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Five misconceptions about premium

Premium isn't what you think it is. New research in France demonstrates how brands can profit from fresh thinking and create meaningful differentiation. MediaCom France's Julien Fere, head of strategy and Melanie Rauscher, consumer insight lead, explain.

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 mind.

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 Nespresso.

Misconception #3: Premium brands should never talk about price
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 purchase.

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 yearswhile just 18% had increased it.

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 to consumers.

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 groups.

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