Strategic Marketing Session 5 - Premiumization Strategy PDF

STRATEGIC MARKETING SESSION 5 – PREMIUMIZATION STRATEGY WHERE ARE WE? BUSINESS AND BRAND GROWTH SALES GROWTH Increase volume Increase prices Frequency CRECIMIENTO EN FACTURACIÓN SAME AMOUNT CONSUMED MORE STRATEGIES FOR VOLUME GROWTH Retention Penetration EXISTING NEW CONSUMERS SALES GROWTH Increase...

STRATEGIC MARKETING SESSION 5 – PREMIUMIZATION STRATEGY WHERE ARE WE? BUSINESS AND BRAND GROWTH SALES GROWTH Increase volume Increase prices Frequency CRECIMIENTO EN FACTURACIÓN SAME AMOUNT CONSUMED MORE STRATEGIES FOR VOLUME GROWTH Retention Penetration EXISTING NEW CONSUMERS SALES GROWTH Increase volume Increase prices FOUR POSSIBLE STRATEGIES RETENTION PENETRATION FREQUENCY PREMIUMIZATION PREMIUMIZATION: DEFINITION The strategy that makes consumers pay more for a product or service Who is the premium buyer? BASKET BALANCING 10 FACTORS AFFECTING PREMIUM CHOICES People are not consistent in their choices: they will buy premium products in some instances The choice of premium goods will be impacted by demand spaces 11 DEMAND SPACES Products or services fulfil a certain purpose What products or services you choose depend on who you are, but also on who you are with, when and where you are Demand Spaces Understands what shapes these decisions and distils them into rich, nuanced, targetable segment https://player.vimeo.com/video/332194851 12 Routine / non social consumption 80% bought below the median price Special /social consumption 63% bought above the median price Source: Ehrenberg- Bass Institute for Marketing Science EXAMPLE: DEMAND SPACES IN SPIRITS CONSUMPTION THREE POSSIBLE PREMIUMIZATION STRATEGIES 1. Increase prices 2. Alter sizes/formats 3. Trading Up PREMIUMIZATION STRATEGY 1: INCREASE PRICES 16 PREMIUMIZATION STRATEGY 1: PRICING AS PART OF THEPOSICIONAMIENTO POSITIONING EN PRECIO Same manufacturer and similar technology, why are their prices so different? PREMIUMIZATION STRATEGY 1: PRICING AS PART OF THE POSITIONING Pricing is a function of the brand’s perceived value Perceived benefits Perceived Value = Price PREMIUMIZATION STRATEGY 1 KEY LEARNING 1: Pricing should always be a function of the brand’s perceived value You need to “earn” the right to increase prices on your brand PREMIUMIZATION STRATEGY 1: PRICE ELASTICITY POSICIONAMIENTO EN PRECIO The extent to which a price change impacts volume for a given brand Elasticity = Change in volume Change in price High price elasticity means that changing the price has big impact on v olume Low price elasticity means that changing price has small impact on v olume Zero elasticity: the v olume doesn’t change if price goes up PREMIUMIZATION STRATEGY 1: PRICING AFFECTED BY IMPULSE/AVAILABILITY POSICIONAMIENTO EN PRECIO PREMIUMIZATION STRATEGY 1: PRICING AFFECTED BY IMPULSE/AVAILABILITY POSICIONAMIENTO EN PRECIO PREMIUMIZATION STRATEGY 1 KEY LEARNING 2: Price elasticity varies according to the occasion/circumstance PREMIUMIZATION STRATEGY 1: PRICING AS PART OF THE COMPETITIVE SET POSICIONAMIENTO EN PRECIO PREMIUMIZATION STRATEGY 1: THE COMPETITIVE SET VARIES ACCORDING TO THE OCCASION POSICIONAMIENTO EN PRECIO Invited for dinner... PREMIUMIZATION STRATEGY 1: KEY LEARNING 3: To assess whether a product is expensive or not you usually look for a reference within a determined competitive set (that varies according to the occasion) PREMIUMIZATION STRATEGY 1: INCREASE PRICES PSYCHOLOGICAL POST-RATIONALIZATION Big focus on tradition, ingredients, production process.... to justify that higher price PREMIUMIZATION STRATEGY 1: INCREASE PRICES PSYCHOLOGICAL POST-RATIONALIZATION Rituals matter PREMIUMIZATION STRATEGY 1: INCREASE PRICES PSYCHOLOGICAL POST-RATIONALIZATION Scarcity PREMIUMIZATION STRATEGY 1: INCREASE PRICES PSYCHOLOGICAL POST-RATIONALIZATION Psychological Price barriers PREMIUMIZATION STRATEGY 1: INCREASE PRICES DEVELOP A GOOD PRICING STRATEGY 1. Perceived value analysis (functional & emotional values) 2. Good understanding of price elasticity 3. Competitive set analysis 4. Psychological post rationalization PREMIUMIZATION STRATEGY 1: WATCH-OUT!: Pricing should not be determined (only) as a function of your costs PREMIUMIZATION STRATEGY 1: TEQUILA EXAMPLE PREMIUMIZATION STRATEGY 1: INCREASE PRICES WATCH OUT! PREMIUMIZATIOON STRATEGY 2: SIZES/FORMATS STRATEGY 2: THE IMPACT OF SIZES/FORMATS STRATEGY 2: THE IMPACT OF SIZES/FORMATS PREMIUMIZATION STRATEGY 3: TRADING UP STRATEGY 3: TRADING UP CONSUMERS WITHIN A PORTFOLIO PREMIUMIZATION WATCH OUT! STRATEGYSTRATEGY: 3: TRADING UP CONSUMERS WITHIN A PORTFOLIO Premiumizing is hard once you have a standard image. It’s easier to offer more democratic options than to premiumize. STRATEGY 3: TRADING UP – ALTERNATIVE STRATEGIES: MORE FOR MORE KEY LEARNING 4: Trading up can very hard, especially if you have an image of affordability IN SUMMARY... There are several premiumization strategies: 1. Increase prices 2. Work on sizes and formats 3. Trade up within a portfolio Getting more for more KEY LEARNINGS... Pricing should always be a function of the brand’s perceived value You need a good pricing strategy if you are going to affect your sales price You can also premiumize by changing formats/sizes Trading up is harder than trading down Never underestimate consumers!