Understanding the Evolving World of Premium
It’s Friday night. You’ve left work on time and you’re headed to the supermarket to pick up dinner. It’s been a long week and it’s time to treat yourself. First, you head up the chilled aisle to pick a pizza and you decide on the more expensive looking pizza—the one with buffalo mozzarella and artisanal crust.
Next stop is the wine section, and you narrow your decision to two options: one looks more premium because it has gold label, but the other one has a higher price. In the end, you pick the gold one. Next, the final item for the basket, some chocolate. Still on the hunt for something that feels a little special, you pick the branded chocolates, and you’re happy to pay a bit more because they’re labeled fair trade.
This scenario is very much like ones that shoppers go through when deciding whether a product appears to be more premium, and whether they’ll be willing to pay a little extra for it. And, as you can see, premium is about more than just price.
To tap into this surging global trend, it’s important to understand what drives the perception of premium with your shoppers. According to Nielsen research, the most commonly cited reasons for a product being perceived as premium are that it has exceptional quality (54% of respondents), or that it has superior function or performance (46%), or style or design (38%).
It’s rational that shoppers would be willing to pay more for a product that is of a higher demonstrated quality or value, but there is also a more subjective component that factors into many shoppers’ ideas of what premium means. Traditionally, well-known big brands have been associated with premium factors like quality of ingredients; they’re also often viewed as a consistent and safe option.
Historically, private label occupied the bottom end of the category and big brands were the main currency occupying both the middle and top ends of the categories. Today, however, we see the smaller niche brands, and even the premium store-label brands, battling against the big brands for ultimate premium status as they all jostle for share in this higher-value segment.
There are also more emotional cues that feed into the perception of premium. We have started to see this come through in products that have overtly stated environmental or social benefits, thereby claiming a higher premium status. Roughly four in 10 global respondents said that they’re very willing to pay a premium for products made with organic or all-natural ingredients (42%), environmentally friendly or sustainable materials (39%), and for socially responsible products (31%). However, as consumers become more demanding, and expect a higher level of brand hygiene and corporate social responsibility as a given, these specific products will lose their premium status to the next wave of consumer trends.
The perception of premium isn’t based solely on rational links to quality and value; it’s highly influenced by emotive cues. Even in this period of economic uncertainty and stretched household budgets, shoppers still want to treat themselves—and will pay more—for premium products. Manufacturers need to truly understand what’s driving their shoppers so they can adapt and compete at the premium end of the scale where they can command a higher price point.
This article originally appeared on the Grocer.