Premium brands have seen the fastest growth globally in recent years, with the pandemic speeding up a pre-existing trend. The bigger premium brands have taken the largest share of recovering markets, with new companies constantly joining the segment. For example, FMCG has seen a 21% increase in premium brands over the last 10 years4. Digitalization has lowered the entry barrier for new brands, so the competition in the premium segment is ever-increasing.
To take advantage of this trend, businesses must identify and implement the right strategies to strengthen their brands in order to maximize sales and carve out market share in the premium marketplace. This won’t be easy, though. The brands that succeed will be those that understand how to access and use data to predict, adapt and react quickly to changes in consumer values, preferences and behaviors, and meet their audiences where they are right now. But what does a robust premiumization strategy look like?
“Claiming brand premium isn’t just about redesigning a product to look higher-end, or launching upscale versions of existing ranges,” says Gonzalo Garcia Villaneuva, GfK’s Chief Marketing Officer. “The key to driving premiumization lies in gaining a deeper understanding of consumers and market forces. Consumers have been, and many still are, starved of ‘normal’ experiences due to Covid-19. With less money spent on travel and leisure activities, people have more disposable income and they’re willing to make a conscious effort to save their funds to invest in premium brands.
“These circumstances are providing impetus for the growing popularity of products and services that don’t just meet basic needs, but truly delight the customer at every touchpoint. Products that are well-crafted and designed, beautifully packaged, or that simply spark joy, will be the winners. The challenge for brands is to find out what motivates their customers to spend more and pinpoint what really matters to them in terms of values, aspirations and personal identity.”
Brands that successfully drive premium can completely transform a category. Dyson is a great example. The company spotted opportunities in several new markets to launch a premium vacuum cleaner – and Dyson products now account for an impressive 40% of vacuum cleaner brand revenues in these markets.
Which levers must brands focus on to achieve and maintain this kind of status in an increasingly competitive environment? To begin with, high quality products that delight the customer with superior quality and functionality are essential. To claim a premium, brands need to deliver true excellence through design, innovation or outstanding customer experience. Their products should be market leaders and seen as ‘best-in-class’ within their own category.
As Madalina Carstea says: “It’s absolutely essential that the product or service delivers the best quality. Consumers are smart and they will see through any gaps in your brand offer. However, where they can clearly see the excellence of your products and services, they’ll pay a premium. This can only be achieved through a dual ‘brand and product’ or product innovation strategy.”
Brands should also seek to exceed consumer expectations whilst promoting their uniqueness by differentiating themselves from competitor brands at every touchpoint – from the finer details of key messaging and packaging design, to multi-channel marketing campaigns and personalized communications.
Brand differentiation is inextricably linked to emotional benefits, so every customer interaction should clearly reflect and showcase the brand’s persona, purpose and values to resonate successfully with the target audience.
Madalina Carstea explains: “Brand purpose and brand values – as in supporting the right causes – do matter to consumers, or more accurately, they are starting to matter. But the importance consumers place on brand purpose really depends on how involved customers are with a category, and their spending power.”