What is Premiumization?
Premiumization is about borrowing characteristics associated with upper class consumerism and lifestyle and attaching them to mass/lower priced brands upgrading their value and making them more desirable and distinct. It is essentially adding the effect of exclusivity as an emotional benefit to the functional benefits of mass products. On a deeper cultural level, it is about democratizing the distinctiveness of the upper class and offering the middle class the desirability and excitement of social advancement.
The Importance Premiumization in China
Premiumization in China is now more important than ever before. With the growing middle class and increased consumer spending as well as heightened health awareness and growing concerns over food safety and pollution levels, the concept of ‘premiumness’ has continued to evolve and brands are now realizing how critical this is to their marketing strategy. We have witnessed the emergence of super premium, future thinking brands over the last two decades like Grey Goose and Red Bull, but as more brands look for new ways in which to add value and premiumize their offers, being able to express these meanings more clearly and trigger stronger consumer desire is still a big challenge and requires a well-thought out strategy.
In China a number of well-established brands have started to lose their premium position due to selective channels as well as the growing importance of ecommerce which has fragmented their premium offer. Others are now regaining ground on their competitors by reacting better and executing a smarter marketing strategy. To make a real difference in China, marketers will need to better understand how to create that ‘specialness’ inherent in a brand’s own equity and it is ultimately the brands that really unravel the complex meaning of premiumization who will be the eventual winners.
People’s perception of premiumization differs vastly across various categories and markets. The key challenge is to better understand culture and emerging trends in order to discover what premium really means for a particular region and audience. For instance, a common problem which brands face in China is the lack of customer loyalty and there is often a wide gulf between customers’ expectations and a brand’s ability to wow and retain happy buyers. Brands simply can’t afford to fail when it comes to delivering a good experience to existing customers and a bad reputation or negative customer feedback will travel fast and impact badly on the brand.
In China where the quality of life is changing so quickly and consumers want to increasingly enjoy and showoff their new prosperity, premiumization represents a huge growth opportunity not only in the mega cities but even in 4th and 5th tier cities. Local players are also catching up in the premium segment as consumers’ growing disposable income is allowing them to enjoy premium products that were previously out of their reach. As expressions of premiumization continue to evolve, brands need to premiumise their offer in the right way. By understanding what premiumization really means to Chinese consumers – creating something more emotional and attractive rather than just offering products at higher price range or promoting a better brand image – then brands can seize fresh opportunities to create new product segments and ultimately increase consumer demand. Both new and established brands are bringing more excitement and raising marketing spend which is helping to attract more consumers into the market. Premium brands must also differentiate themselves from their competitors both in terms of the product itself and the advertising and packaging that promote it. Ultimately brands must deliver on the practical and emotional benefits they promise to consumers and should promote themselves in a unique way that captures the hearts and minds of consumers. Consumers are now in the driver’s seat – increased purchasing power gives them a wider variety of products so brands need to stay ahead otherwise they will eventually lose out in a market they once controlled.
For a premium brand to stand out, the types of visual codes and ideas that communicate ‘premiumness’ are essential components. If a brand promise and the overall experience don’t match and the more basic elements don’t work then something is clearly wrong. Companies like Uber have managed to establish itself in the premium category despite well-documented problems and having to lower prices in markets like China. Future thinking brands like Nespresso are leading the way and consistently delivering both a quality product as well as a great consumer experience. It is imperative that brands provide consumers with a holistic experience across all touchpoints whilst still maintaining a high sense of quality, ultimately going far beyond retail and touching people’s lives by creating an amazing, emotional experience. Consumers are becoming less trusting and interested in a particular brand per se but are instead seeking something which ignites emotion and touches them in new ways.
If brands can develop a true understanding of what premiumization means they will be able to effectively take things to a new level, communicating desire through new and unique expressions that really resonate with consumers.
Cultural strategy plays a key role in this respect. The ability to understand wider cultural issues that impact public opinion and consumer perception is vital to having more effective brand communications. Semiotics is a highly specialized area that helps brands resonate with consumers more effectively in new ways. Qualitative and quantitative research can provide one point of view but when combined with a semiotics-based methodology this will have a much more powerful impact. Instead of solely looking at the consumer perspective, semiotics examines everything in culture and what might impact the brand perception helping to maintain and cultivate unique brand equity across different cultural contexts, tap into deeper cultural expectations and better react to socio-economic developments around them.
- Firstly, discover the definitional and emergent cultural trends around premiumization
- Secondly, deep dive into branding communications to identify emergent communications trends (codes) that correspond to the broader cultural trends proving their freshness and cultural dynamism
- Thirdly, discover new ways to premiumize that are clear, relevant and differentiating helping your brand to stand out from the crowd
- Understand how your brand value proposition relates to specific premiumization trends and culture
- Refine the brand positioning accordingly
- Brand leaders and marketers need to especially focus on how to incite pleasure and happiness through very unique and individual future expressions
- Premiumization should come from the heart. Find new ways to build on this and increase the ‘special’ appeal of your brand
- Increase desire, creating a new future, language and product that differentiates you from the crowd
- Add new meaning and create value but in an authentic way that displays the real, honest appeal of your brand
- Create a specific brand expression ‘tool kit’ to help inform future briefs and marketing initiatives
Premiumization will continue to be a key growth area in China and brands which tap into this rather than solely relying on the instincts of their creative agencies and partners will benefit in the long-term by discovering new innovative solutions that contribute to more sustainable growth. The ideas and perceptions of premiumness continue to evolve and brands must think outside the box in order to differentiate and create a more emergent future focused brand definition. By creating premium experiences that anticipate evolving consumer expectations and new technologies, across multiple touchpoints including retail design, product innovation and content, forward thinking brands will ultimately win in China.
Written by Panos Dimitropoulos, Account Director of Cultural Insight, and Sam Woollard, Client Development Director, with support from the Added Value China team.
Image source: Thinkstock