PremiumizationIndian consumers will pay more for benefits
Brand strategies make premiums affordable
Indians are trading up. The premiumization trend has grown over the past five years, driven by increased consumer affluence, expanded brand choice, improved quality of local products, and wider access to brands because of e-commerce. The trend is concentrated in India’s urban centers, but it is found throughout the country. Premiumization leveled this year, probably temporarily, because of a slowdown in FMCG growth, according to Kantar Worldpanel.
Premium purchasers, also called high-value consumers, are more likely to try new things, seek customized products, and feel comfortable with technology. They also expect high levels of innovation and responsive, knowledgeable customer service. Kantar Millward Brand classifies high-value consumers into two groups: the wealthy who can afford premium products and services, and high spenders with lower incomes, often young people, who can afford to purchase premium selectively.
Spending behavior varies. Wealthier people may move from a mid-level department store label to a designer or luxury brand. Less affluent consumers may abandon a generic brand and move up to a national brand. Consumers among all income groups choose premium brands for occasional treats, while not necessarily including them in their regular purchase repertoire.
To resonate with high-value consumers, brands need to be relevant, clearly differentiated, and capable of inspiring love. Relevant brands have emotional appeal (offering style or status); are distinctive (appealing to discerning people); and functional (opening new opportunities).
Not everyone willing to pay extra for a perceived benefit, such as quality or convenience, can afford to, however. The premiumization trend endures, in part, because of the various strategies that brands have adopted to bridge the affordability gap. When price is an issue, consumers seem willing to trade quantity for quality and buy a smaller size. Some brands have packaged premium products in smaller sizes to them more available and affordable.
Premiumization crosses categories
The premiumization trend cuts across many product categories. It is well underway in hair color products. An entire segment of personal care – anti-aging products – is premium. Premium single-malt scotch has become popular for those who can afford it. In part because of the British legacy, whiskey is India’s preferred alcoholic drink, rather than beer or wine. Beer drinkers can now select among premium options from microbreweries, import labels, and Kingfisher, the large national brand. Wine has become popular among some wealthy Indians. Sales are growing steadily for luxury cars, which generally are the foreign brands. Banks are improving the customer experience, at least for their wealthy clients.
The number of Indian mobile phone subscribers recently crossed1 billion. Those who can afford the highest level of premium typically choose a foreign brand like Apple or Samsung. At the other end of the spectrum, lower priced quality phones are available from Chinese brands such as Xiaomi. Indian brands like Micromax offer phones for the growing segment of the market that desires premium but cannot afford Apple or Samsung. To promote Micromax as a global brand with aspirational appeal, Micromax until recently featured the internationally acclaimed actor Hugh Jackman in its advertising. The brand switched to Indian comedian Kapil Sharma to highlight the importance of local languages.
The premiumization trend touches services as well as products. The parlor phenomenon is booming in India. Parlors are retail establishments that men and women patronize for haircuts and beauty treatments. In-home parlor service also is available. Parlors and in-home services are aspirational, but also affordable options for people with enough money to pay for a beauty treatment, but not enough money to enjoy the pampering experience in the more luxurious salons, which the premium customer is more likely to visit. More men’s hair-cutting salons offer an expanded range of services, such as facials and massages, in a comfortable air-conditioned setting.
Similarly, movie theaters are upgraded to offer a more pleasant experience. The premiumization trend includes other services such as public transportation. Mumbai commuter trains are introducing air-conditioned rail cars and improved meal service. Many Indian consumers are trading up from ordinary cabs to Uber, or Ola, the local Indian option.
Brand Building Action PointsPremiumization
Quality is the starting point. Indian consumers expect quality and may reject products that don’t deliver it.
High-value customers, those who desire and can afford premium, seek products and services that are well differentiated, promise prestige or some other emotional fulfillment, and provide more than basic functional benefits.
Perception of premium is important, and it varies by market. Several global fast food brands create a premium impression in India with a more refined restaurant décor and dining experience that helps attract young, upwardly mobile consumers.
People in urban and rural India share similar aspirations, despite the ongoing disparity in wealth. Even with less money to spend, people in rural areas, particularly young people, are spending on premium.
Adjust the message
Budget-conscious consumers also will spend money on premium products and services, but they will expect more practical benefits like better basic functionality.
Offer size variety
Many consumers desire premium products, but not everyone can easily afford them. Rather than compromise on quality, some consumers will buy a smaller package size to make premium more affordable.