Distribution: One of the most glaring differences between ultra premium and accessible premium products is where the products are sold. Unlike luxuries, which are hard to find by the majority of consumers, accessible premium products are widely distributed. For example, Fiji water, although priced about twice that of other bottled waters, is available at your local convenience store. And Rock & Republic jeans, which come with a price point well above Levi’s, are sold in college towns not just big cities.
Marketing: The marketing of accessible premium products is probably the biggest departure from how ultra premium products are introduced. Where the reputation of ultra premium is earned largely on product quality or performance over decades, successful accessible premium products are typically backed by large marketing efforts, and they can become instant successes. Belevedere vodka was on the market before Grey Goose, but Grey Goose obtained share faster on the back of a lot of marketing.
There are five common marketing strategies employed by accessible premium products:
1. Packaging. For many accessible premium products, unique packaging forms a basis for differentiation and a heightened customer experience. Fiji water comes in a square-ish bottle. Coach handbags are meticulous wrapped and presented to the customer in an expensive bag.
2. Back story. A well documented history of the brand or product, replete with stories of the founder and his or her original production facility is often associated with accessible premium products. It helps if the product is imported (Grey Goose is from France). In order to demonstrate the truthfulness of the statements and set the tone of the story of the brand history, many accessible premium brands have produced “promotumentaries” that play not only on the brand’s website but on mainstream television as well. Patron tequila has done a great job with its back story.
3. Unique production process and nomenclature. In keeping with a deep history of the product, the uniqueness of the production process itself and corresponding unique nomenclature is often employed as a marketing weapon. Starbucks in a way started this trend en masse by altering the normal roasting process and then providing customers non-standard names for serving sizes.
4. Celebrity endorsement. Celebrities seen using or carrying an accessible premium product is a common tactic for these brands. Whereas ultra premium products are often purchased by very wealthy but relatively obscure individuals, the difference between a successful and unsuccessful accessible premium product can be whether it catches on with celebrities. Fiji water and Coach handbags owe some of their success to celebrities and the magazines that publish photos of celebs and their stuff.
5. Niche events. It almost seems like a competition between accessible premium brands to find sports/parties/events to sponsor that strike a balance between appealing-to-most-consumers and niche. Grey Goose is associated with sailing. Rock & Republic sponsors industry events in Los Angeles. But in both cases the proceedings are also either promoted on network television or reported on in the mainstream press.
As a marketer, it can be very difficult to differentiate a product in a commoditizing space. But the big accessible premiumization win is in profit. Although the price may double, the cost to produce and sell an accessible premium product does not scale proportionately, and so the margins tend to be about 50-per-cent higher for these brands. Sidney Frank, the creator of Grey Goose vodka, sold his brand to Bacardi in 2004, just seven years after its inception, for $2 billion in cash. At the time it was the largest single brand sale. Frank’s estimated profit: $1.6 billion.
A carefully designed combination of product, price point, distribution channel and marketing tactics form the fabric of a premiumization opportunity, which I will discuss in detail in my next column.
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.