What Makes a Brand Premium?

STRETTO / FALL 2019 What Makes a Brand Premium?

Article by Doug Briley

Like most people, I like nice things. I’ll confess I spend more on my personal wardrobe than many men, and I’m a guy who will spend money on clothes that last and wear them for years instead of cheap stuff I’m constantly replacing. This is my approach when it comes to my personal wardrobe habits, but how does this notion scale for a consumer just like me when it comes to buying groceries? Or a vacation destination? Or a car? Or even family healthcare?

Think of this concept invert- bigwigs who too narrowly focus on ued perspective, especially if con- ed: How does this idea apply to the short-term results. I’ve observed sidered alongside the abundance of other guy who spends as little as brands who move units quickly with consumer and profile data available possible on his wardrobe so he has deep discounts, hitting volume or to us today. Might this concept be disposable income for other prior- revenue goals this year, but in the a scalable way to evaluate a brand’s ities? There may be more going on long-term they discount the prod- “premium-ness”, regardless of the here than Mosaic profiles and sim- uct and give it away to consumers brand’s category? This neglected ple segmentation. A careful review who will never pay full price. approach can pave the way for col- of consumer tradeoffs and premi- I get it. We don’t want to restrict orful, outside-the-category ideas ums may be a perspective too often our sales only to the consumers for innovation and consumer ap- overlooked. who can easily afford us. We want peal. to sell to anyone who will buy now, ROOM FOR A NEW PERSPECTIVE thinking to ourselves try, learn, DATA ANOMALIES THAT LEAD TO Many marketers operate in a and optimize. What is often over- OPPORTUNITY space where we support premium looked, however, is the depth of the After poring over more than brands, but too many times we be- financial tradeoffs that we’re asking a decade’s worth of brand data on come distracted by selling those those consumers en masse to make thousands of brands, we acknowl- products or services to anyone who in order to trade up for our premi- edge that data supports what we will buy—even people who aren’t the um brand. already assumed to be true about target. We live under the pressure of Measuring the depth of those premium brands: people with lots making growth happen, but some- consumer tradeoffs relative to cat- of money buy nice things. Whether times the business goals are set by egory norms provides an under-val- you’re talking hand bags or trash

bags, restaurants or retail, it’s easy WHAT “PREMIUM” REALLY MEANS or exceeds those consumer expec- to recognize the pattern that the Ultimately, premium brands tations for a sustained period, the nicest, most expensive brands are prompt consumers to make brand generates premium equity. favored by consumers with the high- tradeoffs—consciously or uncon- est household income. But break- sciously—in order to obtain or ex- THE WORK OF BUILDING PREMI- through ideas are rarely borne from perience said brand. As an example, predictable and expected patterns, the Lucchese boots I bought de- UM EQUITY so looking deeper becomes essen- cades ago caused me to make some Caution: don’t underestimate tial if we want to discover some- rather deep-at-the-time financial the complexity of what it takes to thing novel. tradeoffs: they were the most expen- build premium equity. The com- What’s more intriguing to us sive shoes I had ever purchased. At ponents that create it don’t come in the same data, though less obvi- that stage of my career, buying such quickly or easily. If you’re an estab- ous, are the fewer instances when expensive boots was rationalized by lished brand, your premium equity wealthy people opt for the less ex- the years of wear I knew I’d get out is likely the result of years of doing pensive, or when average income of them. The emotional component things the right way, making hard people make deep tradeoffs to was met because of style and aes- choices, even failing from time to purchase really pricey things. Now thetic satisfaction. The boots met time. You’ve probably refused to the conversation becomes even my expectations, and I still wear compromise on quality when com- more fascinating, especially since them. petitors succumbed to lowering there are a whole lot more aver- But what makes a brand pre- their standards. You’ve also en- age-income people than there are mium and ultimately proves its dured the challenge of holding fast excessively wealthy ones. What is “premium-ness” is its ability to to your brand values and taking dif- it about these brands that are able command a price higher than its ficult stances during price wars. to inspire consumers to say “no” to competitors over time. Let’s call If you’re a new or startup brand, some things so they can say “yes” that ability a brand’s “premium eq- and you’re committed to being pre- to a brand that’s slightly or greatly uity,” which Lucchese maintains. mium, you’ll have to “act your age.” out of financial reach? These are Their premium equity is confirmed By this I mean you’ll need to behave the nooks and crannies where op- by the fact that years later I bought like an established brand when it portunity lies for brands to up sell a pair of the same brand for my son, comes to quality, brand standards, consumers on premium choices— and they were still just as expensive and pricing. New technology and especially brands in the top tier and or more than the first pair. We can your ability to adapt quickly could middle of the pack. Even brands all agree that putting a high price be a distinct advantage for you whose sales have plateaued can cap- on a low-quality product won’t if used strategically, especially if italize on the non-obvious anoma- build success, so it stands to reason you’re competing in a mature cate- lies and turn them into possibilities that price alone won’t make a brand gory. or innovations. However, discov- premium. It has to include so much Whether you’re an established eries may require looking beyond more: the brand experience, pack- brand or an emerging one, your ap- one’s own category. aging, quality, customer service, peal as a premium brand will need and all the expectations that a high to command two things: keeping price point sets. If the brand meets your price appropriately north of

Copyright © 2019 Warren Douglas Advertising. All Rights Reserved. A brand’s “premium-ness” is more accurately and quantifiably measured by the premium behavior— not income alone—of the consumers who buy it.

your competition, and voraciously its explosive growth in units and the brand. Marketers have to de- reinforcing (maybe even reinvent- household penetration actually cide what’s more important: al- ing) your credibility in the minds lowered its premium status some- luring growth that may open the of consumers. The two must go what. door to brand erosion, or careful, hand in hand. Premium credibility But Porsche has maintained a controlled growth that upholds a is constantly at risk of erosion, and distinctly luxury, high-performance premium standard and maintains the erosion can happen quickly. brand in ways, they believe, will premium equity. But after analyz- help them extend the brand “to rep- ing decades of data, we observe that WHEN BECOMING LESS PREMI- resent the sportiest and most exclu- premium brands fundamentally sive cars in every sector,” according and consistently do two things: UM IS THE RIGHT THING to Bernhard Maier, a Porsche Sales Here in Texas, we sometimes & Marketing executive.1 What’s 1. They charge an appropriate- see agriculture and ranching in- at risk for Porsche, according to a ly premium price relative to stances in which using a controlled Business Insider article a few years other brands in the category. burn becomes necessary to make later, is becoming known as an SUV 2. They demonstrate their the land healthier. It’s a fascinating manufacturer that also produces a brand’s ability over time to and frightening event that takes few sports car models rather than consistently command that careful calculations, anticipation the premier sports car brand that premium price. of environmental conditions like also makes SUVs.2 Two other pre- weather and wind, and well-guard- mium brands that have done this Measuring a brand’s “premi- ed borders. For premium brands, well are Mont Blanc pens and Tumi um-ness”, however, requires an un- growth planning should induce the luggage. Both brands have extend- conventional perspective like the same sense of fear and respect as a ed their brand offerings into other one discussed earlier—measuring controlled burn. Becoming more categories (apparel and accessories) the tradeoffs consumers make to widely accessible will naturally re- but have done it in careful ways that purchase. A brand’s “premium-ness” sult in a somewhat less premium have been controlled within the is more accurately and quantifiably status, but marketers should care- same retail experience and brand measured by the premium behav- fully anticipate what can go wrong standards. It’s obvious every morn- ior—not income alone—of the con- and manage the clearly defined ing, too, in the Starbucks line as sumers who buy it. So in the end, boundaries with vigilance and people wait impatiently for their $5 what you claim about your brand brand mission. cup of 50-cent coffee. doesn’t matter. What matters is Many luxury brands have done whether or not consumers believe it this well in recent years. For exam- THE COMPLEXITY OF MEASUR- enough to pay more for it.  ple, Porsche used to be so elite and inaccessible in the automobile cat- ING “PREMIUM-NESS” My final thought seems overt- egory that its small amount of con- 1. Maier, Bernhard. (2014, September 10) The Right Prod- sumer data registered as hyper-lux- ly simple but is actually massive- uct at the Right Time [Web log post]. Retrieved Novem- ber 12, 2019 from https://newsroom.porsche.com/en/ ury in much of our analysis. Data ly complex: the factors that make products/the-right-product-at-the-right-time-10759.html a brand premium are the choices 2. Zhang, Benjamin. (2016, March 19) Porsche is Living shows that as the brand expanded Dangerously by Focusing on its SUVs [Web log post]. made by the people who steward Retrieved November 12, 2019 from https://www.busi- into the SUV and sedan categories, nessinsider.com/porsche-suv-sales-game-2016-3