Pop quiz, hotshot – which of these famous brands is a Premium brand?
I’ll tell you the answers in a minute, but before I do, I want to share some of the reasons businesses choose to position themselves as premium brands, and lift the lid on the strategies you need to adopt if you want to do the same.
Although it’s not right for every business – after all, if every brand was premium then EasyJet, Lidl and Aldi and Primark wouldn’t exist – there are plenty of good reasons why brands want to position themselves at the premium end of the spectrum.
But what a lot of people don’t realise is that, when you get high up into the brand stratosphere, there are actually several subtle but important sub-layers, and the differences between them are more significant than you might think.
The cost of misaligning your brand with its audience at this end of the market can be huge – as some very big names have found out for themselves.
So, what’s the difference, and what do you need to do if you want to position yourself as a premium brand?
Why businesses want to position themselves as Premium brands
Let’s start by looking at why brands want to be seen as Premium in the first place;
If you’ve got a product that’s more expensive than your rivals, but essentially does the same job, how are you going to persuade customers to choose yours?
What will make your target customer spend more of their hard-earned cash on your product when someone else is selling something not that different for half the price?
You need to show them there’s a difference.
And that’s what Positioning is all about.
You probably recognise some of these brands. You may even buy them yourself.
All the premium-priced products have cheaper alternatives, so why would you choose to pay more for them?
Why do customers pay so much more for one than the other?
These brands have all done a great job in demonstrating a difference (real or perceived) to their competitors. You may notice how the more expensive brands highlight what makes the product “special”; that it’s organic, where’s it’s made or where the ingredients come from. This is all designed to show that it’s better than its cheaper rival. You’ll also see how the packaging’s been designed to appear artisan, and to appeal to a particular audience.
Need help with your positioning?Contact us
2. Brand Loyalty
Premium brands also often enjoy high levels of brand loyalty.
Customers like to be associated with successful brands (or if you prefer, brands that “successful” people would choose).
Strong brand loyalty can bring lots of benefits:
- Increased Customer Lifetime Value
- Competitive advantage
- Opportunities to up-sell and cross-sell
Positioning your business as a premium brand is vital to support higher prices.
And, as our good friends at Price Maker will tell you
The right pricing strategy is the #1 way to increase profit.
Smarter pricing helps businesses differentiate their products from the competition.
And having the right brand identity goes hand in hand with this.
Look at the two pairs of products below.
These products are not wildly different. In a blind test, to many people there wouldn’t be any noticeable difference.
So why do customers pay so much more for one than the other?
Because one is positioned as a premium brand. Customers perceive that it’s better quality, and as a result are prepared to pay more for it.
4. Customers like being part of a community
A bit like brand loyalty, when customers associate themselves with their favourite brands, they feel like they’re part of a community.
And premium brands are very good at building a sense of belonging.
When customers feel like they’re part of a community or ‘tribe’, they’ll also be far more likely to talk positively to friends and family about you. They become a Brand Ambassador – and help bring more customers to your door as a result.
5. Customers like brands to reflect who they (think they) are
We all look for brands that we feel reflect us as individuals and, in many cases, we choose premium brands because it makes us feel successful (or cool, or independent, or however we want to appear).
Premium brands take great care in how they present themselves to reinforce this feeling; in their choice of images, tone of voice and language and even celebrity endorsements.
The sub-layers of high-end brands
So, how did you do with our quiz?
The answer is that NONE of the brands mentioned at the top of this article are technically Premium brands.
There are actually FOUR different flavours of ‘premium’, and if you don’t understand the differences between them, when it comes to your branding, you could be making a costly mistake.
The four different categories are:
For the record, the three brands I mentioned before are categorised as follows:
And here’s why it’s important to know the difference;
The needs of customers who buy luxury brands are significantly different to those of customers who buy Premium or Prestige brands.
If you position yourselves as one, but you behave like one of the others, it just ain’t gonna work.
Premium vs Prestige vs Prosumer vs Luxury – what’s the difference?
Premium brands (in this context) give you the best features and the best value. They provide the best quality, so customers pay a higher price. Premium brands are more sensitive to competitors in the market and consistently need to demonstrate that the customer gets good value (even though it’s still at a higher price than non-premium brands).
Prestige brands are for the upwardly mobile; the power-seekers who want to associate with products and services they feel elevate them above others. Prestige is 100% about the image of the owner.
Prosumer brands are for the “professional consumer” – the connoisseur. These brands are about total performance; they’re the very best of their breed for customers that are passionate or obsessed about that product or service.
Luxury brands don’t exist to meet a need or solve a problem. Luxury customers aren’t interested in value for money, they want to know about the brand’s heritage and uniqueness. Luxury brands offer the highest status and are unattainable to almost everyone. When something is available at a world record price, it will usually be from a luxury brand. That’s the whole point.
How to build a Premium brand
So how do you go about building a Premium (or Prestige/Prosumer/Luxury) brand?
There are several strategies you need to adopt;
1. Limited distribution
Premium brands carefully limit where and how products and services are available.
Controlling availability is one way to use the psychology of scarcity. It’s one of the key factors that influence customers’ decision making.
Premium brands also carefully consider where you can buy their products. You won’t find Prada handbags for sale in Tesco because it doesn’t fit the image that brand wants to portray.
2. Minimal discounting
Premium brands will be very tight on pricing and won’t allow their product to be sold for less than a fixed price.
For example, Louis Vuitton never discounts (it doesn’t even have an outlet store) and if their loyal customers want one of their designs, they need to get in quick, as they often sell out fast.
Be warned – if you’re differentiating your brand through pricing, as soon as you discount you’ve lost that point of difference.
3. Clear value-added proposition
A Premium brand (but not Prestige, Prosumer or Luxury) will make it clear what value the customer gets from its products.
And don’t forget, there’s a big difference between price and value.
Price is what you pay; value is what you get.
— Warren Buffett
If you want to position yourself as a premium brand, you need to clearly demonstrate your product’s value to your customers.
4. Premium access across all touchpoints
Premium brands will carefully manage every aspect of how the brand is presented at every single point they come into contact with their customer.
Having a great brand identity counts for nothing if you’re not consistent in how you use it.
This has to run through everything your customer comes into contact with – not just your website, brochure and marketing material.
Think carefully about all the points at which your customer sees how your brand is presented;
- Where they buy your product, if it’s not directly from you
- How your employees look and act in face-to-face situations
- Your vehicles that customers might see out on the road
- Forms they fill in, both printed and online
- Even how you serve their coffee in a meeting 🙂
5. Thought leadership and digital presence
Premium brands put out content that positions them as market leaders.
They share thought-leadership pieces that show they’re true experts in their field. Their content is well considered and beautifully presented.
The branding of all the aspects of their digital presence is consistent and their digital activity is constantly on message.
Don’t fall into the trap of thinking you can leave a junior member of staff to look after your social media presence just because “they’re young, so they must be good at Instagram”.
Your digital profile is increasingly becoming your number one presence; it needs to be managed properly.
6. Be prepared to spend on marketing to support your premium positioning
Premium brands recognise the importance of marketing, and back this up with proper investment.
Smaller businesses will typically spend 8-10% of turnover on marketing* and will have a solid brand and marketing strategy in place to make sure they get a good return on this investment.
If 8-10% of turnover sounds like a lot, consider what impact a price increase of just 10% would have to your profitability, made possible with strong positioning and branding:
7. Long-term strategy – maintain your premium position
If you’ve decided to position yourself as a premium brand, you must stick with that strategy over the long term if you want it to succeed.
If you decide to change position, do it for the right long-term reasons – because you’ll find it difficult to revert to Premium once you’ve become Budget.
Remember Thorntons? Back in the 80s and 90s when I was a kid, they were considered a Premium brand. I remember my Mum getting very excited at the prospect of us having a box of Thorntons chocolates at Christmas.
But as the premium chocolate market became more crowded, Thorntons no longer had a point of difference, and they started making strategic decisions that weren’t aligned with being a premium brand.
Soon, you could find Thorntons chocolates for sale everywhere, nearly always at a discount, and in March 2021, following years of struggles, it finally closed the last of its own stores and is now limited to trading through franchises, supermarkets and online. Probably still at a discount.
Heed this cautionary tale.
8. Brand identity
Premium brands understand the importance of getting their brand identity right, and are well aware of the risks of getting it wrong.
If you think good design is expensive, you should look at the cost of bad design.
— Dr Ralf Speth, CEO Jaguar
Mitigate these risks by choosing a brand design agency with experience of working at the premium end of the market.
The value a strong brand identity can deliver to your business will represent a huge return on your investment. Get it wrong and it could cost you big time.
How we can help
Positioning your business as a premium brand can bring great rewards, but it needs to be thought through and managed properly.
If you’d like to find out how we could help you with your positioning and brand identity, get in touch.
If you’d like help developing a pricing strategy to support your premium brand, we recommend speaking to Mark Peacock at Price Maker.