Writing in the June issue of Admap (How to grow via premiumisation), David Taylor, founder of brandgym, notes that while penetration to drive volume growth is important for a brand, a premiumisation approach can also deliver growth by generating more revenue per unit sold.
By strategically extending a brand’s core range, via new products and packaging formats, “this approach can deliver a ‘double whammy’ of growth,” he says – “premiumising your brand AND driving penetration, by reaching new users, occasions and channels.” (For more, read the full article: Range extension to deliver a double whammy: penetration and premiumisation.)
While a price increase accompanied by an upgrade to the core product or service can make it more distinctive and relevant, Taylor warns of “the risk of pricing up so aggressively that you put off existing and potential brand buyers, losing volume and penetration”.
A brand taking this route is also open to being undercut by new disruptive brands and own-label products.
Better, perhaps, to consider one of several alternatives suggested by Taylor, such as adding functionality to create a premium-priced core extension.
And this can be very simply done, as demonstrated by WD40, the multi-purpose lubricant.
For years, the product just had a red plastic straw taped on the side of the blue and yellow can, to help users direct the spray to where it is needed; but the little straw often gets lost. WD40 Smart Straw was the solution – an integrated straw that flips up for directional use; keep the straw down and users get a wider spray.
“It offers consumers real added value, and so it’s worth paying a bit more for versus the normal can,” Taylor points out.
“And this premium more than recoups the extra cost, making WD40 Smart Straw more profitable. So, even if people buy it instead of a normal pack, WD40 still makes more money.”
The product now accounts for up to 20% of brand sales in the regions in which it is available and the brand has built on this success with other format extensions to meet particular needs, such as EZ-Reach for hard-to-access areas and a bigger spray for larger surfaces.
This issue of Admap on premiumisation features articles by thought leaders from across the globe. WARC subscribers can access a deck which summarises the expert advice from contributors and key considerations on the topic.
Sourced from Admap