PREMIUM OPPORTUNITIES

NZ is an economy largely built around retail malls, mainstream shoppers and red sheds swimming in low cost products manufactured in low cost economies...

I just wanted to take a minute or two to talk about premium brands.

NZ is an economy largely built around retail malls, mainstream shoppers and red sheds swimming in low cost products manufactured in low cost economies. A typical ad break here could quite possibly show mainly discounted or 'mass' offerings. With the exception of cars, houses and some fashion lines New Zealanders are not known for over-the-top conspicuous badging or consumption. And with the worsening economy this is unlikely to change any moment soon. Having said that I'd just like to remind you all about a couple of important points:

1. There are always customers in every segment who place a premium on high quality, high fashion or high scarcity brands.

2. In a market of mass appeal, everyday brands the easiest way to stand out is to take the premium position.

3. Where you are up against large competitors or competitors who have lower costs of goods than you, it is difficult to compete in the mainstream.

4. In theory at least, premium brands deliver higher margins in dollars if not in percentages.

The premium position is often overlooked by NZ marketers as we typically are tyrannized by the appeal of big, mass market volumes and short-term sales goals. Obsession with absolute revenue and market share growth tends to lead to myopic and mainstream thinking. If you want to achieve a break-through for your organization look very closely at your market and try to identify the premium end opportunities. If you want to succeed against Chinese imports, or in the China markets, definitely look at the premium opportunities.

The following is a recent excerpt compliments of the Blake Project website on the topic of 'premium-isation'.

There are many reasons for the sudden rise of premium-isation. British consumers are time-poor and cash-rich, and, as a result, they are more comfortable paying higher prices if the exclusivity and extra value is there. On the manufacturer side, we are finally entering an era of mass maturity. Most categories, especially in food and beverages, are now established. With no apparent direction left or right into new product areas, many marketers are attempting to move up instead. Higher prices reduce significantly the need to sell in huge numbers.
 
Then there are private-labels. As British private-labels have grown in quality and popularity, they have forced brands to premiumise to find a high watermark where the rising tide of store brands won't affect them. But retailers are no dummies, they, too, have discovered the potential of premium-isation; Tesco Finest is possibly the best example of premium-isation in the UK.

A final explanation for the growth in premium-isation comes from Stanford University in California. A cross-disciplinary team there has been running a series of experiments on college students in which they are offered identical products, but told they are of differing prices. When students were asked which tasted better - one priced accessibly or a premium-priced one - most opted for the latter.

Interestingly, when the professors wired up the students to a brain scanner they observed that increases in price gave them more pleasure, even if the product itself was no different.

Like it or not, £85 burgers, luxury doggy puddings and £75 glasses of vodka are here to stay. Consumers are quickly growing accustomed to super-premium products - the age of premium-isation is upon us.

One final point. The NZ beer market has been in decline for quite some time. So what have been the outstanding successes in that time? Heineken, Stella Artois and Corona and the various specialty brews, and they are all premium priced!!!

If you'd like to know more or are interested to discuss these further please contact me or Denise on 09 5288808.