Luxury Brand Extensions: Wise Decision or Risky Strategy?

luxury brand extensions

I am a fan of classic watches. The product itself is a marvel of craftsmanship, precision engineering, and  design. Add heritage to the mix and you have the perfect ingredients of a luxury brand.

Professionally, the watch industry offer valuable lessons in premium and luxury brand management.

As a casual industry observer, the launch of the new Baume watch brand by Swiss luxury conglomerate Richemont Group offered the opportunity to address an increasingly popular strategy: luxury brand extensions.

The Brand Extension Temptation

Brand extensions are a very tempting growth strategy. Leveraging a name consumers are already familiar with lends the new brand instant credibility.

This Baume brand poses a stragic dilemma; while the brand name is an obvious offshoot of Baume & Mercier, its positioning and go-to-market strategy is the complete opposite of the traditional luxury model.

According to the company management, Baume aims to become relevant to a new category of consumers, that traditional luxury brands fail to capture: the environmentally –conscious, sustainable consumption advocates, looking to buy their first watch.

Baume watches will be made using responsible sourced natural, recycled and upcycled material, without the use of any precious metals and stones, or animal materials.

The brand uses a direct-to-consumer distribution model via its own website, rather than the traditional brick and mortar, or company-owned stores.

Has the Luxury Industry Lost Its Luster?

The strategy behind the new brand (almost) make sense. Penetrating a new segment in such a conservative category, requires bold moves, and Baume seems committed to tackle many of the challenges the luxury watchmaking industry is facing.

The primary function of the classic watch (telling time) has become irrelevant in the decision to buy a watch rather than using the smartphones and smart watches. Julien Tornare, CEO of Zenith, a Swiss luxury watchmaker summarised the trend perfectly: “Mechanical watches are not there anymore to have the primary function of indicating the time. Their role is to present part of our personality.

Luxury brands have long been criticised to for their business practices, expanding from the materials used in their products, to supply chain management issues. Burberry was forced to revert its practice of burning excess inventory to protect its brand from counterfeits, following intense backlash from consumers.

Luxury brands often lack transparency, and have become very profit oriented. The segment is dominated by 3 conglomerates that are publicly traded, and continue to purchase independent the expense of abandoning their artisan, family oriented roots.

Supporting the point above, production of many luxury products has been moved to low-cost manufacturing countries with questionable labour practices. Few luxury brands are openly admitting this practice, however consumers are starting to take notice. This practice goes against their brand’s DNA and certainly provides no justification for high prices.

There Is Only One Problem

Given the above realities, and that sustainable consumption trend is very popular, especially with the younger audience the luxury watch brands are trying desperately to stay relevant to, the company decision makes sense. With one exception: its name.

With the mane like Baume, which creates an instant connection to the parent company, Baume and Mercier, the new brand inherits the watch making expertise the original brand already possess.

However, luxury brand extensions pose a great risk: the risk of the luxury brand losing its cache. Why should luxury shopper continue to buy into the Baume & Mercier story, when they can have almost the same name on their wrist, at a lesser cost?

Luxury brands, just like ordinary and premium brands, go through a period of transformation, adaptation and soul searching. Protecting the brand cache, and selling the dream, require carefully planned strategic decision.

Moreover, the eco-friendly, sustainable brand positioning, while great in theory, often fail to produce sales results. This is particularly valid with brand extensions; in this case the brand comes with an existing baggage, and management should really question its ability to extend into this space. Even if permission is given, is the positioning relevant enough to consumers that they are willing to pay for it?

Nike “Considered”

Nike tried a similar strategy with the “Considered” line of products, in 2005. Despite the glowing press reviews and positive PR the brand received, the products fail to sell. It turns out the sustainability positioning was too drastic of a departure from the brand’s “performance” image.

Less Risky Strategic Alternatives to Luxury Brand Extensions

While the need for growth is understandable, there are a few less risky strategies a luxury brand can employ, to avoid alienating existing customers.

Firstly, reposition a brand you currently own rather than launching a new one. This strategy works in the case of companies owning multiple brand, targeting more or less the same audience. Let’s take a look at the watch brands Richemont Group currently owns: Vacheron Constantin, A. Lange & Söhne, Jaeger-LeCoultre, Roger Dubuis, Piaget, IWC Schaffhausen, Officine Panerai, Ralph Lauren, Baume & Mercier, Cartier, Van Cleef & Arpels, Montblanc, Dunhill.  Why not reposition one of the brands on the list, rather than creating an offshoot of a reputable, heritage brand?

Secondly, the company can consider strategic options meant to bring the existing brand experience to new consumer groups. One option, commonly used by premium car manufacturers, is to offer entry-level models that are very competitively priced for a younger audience who aspire do drive a premium vehicle. Going back to our case study, a Baume & Mercier Classima model can be had for around $1000 or even less. Why not launched a “sustainable” entry-level model under the same brand, rather than launching a new brand under almost the same name?

A third strategy is to focus on capturing market share with the existing brand(s). The luxury market is constantly evolving both geographically and demographically. Rather than investing in launching a new brand from scratch, companies might find it easier to adapt, extend and reinvent themselves for organic growth.

As the luxury industry becomes more polarised, with three conglomerates owning the vast majority of luxury brands, we will witness more attempts to leverage established names into new territories, be it demographic, geographic, or simply a new mindset.

Baume has a lot of things going for it; however “borrowing” the name of established luxury brand comes with inherent risks. Only time will tell if the strategy bet will pay dividends and Baume will become the independent, self-sustaining brand it wants to be.

In the next article I will continue the journey into the watch industry. The focus will be on another brand introduction, in the same category, with the same positioning, with brilliant strategy and execution.

Image Credit:

Michael Baicoianu is a premium and luxury brand strategist, and the publisher of Michael is based in Toronto, Canada.

5 Reasons to Build a Premium Brand

Staedtler Premium Pencils

I was recently shopping for school supplies for my kids. As expected, the options were overwhelming for every item on the list.

Choosing something as simple as pencils generated a lot of debate between family members; should we go for the inexpensive no-name products, or a premium STAEDTLER set that cost 3 times as much (to put things in perspective, I am talking $3 versus $0.99 for a set of 12 pencils).

We ended up choosing the premium pencil set made by Staedtler, and felt good about our purchase. The message of quality the brand conveys managed to persuade us; we felt confident we bought the best set of pencils for our kids.

The situation above exemplifies the on-going battle happening in our minds every time we have to make a brand decision. The options we are faced with are between premium brands, typically offered by well-established manufacturers, and low-cost alternatives that stretch your budget further.

Is the Premium Segment Shrinking?

There is no denial that low price competitors have made a significant impact and gained increase consumer acceptance in almost all categories.

As a marketer of premium brands, I focus my efforts in two directions: staying relevant against competitors in the premium category, and defending against lower-priced brands looking to capture market share.

Premium brand owners might feel discouraged by these challenges and start questioning if there is still a market for premium, heritage brands; many are exploring lowering prices and transforming the premium brand into a mainstream alternative.

My message to these brand owners is to keep the premium brand alive, as there will always a segment of the market willing to pay more for quality. Here are some reasons why:

People Still Associate Higher Prices with Better Quality

Price is a very important factor in our choice of brands. Value, premium and luxury shoppers use price as a decision tool, for different reasons.

In the premium segment, the higher price sends an instant signal of better quality. This is particularly true when shoppers are not familiar with the category or not sure how to discern quality.

The wine category provides the perfect example: pricier wine is instantly perceived as of higher quality, although in most cases the difference in taste is often not distinguished even by experienced sommeliers. Raise the price of an ordinary wine and it will suddenly taste better.

Consumers Still Appreciate Craftsmanship, Heritage and Innovation

Many premium brands were category pioneers, being the inventors of products that have become integral to our daily lives. With heritage and innovation comes expertise and credibility, which many consumers are willing to pay a premium for.

STAEDTLER’s history in pencil manufacturing can be traced back to 1662, when Friedrich Staedtler listed pencil making as his main profession. The company still considers its pencil line as its core product category, and continues to lead the segment with innovations such as STAEDTLER Lumocolor permanent pens.

Consumers seem to agree with the fact the company knows something about making quality pencils. With low-cost brands flooding the market, STAEDTLER continues to enjoys 70% market share in Germany and is also the European market leader.

Consumers Still Want to Feel Part of a Community

Successful premium brands are very good at building a community around their brand.

Many premium brands understand that their brand is much more than a product; brands such as Staedtler, Moleskine, Ducati, Harley-Davidson, Bosch, have become experts at nurturing and learning from their user communities.

The task of transforming a potential client, who had just stumbled across your company website, into a brand ambassador who would eventually set up a local fan club for your brand, although resource intensive, is also very rewarding.

Building a community is necessary for premium brands. With the “community” approach, the company sets up a conversation platform that is accessible to the masses, which is being used not only to receive the company messages, but to become “message transmitters” within a given area of influence.

Consumers Still Associate Country of Origin with Product Quality

I venture to say another important criteria consumers use to judge quality besides price is the product’s country of origin.

This poses a strategic dilemma for western brands that can no longer afford to produce locally, hence not being able to use the “Made in..” as a badge of quality. It is also as great hurdle for brand owners in developing countries that have long been associated with low cost manufacturing rather than quality, trying to establish their own premium brands.

Premium brands that are able to sustain the country of origin claim use it to their advantage. Walk any trade show in the western hemisphere and you will notice “Made in Germany”, “Made in Italy”, “Made in Switzerland” boldly displayed by brands who manufacture their product locally.

As I mentioned in a previous article on place of origin branding, many brands “borrow” the common associations consumers make with a specific country, and transform them into differentiating elements that help them compete locally and internationally.

Given the political and social climate we currently live in, consumers will shift their preferences even more towards brands that are manufactured locally, and/or in countries that have built a strong reputation in the category.

Consumers Still Want to Own Brands Who Reflect Who They Are

We all look for brands that make us feel good about our choice. And we all love a good story.

Successful premium brands do just that: these brands are great storytellers and make consumers good about their purchase. provide emotional benefits- premium brands make you feel good about your purchase.

Buying an electric vehicle is as much saving money on gas as it is about doing your part in protecting the environment. Incorporating more organic ingredients into your meals is as much about your family’s healthy eating habits, as it is about living a healthy and fulfilling life.

Shoppers seek premium brands for the self-expressive benefits provided. Premium brands allow the opportunity to communicate who you are and what you value as a person.

I hope the reasons above will inspire you in building your premium brand strategy. In fact, every company that is serious about growing its business should consider adding a premium brand to its portfolio.

Profits and customer loyalty aside, cultivating a premium brand provides a sense of focus and direction, and provides great flexibility for growth and staying relevant.

Michael Baicoianu is a premium and luxury brand strategist, and the publisher of Michael is based in Toronto, Canada.

How to Build Trust in Your Brand

brand trust

If I had to rank Brand Managers’ responsibilities by importance, building brand trust would be at the top.

Brand trust is slow to build and easy to lose. The best Brand Managers can hope for is to position the brand in the most favourable light by consistently delivering on its promise at every interaction with the consumer.

The Journey of Discovering a New Brand

Let’s think of our approach as consumers to a new brand.

We first discover it though an ad, a promo flyer, or notice it on the store shelves among a myriad of other brands you’re already familiar with. Our first instinct is to probably ignore it, unless there is something special about it that raises our interest, a hook. Otherwise we don’t usually bother to investigate further, since there are so many alternatives you’re already comfortable with.

Generally speaking we are hesitant to try something new, especially when the existing solution works just fine, and there is no perceived new need that needs to be satisfied.

We may also come across a new brand via a recommendation from a person you trust, be it a friend, co-worker or relative. Suddenly, the trust level in the new brand increases exponentially, as the recommendation comes from a trusted source.

At this point we decide to look into the brand more closely. We visit its website to learn more about the products, availability, warranty, returns, customer service, etc. If the information inspires confidence, we then expand our by “Googling” the brand and its products, read customer reviews, consumer opinions, and direct comparisons to brands you already know.

Finally, if the research raises no red flags, we are willing to give the new brand a try and look for an incentive to do so. Ideally the incentive will make our purchase risk-free.

Our hands-on experience with the brand goes along way to influencing our future attitudes and perceptions towards it: dislike, indifference, happiness or loyalty.

Building Brand Trust-the Brand Owner Perceptive

Now that we’ve mapped the customer journey to discovering a new brand, it’s time to list the elements brand owners have to put in place to turn as many customers into brand ambassadors. Remember, trust is making people believe the brand is reliable, and will deliver on its promise.

New brands often try to impress customers with grandiose statements, mostly centred around their vision, mission and values. While I strongly believe in their importance, in the initial phase of brand discovery these elements should be used as internal guidelines, rather than key brand differentiators.

While visions such as making the world a better place, eradicating world’s poverty, saving the environment, empowering and inspiring people are very motivating, brand building process starts differently.

5 Steps to Building Brand Trust

Brand trust is built by making small promises that benefit customers directly and are fulfilled rigorously. Below are some practical steps to building trust in your brand:

Get your house in order-think of the many times you rushed to clean the house before the guests arrive, to make a good first impression. Just like your house, you have to make sure your brand is ready for prime time, with a reliable product that does what it’s supposed to do, enough stock to satisfy the demand, timely delivery and strong customer support.

Customer support is of paramount importance for a new, unknown brand, as customers will probably have a lot of questions before and after purchase. Your brand’s functional and operational performance affects the customers directly, and sets the path for success or failure.

Educate your market about your product-a step often overlooked by brand owners, who are deeply involved in product design and manufacturing, that they often “forget” to capture and present this valuable information to the consumers.

Depending on the product, market education includes everything from practical information such as product functionality, warranty, pricing, and availability to branded content (establishing brand credentials, what makes the brand different and better than current alternatives).

I met many manufacturers who believe people should just buy their product because it’s available. In fact, brand preference goes beyond price and availability. Making as much information as possible available to consumers proves you are a serious player and positions your brand as a viable alternative.

Seek reputable distribution-your brand’s distribution channel plays an important role in establishing its reputation. What brand would you trust more: one sold through the back of a truck, or one sold by an established retailer?

Securing a distribution agreements with an established retailers goes a long way to penetrating a new market for two reasons.

First, the retailer lends its credibility to the new brand, thus offsetting the fear of the unknown.

Second, the new brand can instantly tap into the retailer’s established customer base, gaining exposure and trial.

For these reasons, linking the brand with an established retailer is worth every concession you can make, and should be treated as one of the most important marketing investments.

Encourage trial-there is no better method to validate your assumptions than to facilitate the direct consumer interaction with your brand. The second most important marketing investment you should make is giving consumers easy access to your brand.

Remember, consumers are reluctant to try something new, especially if they are happy with the current incumbents. In order to encourage trial, your strategy should be identify the perceived risk factors associated with trying your brand, and overcome these factors one by one, thus guaranteeing a risk-free purchase. Some factors are simple and inexpensive to overcome, others not so much.

Start small, learn and adapt– a good strategy to launch a brand is to target a narrow segment of the market, before executing a full-blown implementation.

This strategy allows brand owners to collect feedback, learn and adapt-another advantage of a small-scale approach is the opportunity to gain insight into how consumers interact with your brand, and turn their positive feedback into social proofs that will further validate your brand.

Most importantly, this is a chance to use the negative feedback to make product improvements, clarify your marketing message, and fine-tune your offering, before reaching the critical mass.

You will undoubtedly have unhappy customers for reasons you can justify or not. Regardless, use these interactions to raise your game, be transparent and provide a solution your customer is happy with.

Tackle all misconceptions early and you will and turn these customers into brand ambassadors.

Remember, brand trust is achieved in baby steps.

Photo credit: jbosari on Flickr

Michael Baicoianu is a premium and luxury brand strategist, and the publisher of Michael is based in Toronto, Canada.

How To Build and Protect Brand Equity

brand equity

Building brand equity should be the number one priority of any business, big or small. Positive brand equity takes a lot of time and resources to achieve, hence the need to start from day one.

Overwhelmed by daily tasks, brand owners can easily lose sight of this strategic business objective. Moreover, brand equity can be an abstract concept that is difficult to understand and quantify.

This article aims to demystify the concept of brand equity and convince brand owners of its importance.

What is Brand Equity?

When first launched, a brand is just a name tied to a product or service. Slowly (or more rapidly depending on the budget), through voluntary and involuntary actions, reactions, and behaviours, that name surrounds itself with reputation (positive or negative), and a new brand is born.

Brand equity is a fancy name for how strong a brand is, and how much it’s actually worth to the business. Brands that are highly regarded by customers enjoy positive brand equity; those that disappoint to the point of people avoiding them altogeher, have negative brand equity.

Brands can be evaluated as company assets from many angles:

Brand as a financial asset: if people shopped solely on price, there would be no need for branding; the product with the lowest price would always win.

In reality, all of us are often paying a premium for a particular brand, because of the tangible and intangible benefits we associate with that particular brand. The price premium a brand commands translates into incremental revenue for the business; brand equity is directly proportional with the revenue it generates.

A brand’s assessed value could greatly exceed the physical assets (buildings, inventory, infrastructure, logistics) of a business.  Let’s look at top five most valuable brands in 2018, published by Forbes:

  1. Apple ($170 B)
  2. Google ($102 B)
  3. Microsoft ($87 B)
  4. Facebook ($73.5 B)
  5. Coca-Cola ($56.4 B)

Looking at the list above it’s hard to believe how much equity these brands have managed to accumulate, given that two of them are less than 20 years old.

Brand as a conditional asset: it has been said that behind every successful man is a great woman. Similarly, behind every successful brand is a great product (or service). Branding is not possible without the support of a product or service.

Unfortunately, many great products never become brands.

Investing in product development, but failing to build a brand around it leads to two alternatives: others will build their brand around your product (you essentially being a product supplier), or your product will be eventually copied and launched at a lower price.

A good product is the foundation of positive brand equity; never forget to turn your product into a brand.

Brand as an influencer: we like to believe that our purchases are based on rational decisions; however, neuroscience, psychology and consumer behaviour research has shown that humans are not as rational as we think.

Our behaviours are strongly influenced by brand messages, the tone of those messages, and the interactions of those around us with the same brands. Brands have the power to influence us.

Let’s look again at the number one brand in the list above, Apple. Although the company’s products are sold at a price premium, Apple enjoys one of the most loyal consumer base. The brand has managed to influence its audience through product design, advertising, PR, and other intangibles people associate with it.

Building Brand Equity: The Journey

About 10 years ago, I was involved in launching a new brand, in a mature, highly competitive category. I still remember the presentation made to the management team, specifically their lack of reaction as I was going through the brand name suggestions.

Envisioning a brand behind a new name isn’t easy. My colleagues didn’t know how to react; the name was new, pretty generic, and unlike anything they were familiar with within the category. My strategy involved putting the name in the context, and illustrating how this new brand will be part of people’s life.

A brand’s power of influence is directly related to its assets. These assets include:

Brand awareness-the level of familiarity consumers have with your brand goes a long way to building brand equity. Brand awareness can be of two types: unaided and aided. Unaided brand awareness, that occurs when a consumer names your brand in a specific category without being offered any clues, is more valuable in building brand equity than aided brand awareness. A high level of unaided brand awareness means the brand is top-of-mind in its category.

Brand values and personality-our relationships with brands mirror the ones we have with people. We have brands we love, brands we hate, and brands that don’t mean anything to us. We have brands that express who we are, brands we avoid at all costs, and brands we deal with because we have to.

Brand personality and values are tricky to communicate and consistently deliver on. Building positive brand equity requires constant brand evaluation and reinvention; many established brands go through identity crises and have a hard time keeping their values relevant to the constantly changing audience.

Brand preference-the ultimate sign of brand strength. Brands that are preferred by consumers even if they have to pay a price premium or go through great lengths to acquire it enjoy positive brand equity.

Brand preference translates into customer loyalty, a sign the brand has moved from being known and considered to actually influencing consumer behaviour. Let’s think for a moment of some brands that enjoy strong consumer preference: Apple, Nike, Harley-Davidson, Ferrari. These brands transcend their respective product categories and have become status symbols, and a reflection of our aspirations and how we want to be perceived by our peers.

Measuring Brand Equity

Brand equity can be measured from at least two angles, namely the consumer and brand owner perspective.

The indicators that determine brand strength from the consumer perspective include the levels of brand awareness and preference, customer satisfaction, loyalty rate, brand associations, and emotional connections consumers have with the brand.

From a brand owner perspective, the most accurate assessment of brand strength is reflected in the price a potential buyer is willing to pay to acquire it. Other analytical indicators that are a reflection of brand strength include brand’s ability to generate profits, the price premium the brand is able to command versus the closest competitors, its market share, growth rate and growth potential.

Protecting Brand Equity

Building positive brand equity is only half the battle; protecting it is proving very challenging, even for established brands. The Volkswagen diesel scandal, United Airlines incident, and various harassment accusations that lead to the creation of the #MeToo movement are concrete proofs that the line that separates positive from negative brand equity is very volatile.

On the product front, competitive advantages are short lived. Successful products have to fight less expensive alternatives in a matter of months; sustained the product advantage requires constant innovation, which is time consuming and expensive. To tackle this challenge, brands have to move quickly from functional differentiation to owning space in consumer’s heart.

Which leads to the second challenge, protecting the brand message.

We live in a highly transparent society, where every move, action and behaviour by both people and brands is quickly scrutinised and labelled. Brand messaging is mostly controlled by its community, with the brand manager acting mostly as a moderator, and initiator of new conversations.

Companies must do a great job at controlling the things they can: offering a great product, providing excellent support, building an inspiring brand story and be honest and transparent with their customers, and most importantly adapting to change. The rest should follow into place.

Photo credit: Kim Unertl on Flickr

Michael Baicoianu is a premium and luxury brand strategist, and the publisher of Michael is based in Toronto, Canada.

Pricing Strategies: Is Competing on (Low) Price A Sustainable Strategy?


The following statement is part of “Pricing Strategies 1 on 1”: positioning your brand as the lowest priced competitor is a risky strategy. And in most cases it is, at least in theory.

The economic reality is different. With little to no meaningful differentiation between products,  operating on skinny margins is a common strategy. The low price pressure is experienced by everyone in the supply chain: manufacturers, distributors, agents, and service providers.

The “Extreme” Consumer

As a society, we’ve come to expect excellent products at rock-bottom prices, and flawless customer service. Consumers have become polarised in their spending habits: the same person can spend a lot of money on things and experiences that convey a certain status, and close to nothing on other life necessities that are not as “flashy”.

There are many reasons behind this trend:

-the job market is more precarious than ever, especially for millennials. Full time jobs that pay well, are relatively stable and offer good benefits that have been enjoyed by the baby boomers are quickly disappearing. The new jobs are often short term, part-time, and offer hardly any perks, hence the need to spend wisely.

-the gap between the rich and the poor is widening globally. More people live frugally, either by choice or necessity.

-millennials are less obsessed with owning “things” put more value on “experiences” . “Owning” has been replaced with “sharing”.

-the same person can illustrate the spending extremes, indulging in luxury purchases that convey a particular status, while rationalising drastically in non-essential categories.

The “Stuck In the Middle” Danger

The above trends illustrate a new reality brands have to face in search for identity: the mid-market segment is slowly disappearing. Being “stuck in the middle” is a serious threat for many brands.

Nowhere is this trend more noticeable than in retail. In North America, 2017 has been a brutal year for retail. Many well-established brands, that have been a staple for many generations, have either filed from bankruptcy or announced massive store closings: Sears, Toys ‘R’ Us,  Gymboree, Payless ShoeSource, RadioShack, just to name a few.

As players is the medium price point are struggling to find their value proposition, brands at the 2 extremes are prospering.

Given this reality, brands will have to make a choice to move either up or down, and re-invent themselves. Many will find it easier to move down, as turning a generic brand into a luxury one is an almost impossible task.

Is the Low-Price Strategy Viable?

As we’ve seen above many brands are forced to consider becoming a low-priced competitors, which begs the question: can you make the low-price strategy work?

The short answer is yes, if executed properly. Many businesses claim to offer “best-value” to their customers, but for most the promise is just a meaningless slogan.

When it comes to executing the “best value for money” strategy to almost to perfection, I can’t think of a better example than American retail giant Costco.

For those of you not familiar with the brand, Costco is the second largest retailer in the world after Walmart, and  the largest retailer in the world in certain categories such as wine, organic beef and rotisserie chicken.

While most  retailers struggle to attract customers via expensive marketing campaigns promoting aggressive price cuts, Costco customers have to pay an upfront annual fee for the privilege of shopping there.

Enjoying a yearly membership renewal rate around 90%, Costco plans to open another 28 locations in 2018. Costco has also built a reputation of looking after their employees, who enjoy good benefits and work conditions.

How does Costco manage to prosper, at a skinny margin (said to be between 8%-10%) in an environment where most competitors are forced to close stores or file for bankruptcy? A closer look at its business model will give us the answer.  Here is how Costco does it:

Narrow product assortment- traditional business wisdom dictates that the more products in the assortment, the higher the sales. Line extensions are the preferred growth strategy, to the point where consumers are overwhelmed by the number of choices in every category.

Costco assortment consists of 1 or 2 choices in each category, which translate into high inventory turnover, low acquisition costs, and maximised store space. Costco shoppers deal with less uncertainty as to what product to buy, the limited options forcing them to make a decision.

Smart packaging: every product manager knows that packaging costs can really add up. For some brands packaging is part of their DNA (Apple for example). For Costco, packaging has a strictly functional value. As a result most products are backed bulk, directly on pallets, with no fancy signage. In its quest for cost efficiencies, the retailer pays attention to the smallest detail, such as how the shape of the packaging influences the number of products that can be stored on a pallet.

Excellent buyers-Given the narrow product selection, Costco buyers are tasked with the major responsibility of selecting the 1 or 2 items that will make it to the store shelves. They have the understanding of the market, product knowledge, negotiating skills, and decision-making capabilities to always deliver on the brand promise: the best value for money. Costco’s success is due in part to its buyers being the best in the business.

Minimal (but great) service: A low price always comes with trade-offs, and Costco is no different. The retailer does not offer many of the services offered by traditional retail (in exchange for a between price), while over-delivering on the essential ones.

Costco does not employ sales clerks, merchandisers or store designers. Costco stores are basically giant warehouses. However, Costco is famous for its excellent service: best exchange/return policy of any retailer (including membership refund in case you are not satisfied), no risk purchases, cashback rewards, speed of service and the overall customer service.

High quality products (including a reputable private label). We often associate low price with low-quality products. This is not the case at Costco, which has built a reputation for high quality products. The retailer assortment consists of brands consumers are familiar with, eliminating the need for expensive advertising and educating the consumer. The retailer also managed to build and one of the most trusted private label brands in retail, Kirkland, which generates a quarter of its total sales.

In a nutshell, Costco turned the traditional retail model on its head, by doing the exact opposite: narrowing the assortment, rationalising packaging, investing in employees, eliminating non-essential expenses, and offering high-quality products.

Your brand might have to adopt the same bold strategy in order to succeed. That being said, simply copying the strategy above will not be enough, as many brands have already discovered. What sets the winners apart is the discipline and consistency in execution.

Photo Credit: Mike Mozart on Flickr

Michael Baicoianu is a premium and luxury brand strategist, and the publisher of Michael is based in Toronto, Canada.

Indian Luxury Education: An Eye Opener

This is a guest post by Love Ranga, Chief Strategy Officer and Author, The Ghost of Luxury

September 2008

“So, what do you know about Luxury Retail?” asked the interviewer.
“Sir, in Luxury Retail we sell expensive products,” replied the candidate.
“And?” the interviewer persisted.
“Here the customer is the ‘rich’ king,” the candidate answered with a big smile.
The interviewer laughed and continued,” Can you name a few luxury brands?”
“Sure, sir. Versaake, Louiss Vuittan, Zeghna-”
“Interesting way of putting them across. How are the three different from each other?” the interviewer scratched his head.
“They are all the same. They sell high quality luxury fashion,” pat came the reply.

The Background

Such was the status of ‘so called’ potential work force when India had just opened up to structured luxury retail. To meet the high standards, the brands in the business of conspicuousness had no alternative but to poach manpower from hospitality and aviation industry.

Gradually, as has been the case elsewhere, was felt the need of absolute professionals with deeper understanding of luxury brand management. Hospitality professionals no doubt displayed sophistication, but lay flat in application of luxury strategy. For apparent reasons, most of them were restricted to front-end, selling goods at the boutique.

Indians who travelled to European institutes, specifically to become skilled at the art of luxury, gained immense favour back then in India. Seeing the gap, institutes like IIM and SDA Bocconi introduced specialised short-term executive courses in India.

It was not until 2014, the country could see its first full time post-graduate course. Pearl Academy runs a postgraduate and even an undergraduate program in luxury management.

Today, the competition grows immense with new names like Fad Academy, Instituto Marangoni, SP Jain, MBA ESG and more finding their feet in Indian Luxury Education segment.

Content Management

Courtesy legendary maharajas who revelled in brands like Rolls Royce, Chaumet, Jaeger-leCoultre, Boucheron, Vacheron Constantin, India has since long been acquainted to luxury consumption.

However, there never existed any firm connection with the contemporary concept of luxury, something Europe is famously known to practice. As a result, the first courses struggled with content generation and management.

The state of affairs in fact, has not improved much. Indian academicians approach the subject of luxury, taking cues from generic business management, marketing and retailing. The Indian Luxury professionals, on the other hand, for obvious reasons fall short on academic rigour required to deliver such niche courses.

A more serious issue is the lack of content. Either the faculty could not comprehend the available textbooks on luxury, or they could not build upon them to accommodate long-term courses. Most did not aim to do research to create relevant content of their own.

The students pursuing these courses, quite often complain of redundancy and generalisation, widely triggered by basic brand study and rigidity of teaching modality.

The Foreign Association

It was unambiguous from early stages that any luxury course in India would need a foreign association. How else can Indian students witness the true luxury destinations like Paris, Milan and Switzerland?

Every such course therefore, is either validated or run in collaboration with a foreign counterpart. This, understandably, leads to division in revenue and equity between the two institutes.

In this regard, Roberto Riccio, CEO of Instituto Marangoni has been smart enough to open a new campus in Mumbai. If it offers a full time course on luxury in future, its students will get to remain with the same school throughout their modules in India and Europe.

The other schools must learn if they have to remain competitive. Of course, their Mumbai campus is not only about Luxury courses.

A foreign tie-up also addresses the crunch of meaningful and exciting content. The experience imparted by the foreign counterpart, paired with cultural excitement becomes so overwhelming that students find the inputs of Indian institute vague and insignificant upon comparison.

The Treatment

For a moment imagine a luxury product, in concern of which its creator focused only on positioning it at a high price, but did not pay attention to detailing and artisanship. Most luxury courses in India are the result of similar ideology.

Needless to mention, they are more expensive than regular design and management programs. If not for the heavy revenue they bring in, the basic expectation of quality inputs deserves attention of the same strength.

To achieve success in terms of numbers and content quality, the treatment of luxury courses must change. Right from marketing collaterals, to counselling sessions, from assessment strategy to grooming sense of faculties, pretty much everything should undergo an overhaul to meet the standards of luxury.

Teaching Talent

The ideal faculty is the one in possession of both luxury trade experience and academic understanding.

We have briefly touched upon how the two cadres of academicians and Indian professionals fail to provide real value to luxury courses. The solution lies in hiring either, and further training them to inculcate the other missing half. Training the teachers therefore is of utmost significance.

This also means that one kind of training plan cannot suit everyone. It must be individually tailored, depending upon the kind of experience one has gathered in past.

Another, crucial aspect here is knowledge sharing between entire course team. The business of Luxury relies on strict strategic coherence. Hermès is probably the example of highest order.

The students need to learn the art of creation and maintenance of coherence before they head out in the industry. A faculty cannot preach it, without first infusing coherence within the course. The entire team must come together to align individual course deliverables towards a specific end.

A course on luxury must exhibit a character of its own, for it is in no way less than a luxury product. This goes beyond the traditional approach of Constructive Alignment.

Teaching Methodology

‘Value for money’ is an ideology deeply rooted in the Indian culture. No matter how rich, one will not buy a luxury automobile without bothering about the mileage, something that technically becomes illogical at that end of the spectrum globally.

It is not very different with Indian students when they indulge in the expensive service of luxury education. They expect wow factors in return, in addition to decent internship and placement at the end.

Which is why, one teaching medium fails to command attention. PowerPoint presentations cannot do the trick every time. Teaching modality, assessment tool, teaching strategy, all must change regularly to maintain interest.

The Showmanship

The term ‘faculty’ may have been used in this article until now for ease of understanding, otherwise faculties must assume the standard and mentality of a ‘trainer’ while dealing with Indian Luxury Education aspirants.

Showmanship, is what is the need of the hour, something mostly, the trainers are identified with. A surprising action, a shocking revelation, an unusual teaching style, a bit of entertainment is the right way of delivering such expensive courses.

The modern concept of luxury may belong to Europe, but it is only a matter time when Indian clientele and brands decipher the absolute codes of luxury. Many global luxury brands are already here, and more are eyeing entry in this market of burgeoning high net worth individuals.

The demand for learned professionals is surely going to rise in the coming years. The Indian Luxury Education segment is not even a decade old, the misses and hits are part of the learning. What matters, is the evolution. Is it not evolving at a healthy pace?

Love Ranga is a luxury business leader, educator and an avid learner. He is the originator of ‘Brand Extremity’, hailed as the most aggressive tool ever devised to facilitate indefinite coherence and extreme differentiation for luxury brands. His most recent book, ‘The Ghost of Luxury’ is widely acclaimed as an exceptional content on strategic luxury brand management.

Post his experience with brands like Versace, Corneliani and John Smedley in India, in the capacity of Chief Strategy Officer; he strategized India’s first short-term Executive Luxury Brand Management course in association with SDA Bocconi, Milan. Later, he joined a Laureate Network Institute to lead India’s first full-time programs on Management of Luxury, validated by Italian design institute, Domus Academy.

Backed by a decade of intense experience, he consults for various luxury brands and luxury education institutes across the globe. Often invited as speaker and trainer, he is described as the facilitator of innovation and creativity.

Michael Baicoianu is a premium and luxury brand strategist, and the publisher of Michael is based in Toronto, Canada.

How to Use Amazon to Build Your Brand

how to build your brand on Amazon

It is a reality acknowledged by more and more marketers: a brand can no longer rely on intermediaries such as distributors, sales agents and independent retailers to convey its messages to the target audience.

A strong brand communicates directly with its end users. Their feedback is invaluable to brand owners in answering questions such as the ones below:

Does my product address the needs it’s designed to?

Why are people buying my product?

Is my product easy to use?

Are there any product defects that deter people from buying it?

What is the optimal price for my product?

Is my company able to provide a shopping experience that matches customers’ expectations?

The longer the distribution chain, the more difficult it is to find answers to these questions, meaning delays making adjustments and stay competitive.

Selling direct shortens the process and allows you to get feedback faster, but you still need to have a large enough customer base to obtain any meaningful results.

Amazon as Brand Building Platform

A strategy I personally employ and recommend to new and established brands is to use Amazon as a distribution channel.

I am not suggesting Amazon is a good fit for any business. If your product is too bulky, heavy, complicated to use, or requires installation by a third party, the online channel is probably not your best option.

Selling on Amazon is important simply because of its dominant retail presence, particularly in the United States. Consider these facts:

  • Amazon has become the go to platform for product searches, surpassing the traditional search platforms such as Google or Bing.
  • Amazon accounts for more than half of all online sales in the USA.
  • As of September 2017 close to 90 million US shoppers are Amazon Prime subscribers, spending on average $1300 USD per year.
  • Many top product search results on Google belong to Amazon product listings.
  • Amazon advertising platform delivers much better ROI than those of traditional players such as Google, Bing and Facebook.

Google Versus Amazon

Just like Google, Amazon acts as a huge search engine platform people use to research and shop for products. However, there is an important distinction between the two players when it comes to online shopping.

While Google is primarily a research and discovery platform, Amazon users are primarily shoppers who have an active need they need to fulfil.

Amazon provides these shoppers with all the tools they need to make the purchase: instant checkout without the need to visit another website, Amazon Prime benefits, product comparisons, customer reviews; all backed by Amazon’s reputation as the largest ecommerce retailer (unlike Google, perceived as a search engine).

Amazon provides brands with a huge benefit: millions of shoppers who are actively looking to buy.

For this reason, many “young” brands have used exclusively Amazon as a launch platform.

5 Reasons to Build Your Brand On Amazon

Here are some of the benefits of using Amazon to build your brand:

Building brand exposure-given the massive Amazon traffic, both new and established brands have the opportunity to gain brand exposure.

For new brands that are unknown to shoppers and struggle with initial exposure and building credibility, Amazon offers few advertising tools that are very effective in building awareness and initial sales. Even low to moderate advertising budgets can generates hundreds of sales monthly.

Once your brand is starting to sell, it will rank higher in organic searches, which leads to additional exposure and sales.

Finding optimal price for your product-one of the biggest challenges brand owners have is pricing their products for maximum profits.

In a traditional distribution model price elasticity is slow to test and measure. Intermediaries and retailers will fight against any price change, and ask for grace periods ranging from a few months to years, depending on the agreement.

The only “agreement” you need to reference when selling on Amazon is your break-even point. Amazon shoppers are used to price fluctuations, so the negative impact will be non-existent. Moreover, price adjustments can are implemented in as little as 15 minutes.

Keeping the break-even point in mind, sellers can adjust prices up and down, and watch the impact on sales. With proper tracking, brand owners will identify the optimal price that allows the best ratio of product sales to profits.

Getting honest product feedback-one of the main benefits of selling on Amazon is the honest customer feedback you will receive.

Amazon provides brands with real-life feedback; while survey sites can offer you the audience to test some of your concepts, the level of involvement is different. Survey audiences receive your product complementary, so the chances of biased feedback are high.

Amazon customers are actually paying for your product; as a result the feedback you get from them is as genuine as you can possible get. You might agree or disagree with it, but these are your brand’s perceptions in the marketplace.

This information is invaluable to brand owners, as it allows them to identify key competitive advantages, uncover new uses for their product, learn about real life experiences and applications for their products, and correct potential defects that turn customers away for purchasing it.

Another useful strategy is to monitor the feedback on competitive products, especially the negative feedback. This will prevent you from launching products with the same flaws as your competitors, which can turn into a big competitive advantage.

Growing sales (or getting initial sales)-using Amazon as a distribution channel can significantly contribute to your brand’s bottom line. There are thousands of brands that sell in the millions of dollars on Amazon, and solo entrepreneurs who make a living exclusively from sourcing and selling on the platform.

New brands cat get those much needed initial sales and revenue from Amazon, which will allow them to expand and grow.

Getting your product distributed via traditional retailers is usually very difficult for an unknown brand, with limited resources. In contrast, accessing millions of shoppers on the on the amazon platform can be done in a matter of weeks.

Improving operational performance-Amazon has built its impressive reputation on the high standards the company maintains with the employees and suppliers. As an Amazon seller you will be held accountable on a number of performance indicators, ranging from responding to customer messages within 24 hours, maintaining proper stock, shipping products within the designated time window, proper packaging and of course, compliance with the law.

While very demanding at first glance, this high level of accountability is a great chance to improve your company’s overall operational performance, which will benefit all your customers, regardless of the distribution channel.

I can argue that of all the steps needed to sell on Amazon, making sure your operational performance matches Amazon standards has to be address first.

Not All Amazon Platforms Are Created Equal

As an Amazon seller you have access to two main platforms: Amazon North America (USA, Canada, Mexico) and Amazon Europe (UK, France, Germany, Italy and Spain). All other Amazon platforms such as Amazon Japan and India are much more difficult to access as an international seller, while Amazon Australia is still in its incipience, but big plans lay ahead.

As an active seller on Amazon North America and Europe I encourage you to sell your products on as many Amazon platforms as you possibly can.

Although in terms of sales volume Amazon USA is the clear winner, selling in multiple markets will allow you to understand the various nuances of exposing your product to a local audience.

Amazon: Just One Piece of Overall Distribution Strategy

Even if your primary distribution strategy is not online, you should still consider listing your products on Amazon for the many reasons described above. That being said, do not rely exclusively on Amazon to sell your products.

In the end, Amazon is an independent distributor you have very little control of. Any change Amazon decides to implement can, at any point in time, affect your ability to sell on the platform. If Amazon is your only channel, you business will be at risk.

Moreover, as an Amazon seller, you have little to know information about who is actually buying your products. Amazon completely forbids any communication with their customers, other than related to a specific order .

As a result, your strategic goal should be to diversify your distribution channels, and invest in building a direct relationship with your customers.

Michael Baicoianu is a premium and luxury brand strategist, and the publisher of Michael is based in Toronto, Canada.

Starting Your Own Business? Read This Branding Reality Check First

You feel stuck in a boring 9 to 5 job.

You know you can do more with your life.

You have the determination to build your own brand(s).

You want to leave a good legacy for your children.

All of the above are good reasons for starting your own business.

You’ve probably come across hundreds of articles that tell you how easy it is to start your business, get leads and make money, all in a short period of time. And yet 25% of new businesses fail in the first year, and 90% close within 10.

Often times, new entrepreneurs discover the harsh realities of starting a business after they’ve already invested important financial and human resources into bringing their idea to market.

For those of you planning to start on your own, here are some things you should be aware of before launching your new brand.

Every successful brand is backed by a good product. A good product does not automatically translate into a successful brand, but a bad one is a guarantee for failure.

I always stress the importance of offering a good product to the success of a new business during my discussions with new entrepreneurs.

The product is one of the tangible elements your clients come in contact with, touch, feel and use to satisfy their needs. It is the first investment people make in your new brand.

Established brands can survive occasional product failures, due to the amount of consumer trust they enjoy. Young brands don’t have this luxury. Products can build or ruin a new brand reputation, hence the need to get it right the first time.

Don’t think only of physical products, but your services as well. Word spreads quickly, and once negative perceptions start to spread it’s very hard to recover.

Do not launch a product that is not 100% ready to hit the market. In their quest for initial feedback and sales, many entrepreneurs decide to rush a product to market and tweak it as they go along.

Going back to the previous point, an “almost-ready” product might not ever get a chance to be finalised. If the initial version is negatively received, it’s almost impossible to reverse the trend.

What is a “market-ready” product, you might ask? Here are a few contributing factors.

The”market-ready” product performs as expected, with little to no failure rate and satisfies the need it’s suppose to. It does not rely on a technology or complementary product that will soon become obsolete. Finally, the product is offered at a price consumers are willing to pay and is easily available for purchase.

Building brand credibility is a slow and costly process. Creating the basic brand infrastructure (brand identity, communication materials, advertising) used to be prohibitive for new entrepreneurs on tight budgets, but not anymore. From fancy full service agency to websites such as fiverr and UpWork , it is relatively easy to find help for every budget.

Then the hard part begins.

Most of your marketing budget will be spent getting into people’s mind, letting them know your brand exists, and being on their radar when they decide to spend money. This is a slow and costly process for a few reasons:

The choice is abundant, almost intimidating, in almost every category.

Humans are reluctant to new and tend to resist change.

People are busy and always in a hurry (especially in America).

The average attention span is 8 seconds (down from 12 seconds in 2000).

Consumers tend to gravitate towards brand they are already familiar with, even after the occasional disappointment.

More and more consumers use tools to block brand advertising and unwanted email.

As you can see everything seems to work against new brands, so your patience and budget will be stretched to the maximum.

Strategies that involve tangible interactions are most effective in building brand trust and making sales. Regardless of what digital marketing experts tell you, consumers that can touch, feel and try your product have more chances of converting.

In his book “The Revenge of Analog: Real Things and Why They Matter”, author David Sax makes the case, supported by well-documented examples, that people are returning to things and habits digital experts announced obsolete: listening to vinyl, writing on paper notebooks and sticky notes and reading physical books.

In retail, brands that started out selling their products exclusively online have started to open brick and mortar stores for a more palpable, real experience.

According to Neil Blumenthal, founder of New York City eyeglasses company Warby Parker, “People were telling us ‘I want to touch and feel the glasses before buying them.”

I often get asked by people who sell services, such as real estate agents and mortgage brokers for strategies to market their business and get more customers. My advice is always the same: networking and referrals are the most powerful conversion tools; digital advertising doesn’t even come close to providing the same results.

In conclusion, your marketing plan for the new brand should include strategies that involves physically putting your products, and yourself, in front of the consumers as often as possible.

Repeat business is the fundamental sign of success. Generally speaking there are many strategies you can use to make the initial sale.

But if you want to know if your new business is succeeding, look at the number of repeat customers. Those customers have enough trust in brand to ensure its long term success.There are a number of reasons repeat customers are good for any business.

In case of a startup repeat customers mean more than lower cost of acquisition and positive word of mouth; they represent a sign that your strategy is working, and your product, service and messaging resonate with your audience.

Never rely exclusively on a distribution channel you can’t control to build your brand. There is a proliferation of third party retailers, particularly online, that will give you access to their platform to sell your brand, for a fee. You might be tempted to dedicate all your resources to servicing those channels, especially if you see positive results fast.

Starting from scratch and building traffic to your own website is a slow and costly process. Despite all your efforts, you will never come even close to matching the traffic amazon can generate for your product.

You can start selling your brand on Amazon, and benefit from all the instant traffic and demand, in a matter of weeks.

That being said, relying on Amazon to build your business is a mistake, for (at least) three reasons.

First, you don’t own the customer, Amazon does.

Moreover, Amazon may decide one day to ban your product (it happened to me) or to close your account for various reasons, in which case your entire business will simply collapse. Finally, on Amazon you are making a sale, but don’t build a brand.

This is not to say you should not sell your product through third party retailers. However this should be part of an omni-channel distribution strategy, focusing on building a distribution channel you can control 100%.

Always be aware of your financial situation. Although I don’t have any concrete evidence, I am pretty confident the lack of financial knowledge is among the top reasons new brands fail.

Most entrepreneurs don’t have a background in finance. Some of them even hate numbers. They have a great idea, and are determined to succeed bringing that idea to life, regardless of costs.

Unfortunately passion and determination are some of the ingredients needed to succeed.

The foundation of any successful business is its ability to generate profit. That’s not to say new businesses are, or should be profitable instantly. Building a new brand requires investments that will not be matched by revenue, for a period of time. That’s ok, as long as it’s planned for.

Running a business and having no idea of your expenses, revenue, break even point, taxes and other financial obligations, is like shooting in the dark. Regardless of how great and unique the idea, it will end up in failure.

If you are not confident in your financial skills get professional help. It’s the best investment in your new brand you can ever make.

The above is not meant to deter you from starting your business. Au contraire, I am a strong believer that entrepreneurship is the only way to go moving forward. I just want to infuse a dose of reality into your dreams, and prepare you for the long and sometimes challenging road ahead.

Photo credit: Alexandra Galvis on Flickr

Michael Baicoianu is a premium and luxury brand strategist, and the publisher of Michael is based in Toronto, Canada.

Premium Branding: 3 Tips to Market Your Business to High-End Consumers

Millennials have been the marketing industry’s latest target as they constitute a huge consumer group with high purchasing power. In fact, according to a report by Pew Research Centre, ‘Millennials have surpassed Baby Boomers as the nation’s largest living generation.’

About 75.4 million millennials (those between ages 18 and 34 years) and 74.9 million baby boomers (aged 51 to 69 years) exist in the United States.

Moreover, according to the 2017 Affluent Perspective Global Study by YouGov, ‘Affluent U.S. households will spend 1 percent more this year (in 2017) than last, for a total of $335 billion.’

Marketers, therefore, have all the reasons to focus on understanding and securing the millennial market.

The question, therefore, is: How! How marketers and brands can win over this affluent group of people?

In this post, we discuss three tips that will help you market your business to high-end customers, these affluent millennials.

Tips to Market Your Brand to Affluent Customers

As an increasing number of mainstream brands make their way into the premium category, it has become even more challenging for premium brands to distinguish themselves and retain their cachet and mystique.

The following tips can help premium brands reach customers and keep up with their business goals:

1. Embrace Uniqueness

What sets premium items apart from other mainstream items? It is their uniqueness and one-of-a-kind nature. Premium items were once made to the customer’s specification to ensure complete satisfaction and make sure the owner could take pride in owning the unique item – thus the high price!

Modern premium brands can also cash in on this trend and appeal to their specific client base. Take for example the case of Surmesur, the Canadian online retailer that offers precisely tailored clothing to their customers. The brand has gone a step ahead to attract the digital generation.

Surmesur uses proprietary software to create customised shirts and then allows customers to view the style on a mobile device (with the garment shown in 3D representing a customer). Customers are allowed to choose from a range of 8,000 fabrics and create a style that is unique to them.

2. Create Appealing Mobile Apps

A January 2017 survey by Ipsos (involving 850 US adult internet users with household incomes of $100,000 or higher) found that the percentage of people who have a mobile wallet app installed on their mobile devices has increased since 2013.

Of course, not everyone who has a mobile wallet installed uses it. But 86 percent of the respondents accepted using their mobile wallets. PayPal and Apple Pay are among the most popular wallets being used by consumers.

It is wise to target the audience through devices that they use the most.

The above statistics indicate that mobile commerce has become more popular among the affluent class.

By building a high-quality mobile app that showcases your products and allows customers to purchase products directly, you can offer a great user experience to your target audience.

Custom mobile apps make customers feel more connected to a brand. However, there is an abundance of mobile apps, so you need to do something different to make your brand stand out.

For example, the L’Oreal mobile app allows its customers to shop by scanning products directly from the magazine ads. Other premium brands such as Net-a-Porter and Victoria’s Secret have also leveraged the scan-to-shop technology.

Premium brand Michael Kors has also found a way to entice their elite clientele through their mobile app.

To help customers buy easily from Instagram, the brand encourages them to double-click on the images tagged with ‘#InstaKors.’ An email with a direct link to the product featured in the ads or posts is then sent to the customer’s inbox.

3. Don’t Make Products Too Accessible

Products that are easily available to the masses lose their charm rather quickly, while those in limited supply are perceived as highly appealing.

This is because the fear of missing out on having a specific product leads to impulsive buying. According to a survey conducted by WhichTestWon, the sale of products with a countdown timer placed on their pages is nine percent higher compared to those without a countdown timer.

This is especially true for customers in the premium market. For instance, Prodiguer, a premium vodka brand often launches its products in limited editions. The company launched its Juliet Immaculate Vodka with the Sue Tsai edition bottles.

Such initiatives help the brand to maintain the exclusivity of its products and keep the urge for obtaining their products high among the target audience.

Similarly, Hermès, French high-fashion premium goods manufacturer created hype for the Hermès Birkin bag and the result was a customer waiting list of six years.

Brands that are looking to improve their brand awareness and sales can leverage this technique.


The best thing about premium brands is that they are already recognised by most people, but attracting new customers and persuading them to invest in their expensive products can be a difficult endeavour.

The above tips can help you attract the attention of the affluent millennials and persuade them to become loyal customers.

Author Bio

Pratik Dholakiya is the Co-Founder of E2M, a full service digital marketing agency and PRmention, a digital PR agency.

He regularly speaks at various conferences about SEO, Content Marketing, Growth Hacking, Entrepreneurship and Digital PR. Pratik has spoken at NextBigWhat’s UnPluggd, IIT-Bombay, SMX Israel, and other major events across Asia.

As a passionate marketer, he shares his thoughts and knowledge on publications like Search Engine Land, Entrepreneur Magazine, Fast Company, The Next Web and the Huffington Post to name a few. He has been named one of the top content marketing influencers by Onalytica three years in a row.

Michael Baicoianu is a premium and luxury brand strategist, and the publisher of Michael is based in Toronto, Canada.

How to Build a Premium Brand

premium brand

Not all consumers are price sensitive.

As disposable income increases, people are willing to pay more for a quality product that will save them money in the long run. Increasingly people value quality over quantity, free time, craftsmanship, social responsibility, and local sustainability.

Premium brands are highly valuable assets for a few reasons.

The premium price usually translates into higher profit margins, as additional costs for product enhancements are more than covered by the price premium.

Premium brands are also often viewed as status symbols. Consumers take pride in owning premium brands and showing them to their friends, which in turn increases brand exposure and sales.

Finally, many premium brands appeal to people at an emotional level, offering consumers a sense of belonging to a certain social group, thus leading to increased brand loyalty.

Premium Versus Luxury: An Important Distinction

The process of building a premium brand starts with an important distinction between premium and luxury branding. Consumers use these attributes interchangeable when labelling a brand, depending on their social status and geographical boundaries.

Is BMW a premium or a luxury brand? What about Coach? The answer depends on who you ask.

However, understanding the difference between a premium and a luxury brand is important for the brand owner.

A premium brand demands a premium price because of superior attributes (design, functionality, service) that one can justify rationally. Premium brands reach the status symbol level after years of delivering on its premium promise.

In order to be profitable, premium brands, just like ordinary brands, are built on the principles of mass production, broad distribution, and immediate delivery.

A luxury brand’s high price cannot be justified rationally. While the foundation of a luxury brand is a quality product, the price tag greatly exceeds its functional value.

Luxury shoppers seek a sense of belonging to a certain social class, or very selective group of individuals.

Luxury brands are built on principles that are diametrically opposed to premium branding: limited production, selective availability, and  non-urgent delivery.

How to Build a Premium Brand

Although price is usually the first indicator of a superior product, charging a higher price than competitors does not automatically make a brand premium.

We’ve seen that investing in a premium brands is (in most cases) a rational decision. The purchase is based on a lot of research and competitive comparisons that bring justification to the price premium.

The starting point in building a premium brand is a realistic segmentation of the category you wish to compete in. The goal is uncover potential benefits consumers are willing to pay a premium for.

These benefits include:

  • lower cost of ownership
  • the easy of use
  • superior materials and ingredients
  • unique, distinctive, attractive, functional design
  • better performance
  • time savings
  • more “must-have” features
  • sustainable, ethically sourced products
  • local businesses and locally sourced products

We tend to think that premium brands exists only in “glamorous” categories such as fashion and apparel, automotive, and travel. While these categories get a lot of exposure and coverage, premium brands can be introduced in almost any category that presents such an opportunity.

AquaVial is a premium product in the rapid water testing category.

Many products in the category deliver on the basic consumer need to identify potential issues with their water supply before they become a serious risk: an easy-to-understand testing procedure, the ability to deliver results in 48 hours (versus up to 2 weeks in the case of laboratory testing), and a low cost per test.

AquaVial is based on an innovative technology that delivers at least two superior benefits: results are delivered is as little as 15 minutes (versus 2 days), and the ability to detect a wider range of harmful bacteria.

These are important benefits consumers value and are willing to pay a premium for.

Is Premium Branding Possible In Case of Commodities?

The short answer is yes; even tap water can become a status symbol.

Products that are very difficult to differentiate functionally can be bundled into a superior “overall package” and positioned as a premium offering.

The components of an overall package can vary from quantifiable benefits such as company responsiveness, better product delivery, superior warranty, and post sales service, to intangibles such as company’s “social” reputation.

All these benefits and the premium associated with each, are only relevant within the context of each category, by reference to the lower-cost brands.

The superior overall brand experience has become an even more achievable strategy in the age of product reviews, instant communication and feedback, and social media.

Price elasticity is very important when it comes to premium branding. Since premium brands are mass produced, the brand appeal has to be broad.

The premium price has to be within the reach of most people in your target audience, even if it requires small sacrifices.

If the additional features demand a price tag that is simply unaffordable, the product will not be able to be profitably mass produced and commercialised. Remember, you are building a premium, not a luxury brand.

Premium Branding: Communication Strategy

The goal of the communications strategy is to highlight the differences that justify the price premium. Some differences (such as superior design) are obvious and require little explanation. Others, especially the intangibles, require more work.

Higher price tags come with higher consumer expectations. Adequate training of staff that deals directly with consumers is a must.

The training should go beyond highlighting the superior technical features of the product, and include a “social” component. Employees’ social skills and knowledge can make the difference between a sale and a lost client.

Endorsements tend to work well for premium brands, especially for reaching the status symbol level. Influencers are typically attracted by the opportunity to associate with a premium brand, which in turn will elevate their image in the eyes of their audience.

(Premium) Branding is a Marathon, Not a Sprint

Premium brands have to be built on a sustainable competitive advantage.

An innovative new product that deliver superior benefits versus the existing alternatives should definitely be marketed at a premium price.

However, the market and consumer expectations eventually catch up. What has been perceived as innovative becomes expected.

In order to maintain the premium status a brands has to continually innovate or lower the price and join the pack of “me too” brands.

Michael Baicoianu is a premium and luxury brand strategist, and the publisher of Michael is based in Toronto, Canada.