This text was developed by Tech & Durables trade specialists Ines Haaga and Sohjin Baek of the GfK World Strategic Insights Crew.
Set in opposition to a backdrop of rising costs, shrinking markets, and altering client habits, it sounds a contradiction to counsel {that a} premiumization technique gives progress potential in in the present day’s difficult atmosphere. Nonetheless, we at GfK we’ve got recognized that the present rise within the attraction of higher-priced tech and sturdy merchandise amongst premium consumers will persist all through 2022.
In earlier articles, we coated how manufacturers can embrace premium and how premiumization can save client tech and durables. On this weblog, we look at the drivers and the merchandise already benefitting from the development. We profile excessive spec premium consumers, and share understand the chance they current in your enterprise. So learn on to find if your enterprise may maximize the ability of premium.
What’s driving the shift to premium?
Firstly, family budgets are more and more restricted, and the share of purchases has modified. Between Q1 2019 and Q1 2022, the share of low and medium-income consumers in Tech and Durables declined from 38% in Q1 2019 to 29% in Q1 2022. Over the identical interval, high-income consumers grew their share from 26% to 36%.
In order these with extra restricted budgets delay and even keep away from shopping for, better-off premium consumers obtain a much bigger share of gross sales. These with decrease incomes can also be impacted by the discount within the variety of entry-level objects on the market, as pushed by provide chain shortages, producers have focused on producing larger priced-items providing higher margins.
As well as, client preferences are driving the potential of premium. Our 2021 Shopper Life examine has proven that greater than one-third (37%) of shoppers agree ‘it is very important indulge myself regularly’. This can be one other motivation of premium consumers for upgrading to higher-priced, feature-rich premium merchandise.
Meet the ‘Excessive Spec Premium’ purchaser
Characteristic wealthy and well-known manufacturers are essential standards in serving to Excessive Spec Premium consumers make buy selections. Based mostly on gfknewron Shopper evaluation, shoppers may be labeled into seven viewers teams, with Excessive Spec Premium consumers representing 15% of all shoppers in Europe. This group values well-known status manufacturers in addition to product options. Virtually all (95%) agree with the assertion “I desire a feature-rich machine from a model I do know nicely. If which means paying extra, then so be it!”
For these premium consumers, pricing is much less prone to be an essential consideration issue. There are quite a few components that attraction to Excessive Spec Premium consumers, together with whether or not it’s sustainable or good, maybe it helps make life less complicated, or gives an upgraded, enhanced expertise. Upgrades are an essential driver, and actually evaluation of TV gross sales between Q1 2019 and Q1 2022 reveals that ‘upgrading a working product’ is on a progress trajectory as a cause to purchase (up from 29% to 34% by Q1 2022), whereas ‘changing a defective product’ has remained flat through the time interval.
The premium worth alternative: Driving income and margin
Gross sales on the higher-end have been rising since April 2018. The most recent evaluation reveals that the 5% of unit gross sales on the prime finish worth level accounted for 26% of income from Could 2021 to April 2022, making them each environment friendly and efficient. So higher-priced merchandise provide a greater revenue margin too. The place sources are restricted, it’s logical to give attention to the dearer, higher-return objects. This development is going on in key classes together with flat TVs, smartphones, cell PCs, displays, washing machines, and vacuum cleaners. Right here gross sales are rising in double-digits, whereas on the lower cost level, gross sales have plateaued or are in decline.
Evaluation of shoppers who purchased a flat-screen TV reveals that these buying within the low- to mid-level worth level of €699 or much less are buying particularly to interchange an merchandise. Compared, these – premium consumers – spending €1300 or extra are changing a working product. This implies that these shoppers are shopping for to indulge their need for higher options, or to indulge themselves, or a mixture of each. Evaluation of shoppers shopping for higher-priced vacuum cleaners signifies an additional hyperlink, this time between excessive ranges of client confidence and spending.
So, whereas some shoppers are feeling the squeeze of rising costs and are chopping their expenditures within the TCG class, this isn’t the case for all. There may be nonetheless a major proportion of customers who’re attracted by feature-rich merchandise from well-known status manufacturers, and who can afford to purchase them to fulfill their want for self-indulgence. This implies there’s a real alternative to maximise the potential of premium in case you perceive what is going to attraction to Excessive Spec premium consumers.
Learn to maximize the potential of premiumization
