By Retail Brew Staff
less than 3 min read
Definition:
A strategy to sell a product or service at an elevated price by marketing it as higher quality, more efficacious, or otherwise more beneficial to consumers. This strategy is often employed among mass market products and brands, highlighting elements like functional ingredients, premium materials, or modern packaging, in tandem with a higher-than-typical price tag. (We’re still looking for a term to describe the increasingly common practice of making a product worse and charging more $$ for it.)
The origins of premiumization
The concept of premiumization has gained steam in the last few years as CPG companies looked to balance the fact that, while consumers’ post-pandemic spending was strong, the supply chain woes of the pandemic’s early days were gone, so continued revenue growth from higher prices had to come in tandem with additional benefits.
Premiumization of products, whether they be food and beverage or beauty items, relies on messages of elevated quality or the deliverance of a particular result or function, whether that’s the $20 Erewhon smoothie filled with sea moss (don’t ask us the benefits of sea moss, but apparently the cool kids are eating it these days!) or a serum-infused Dove body wash line featuring salicylic and hyaluronic acids. For the beauty category in particular, recent premiumization efforts have begun to close the gap between mass and prestige products.
Premiumization in context
As we previously reported, “CPGs, instead, will largely focus on portfolio and product mix to drive profitable growth this year, per Deloitte. For most (95%), that means innovation will be a priority, with 80% saying they’re upping spend in that area. Those innovations won’t necessarily center around value, as 66% of execs (and 76% of those at personal care product makers) said their company would be executing a premiumization strategy.”
Mass brands are making a premiumization push, with companies like L’Oréal, Unilever, and Not Your Mother’s seeing sales boosts after debuting elevated products at higher price points within skin and hair care. Now, as consumer expectations and spending habits change and brands adjust, the gap between mass and prestige could be narrowing.
