Misconception #5: Premium has
to be unique
The final misconception is that premium has to be unique. Once
again that's confusing luxury and premium. The definition of
premium is strictly in the mind of the consumer and thus there are
many premiums and it varies by sector.
Premium goods in one sector are not
bought for the same reasons on another market, so while 68% of
premium automobile purchases felt that their brand choice allowed
them to show off their originality, this was only the case for 48%
of premium grocery consumers.
What brands are faced with is a
radical repositioning of premium. The old definition that defined
premium on price is no longer relevant. Today quality perceptions
are superior to all other factors in defining this sector means in
the last few years.
Brands that don't want to survive on
the wafer thin margins at the low cost end of the market (in all
sectors) need to ensure that their brand is seen to deliver value
Premium status can be earned by added
value, ownership of a key emotional territory or buy in from a
particular target group.
Thus Evian has
secured its premium position in France via actions such delivering
Evian products to mothers in maternity wards.
Heineken has ensured
that it, too, is perceived as premium - despite being the top beer
by value and volume in France - by targeting niche trendsetting
groups and creating exclusive content for them.
Premium status can also be earned well
beyond the point of purchase, via added value that becomes an
essential service. Nike's running tools are a
perfect example of this.
Premium is not a market, it is a
position on the market and smart brands will be seeking to
differentiate themselves by demonstrating value to their target
First published by Contagious, 8th April