In the first article we wrote back in February, we introduced a global audience group that we call modern affluent consumers. These are people who use their disposable income to make discretionary purchases on premium products and services across categories that boost their ‘cultural capital’.
Our research into this audience over the last few years has helped us develop an evidence base around the types of behaviors they exhibit when purchasing premium products and services. Our findings demonstrated that they are primarily led by hedonic motivations over more utilitarian ones. We describe the result of these behaviors as emotionally charged purchases.
In collaboration with BVA Nudge Unit, a global behavioral science consultancy, we trawled academic literature to better understand emotionally charged purchases and the factors that can be leveraged to increase people’s willingness to pay for a premium product (WTPFPP).
Our report (which you can download here) identified ten factors that can increase WTPFPP: quality, reputation, country of origin, cause-related brands, environment-friendly, trust, location, competition, brand extension and uniqueness.
Let’s take a look at a few of these factors here, as well as some examples of premium brands that we feel do a great job at using communications to increase WTPFPP.
Country of origin
Some regions around the world have positive associations that enable a price premium to be charged. The Champagne region in France is a prime example of this, with brands such as Ruinart, Dom Perignon and Veuve Clicquot leveraging the region’s stamp of quality, authenticity and prestige to elevate their offering. Even with the recent explosion of the sparkling wine category, with producers popping up all over the world to challenge the status quo, the engrained association of quality connected to the Champagne region still remains and therefore continues to command the highest price premium in that category.
One of the most recognizable brands that trade on their cause-related approach is Patagonia. Loved and respected for their single-minded reason for being ‘in business to save our planet’, they strive to produce sustainable products that stand the test of time, which in turn allows them to achieve a higher price premium versus their counterparts. Coupled with their cut-through and headline-making marketing campaigns, they are masters in maintaining this price premium and in communicating their justifications for it.
Unlike country of origin, location is linked to the popularity and exclusiveness of the geographic location a product or service is based in and, therefore, the price premium that product or service can command.
Apple has done this with Cupertino, California. It has successfully divorced the manufacturing of its products, which happens mostly in China, from the intellectual cradle of the brand, California. By doing so, they’ve tapped into the technology credibility of Silicon Valley and the lifestyle vibe of the state. ’Designed by Apple in California. Assembled in China’, is an enviable positioning which has consistently won hearts, minds and market share, and it has created a company worth over $2tn.
Brand extension price premiums occur when strong brands expand into a new product category, charging a premium price compared to existing competitors. For us, there is no better example of this than Dyson, who have moved from vacuum cleaners, to air treatment to hair care and lighting. And, every time, they’ve entered the market as one of the most expensive in each respective category. Perhaps the thought of buying a $300 hairdryer would have been unthinkable for many until Dyson took their associations of innovation, quality and performance and reapplied it in a new space and made it ‘acceptable’ to invest. Our view is that they not only re-engineer products – they disrupt categories.
In the report we highlight Tesla as a brand that trades well on uniqueness. This spans the uniqueness of their product offering when they launched the first premium electric vehicles, and the uniqueness of the way that their founder and the brand uses marketing and communications to build hype. Being unique as a brand, and offering something seemingly unique as a product, can help brands grow out of nowhere, just as we’ve seen with Tesla. That said, this is probably one of the most difficult things for established brands to be.
Most recently, we’ve seen brands exploring uniqueness through partnerships – which have long been an effective way to tap into any one of these ten factors. Whether it’s Nike partnering with Dior, Louis Vuitton and NBA, AMBUSH and Möet & Chandon or Aíme Leon Dore and New Balance, brands are coming together to offer unique products that often command a higher price premium in that category. These collaborations also feed into things like drop culture, help to build social capital, and provoke a desired re-evaluation of the brand amongst new and existing audiences. Of course, done well it appears like an effortless match, but, when forced, rarely works – no matter how desirable the economics.
Overall, modern affluent consumers around the globe are emotional beings and some of the best premium brands out there are leveraging the factors that we’ve identified above. We think it’ll be interesting to observe how these factors rise and fall in importance over the coming years, how they have or have not been impacted by Covid-19, and what else will come into the picture as being an important factor in increasing WTPFPP.
In the final article in this series that accompanies the launch of our research report, we’ll be looking into how emotionally charged purchases play out in different product categories, including automotive, fashion, consumer electronics, food and alcohol, and more.
By Prashant Yadave, Richard Chataway and Gonzalo Lopez