Gone are days when the premium products and services could be strictly restricted to the niche category of customers who were sifted on the basis of the income level. The borderline between mass and premium market is growing thicker especially in the Indian context with rising income levels and increasing levels of disposable income at the hands of the Indian middle class. This rising segment is where I believe mass premium offerings can sustain and generate profits. The youth is willing to welcome the premium offerings with open arms. Even the budget-conscious Indian middle class has developed an appetite for varying degrees of premium with respect to many products and services. These target groups ample provide opportunities for companies to venture into the mass premium segment. But if the willingness to pay the premium has to translate to purchases the major challenges of differentiation and winning the perception battle need to be addressed. The questions of what unique are we offering and how will we make the customer perceive a greater value in return for the premium have made the companies shy away from being caught in the middle of the premium and mass segment and facing the battle alongside the mass products on the same shelves. However, the example of HUL’s Magnum is an apt example of how rewarding the Indian mass premium market can be with the right marketing strategy.
Magnum was a case of going premium with ice-cream, a mass-market product. The pricing, though affordable for the middle class, was on the higher side of Rs 75 per bar. Its key differentiation came from with the rich royal taste of Belgian chocolate, the indulgence experience it entailed and the high levels of satisfaction it offered. These factors prevented the pricing from being a deterrent to large sales and gave room for expansion into tier 2 cities as well. The promotional campaigns deserve a special mention because the high price of the product demanded advertising that could create awareness of the emotional engagement associated with the product along with the other unique selling points and induce trials. Understanding the necessity, HUL put its financial muscle to good use by using the right channels for sending the message. It flooded the social media platforms targeting the youth, brought actresses on board as pleasure ambassadors, conducted point of sales activities and used visual aids that conveyed the product’s distinctness. By being different, functionally superior and offering an emotionally satisfying experience backed by the efficient communication of the same to the market the product could connect with a large of consumers which resulted in the success of the mass premium brand.
If Magnum was the case of going premium with a mass market product, there are ample examples of companies in the niche luxury segment entering the mass market with their product or launching a mass market product through brand extensions. Through these extensions they appeal to a group of High-Earners-Not-Yet-Rich (HENRY) consumers that help them enhance the volumes. This category could potentially be the market for them in the future. Hence reaching out to them early offers a competitive advantage. There are internal concerns such as brand dilution and brand confusion that need to be addressed for the mass premium venture to be worthwhile. Armani got it right by not going too far with the extension and maintaining brand integrity. Its venture into casual clothing from upscale clothing with Armani Jeans struck the right balance between managing luxury and mass premium.
Additionally, there are categories of products with which consumers attach a high degree of importance. The perception of the value brought about by the product for the consumer is high which gives a great mass premium potential to it. Beauty and skin care products are an example where prominent concerns of fairness and ageing skin have enabled high-priced premium products to receive mass appeal. Looking good is a requisite for today’s men and women. Capitalizing on that, various companies in the market launch further promotions and advertisements emphasizing the importance of grooming and reinforcing the perception of high-value addition which enables them to them to launch premium products, generate volumes and sustain in the mass premium space. Nivea and Ponds are the best examples of such companies in the Indian context.
There is industry specific caveat associated with targeting the mass premium market. Fierce competitiveness in the industry and highly price sensitive customers would act as major roadblocks for playing in the mass premium market. The highly priced product would not be able to sell itself lying alongside the other competitively priced products. One of the best examples of a failure in an attempt at the mass premium was Kingfisher red.
Post the acquisition, low-cost carrier Air Deccan was rebranded as Kingfisher Red. Competitive pricing was at its peak in the airlines industry and the Indian middle class showed high levels of price sensitivity for airline services. Kingfisher Red was priced slightly higher with extra services on offer and lost out on sales with low-cost carriers. With Kingfisher already operating in the premium segment, Kingfisher Red ended up as a misfit by not providing much differentiation in a highly price sensitive market.
Premium products and services are not necessarily niche and have a good revenue potential if made accessible for the masses. However, mass premium fitting into the scheme of things depends upon the nature of the industry targeted, mass’ appetite for premium, scope for differentiation of the product and the promotional capabilities to convey the uniqueness of the product.
Surya Jaishankar is PGP student (2015 – 17) in IIM Ahmedabad