I was out for a few drinks with some colleagues on the weekend. One of these gentlemen is a martini guy. It is his drink. And when he orders it, as he did that night, he always asks for Grey Goose vodka.
He insists he can taste the difference. Maybe he can.
I always have the same three thoughts when we reach the Grey Goose juncture:
1. It doesn’t really matter whether the vodka is “better” or not – his perception is that it is.
2. Although he considers this brand special, it is available almost everywhere, from chic clubs to neighbourhood bars.
3. The extra cost might be a slight stretch in relative terms, but it isn’t enough to give him pause or embarrass anyone around him.
Grey Goose vodka is a great example of an emerging marketing trend I call accessible premiumization. A premium product, in a more-or-less commoditized category, priced and distributed such that it is a clear step up from other brands in the category, yet available to the masses.
Starbucks may not have been the first accessible premium brand, but it was among the early entrants, with a unique language and higher price points. By design in some cases, and by accident in others, Starbucks created an accessible premiumization blueprint for brands in other categories. Think Fiji in bottled water and Coach in handbags. The fundamentals of accessible premiumization are fascinating.
In order to better define accessible premiumization, we need a reference point. Let’s use ultra premium consumer products, which are a notch above accessible premium products, as our measuring stick.
The ingredients of ultra premium
Ultra premium products tend to be pure luxuries. For calibration, I am referring to cars such as Ferraris and jewellery such as Fabergé eggs.
When you dig into what makes a product ultra premium, some patterns emerge:
Product: The first pattern is that there is zero question about either product quality or design authenticity. These products are a clear step above others in the same category. They are typically hand-crafted and boast a legitimate and well-earned history of excellence. Best-in-class is a label often used here.
Price: For ultra premium products, pricing is typically not measured as a percentage increase over the average in the category, it is a high multiple of a standard product in the category. Staying with Ferrari, the price point of the brand is five to 10 times the price of a car driven by a typical consumer.
Distribution: Ultra premium products are not widely distributed as their target segment is so small. Sales are by order only or dealers and retailers will have a footprint of 10 per cent or less of those of national brands. There are five Ferrari dealers in Canada. Mazda, by contrast, has 168.
Marketing: Conventional marketing tends to be far less important for ultra premium goods than for more mainstream products. Simply showcasing the product can be enough for some brands. For others, it means promoting hyper-exclusive parties (attended not by celebrities but by insiders and influencers), or promoting obscure events not meant to create a public splash. When was the last time you saw a Ferrari TV ad?
The fundamentals of accessible premiumization
Compared with luxuries, accessible premium products are a marketing construct as much as an actual improvement over other offerings in the same category. For example, unlike Ferrari, which is arguably a very different car (unique engine design and placement) and therefore a step change in product design and quality versus convention, Fiji Natural Artesian Water is simply water in a plastic bottle, only of elevated quality measured against other water-in-a-plastic-bottle offerings.
When you dig into the elements of accessible premium products, some different patterns are clear:
Product: It is about “evolution not revolution.” Accessible premium products tend to be measurably better but not fundamentally different from their competitors. Grey Goose vodka is quantifiably better than its competitors (more involved distillation process, wins taste tests), but it is still vodka.
Price: Price plays a very important role in signalling the premium nature of the offering, while also ensuring the product remains accessible to a sizable consumer segment. Research shows that accessible premium products are almost always in the range of two times higher in price versus the average priced product in the category. For example, when Starbucks introduced $4 lattes, “normal” coffee shops were charging $2 for a similar product. A more current example is Coach, which has handbags that retail for about twice what a comparable product would sell for at a national retailer in the same mall.