When the Best Isn't Good Enough

What drives consumers today to pay 28 dollars US for a one-pound rose petal-flavored Boulé Marshmallow Sampler at Dean & DeLuca, 480 dollars for a limited edition, frosted glass water bottle adorned with Swarovski crystals, or 5000 dollars for a leather-encased Reserve Edition ThinkPad laptop with dedicated support staff and sold by invitation only? Listed on Trendwatchers.com as one of the top eight trends expected to dominate 2008, it is the phenomenon of Premiumization: the upscaling of products or services to contribute to a luxury RVP.

Central to any effective RVP is a competitive assortment strategy. With the marketplace becoming increasingly saturated and consumers becoming more expectant, retailers are seeking to add differentiated products to their assortment. For the premium-segment consumers, this means finding elaborate ways to satisfy the wealth that is burning holes in their pockets more than ever before. The link between luxury goods and status has always been prominent, but because average consumers are increasingly able to access premium products, the bar has been raised and an ultra-premium category is on the rise. Under what other conditions would the market accept Renova, a company that sells fashionable toilet paper for 3.50 dollars a roll, available in a multitude of colors?

Take, for example, the premiumization of bottled water. A trend that has trickled down from Hollywood that revolves around the idea that “you can tell a lot about a person by the bottled water they carry.” Where Pellegrino or Perrier used to occupy the premium position, suddenly status-obsessed consumers began opting for even better. Selling for 15 to 20 dollars US, Evian released the limited edition Palace bottle which has a custom designed pouring top and is complemented by a stainless steal coaster. Pushing the limits further, Tasmanian Rain is water that has been captured “on the pristine north west coast of the island of Tasmania, Australia.” It has been collected “just minutes from where the World Meteorological Organization records the world’s purest air.” A specially designed catchment facility accumulates the water after traveling eastward through the air over Antarctica and 10,000 miles of ocean.

The most key dimension of the RVP that premiumization affects is customer experience. For example, the premiumization of coffee is nothing new. It has been accepted into mainstream culture with the advent of Starbucks, and has led to a larger offering of a “third place”, or a location apart from home or the workplace where consumers can relax and enjoy a high-priced latté. On a smaller scale, carrying the white Starbucks coffee cup as you walk down the street contributes to your sense of status, as the brand association shapes your experience.

Premiumization: credible or outrageous? Like it or not, as long as consumers are coveting these products and setting the bar for acceptable consumerism, there is no industry or product that will escape a premium version.

- Sydney Dundas

For more information, visit:

· http://www.trendwatching.com/trends/8trends2008.htm
· http://www.canada.com/saskatoonstarphoenix/news/weekend_extra/story.html?id=a328c555-8174-4900-84fe-370ca8962304&k=7059
· http://www.boston.com/business/blog/filter/2007/12/premiumization.html
·http://www.reportbuyer.com/consumer_goods_retail/shopping/shopping_trends/masstige_super_premium_consumers.html