In the last column I followed up a piece on the fundamentals of accessible premiumization with one on how to spot and act on an opportunity for a new accessible premium product or brand. I received a number of e-mails pointing to brands not mentioned, such as Sub Zero and Viking appliances, and Rolex watches.
These brands don’t really meet all the criteria of accessible premiumization. It is the accessible bit where they fall down – they are true premium brands. Sub Zero and Viking appliances are not available through mainstream distribution, unlike Fiji bottled water, which can be purchased at conventional grocery and convenience stores, even though it is twice the price point of its average competitor. Rolex also distributes more exclusively than, say, Tag Heuer, and its price points are far higher than double the category average.
Accessible premium product opportunities – or affordable luxury opportunities, as some refer to them – can be spotted and capitalized on by answering the following questions:
• Is the category in question more-or-less commoditized?
• Is the category missing an accessible premium brand?
• Is there sufficient demand for an offering at about twice the price point of the average priced product in the category?
• Is mass distribution available?
• Does the brand under consideration have a legitimate back story, and does it boast a product that can defensibly be said to be of higher quality than competitors in the category?
One aspect of accessible premiumization we have not discussed is the customer make-up of these brands. Who are the customers of affordable luxury products? How do we find them and market to them?
Boston Consulting Group (BCG) has done a lot of work on the concept of trading up and down in adjacent categories – where a consumer will splurge on a product in one category while saving money in another. One interpretation is that different consumers will choose to “trade up” in different categories, and that would mean a Fiji water customer is not necessarily a Starbucks customer, and a Coach customer is not the same as one who buys Godiva Chocolatier.
Each category has its own accessible premium product customers.
So are there any commonalities? At a fundamental level, yes. Customers of any accessible premium brand believe they are getting benefits – rational or emotional – in excess of those of average-priced products in the same category.
Examples of rational benefits:
• Functional superiority.
• Technical superiority.
• Higher durability.
Examples of emotional benefits:
• Good works.
• Self empowerment.
Does Grey Goose vodka provide rational or emotional benefits beyond those of other lower-priced vodka brands? It would be hard to argue a rational benefit. But Grey Goose does convey status, and it can provide certain consumers with a sense of empowerment.
With most accessible premium products, the brands play to the emotional benefits. So how do we identify and target the potential customers of a new accessible premium brand, assuming we have identified a category opportunity and we are attempting to elevate a little known brand?
There are four steps to identifying and targeting accessible premium brand customers:
1. Map the current market for the product. Who are the buyers of the brand or product right now?
A thorough segmentation is required, likely focusing more on psychographics and needs than on demographics, although disposable income levels may prove important, given the price point that might be pursued. The segmentation will uncover pockets of potential customers for an accessible premium offering by highlighting those customers whose rational, or more likely emotional, needs are presently unmet in the category – and who are willing to “trade up.”
2. Map the current rational and emotional benefits the product provides. What real and perceived benefits does the customer obtain from the product?
A gap analysis is probably the right methodology here. Start by interviewing the managers and producers of the product or brand to be elevated, looking for the tangible benefits. Then survey, interview or focus-group customers and potential customers (category enthusiasts), seeking to understand the emotional benefits received or potentially received from the brand. A matching analysis, tangible to emotional, will reveal missing pieces in the offering, and potential holes in the marketing story.
3. Determine what else the brand or product could provide, looking for upside that will justify the brand elevation and price increase.
A look at adjacent product categories may yield ideas for additional benefits. Studying a category with a true luxury segment, and determining the additional benefits that the luxury component provides, along with the functional or rational benefits that support the emotional benefits, could prove beneficial.
4. Put all of these data points together to isolate the high-potential segments of customers looking for more from a product or brand in the category, and to focus on the existing emotional benefits supported by rational benefits, which can be amplified through product improvement and marketing.
The brand and product have to ultimately promise and then deliver on expectations of a superior rational or emotional experience for the customer. Only by sizing the promising segments (in population and revenue), projecting market penetration (based on market research) and running pro-forma calculations (expected revenue along with cost increases necessary to elevate and market the brand or product) can potential profitability be arrived at.
This final analysis will give you a good idea of whether you have an affordable luxury hit on your hands.
Special to The Globe and Mail
Mark Healy, P.Eng, MBA, is a partner at Satov Consultants – a management consultancy with practice areas in corporate strategy, customer strategy and operations strategy. Mark’s focus areas inside the customer strategy practice include consumer insights, customer experience, innovation and go-to-market strategy. He is a regular speaker and media contributor on topics ranging from marketing to strategy, in telecom, retail and other sectors. Mark is known as much for his penchant for loud socks and a healthy NFL football obsession as he is for his commitment to Ivey and recent Ivey grads. He currently serves as chair of the Ivey Alumni Association board of directors. Mark lives with his wife Charlotte and their bulldog McDuff in Toronto.