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.

How Should A Premium Brand Respond to Competitive Price Pressure?

Premium branding

Imagine this scenario: your company owns a premium brand with a lot of history, strong local manufacturing content and positive attributes behind it.

Back in the days when consumer had fewer choices your brand was shining and charging a price premium was not an issue. People loved your brand. But then the economy became global and your customer is bombarded with offers from your competitors for apparently similar products at a much more attractive price.

If this is happening to your brand, you are not alone.

The big question becomes: how do I protect my premium brand without going bankrupt?

My recommendation: launch a new brand to successfully compete in the newly created segment.

The biggest concern that most management teams have with this strategy is the danger of cannibalizing the existing premium brand. Based on our experience, in order to be successful a few tactics should be taking into account:

  • Use a stand-alone brand name, with no obvious connection to the premium brand. Don’t go for brand extensions such as X Light, X International, X Global.  Instead go slow, but safe: choose a stand alone name. The new brand takes more time and resources to build but your risk of cannibalization is much lower.
  • Develop a positioning strategy based on attributes that are meaningful for the price sensitive segment, and not for the premium one. Usually premium brands are positioned on emotions and experiences, while value brand use a product-based positioning. Think of Toyota (reliability) versus Lexus (“The pursuit of perfection”).
  • Leverage positive attributes associated with your company. If you are known for great service, speed of delivery, exceptional sales force, you can safely promote them when launching the value brand. These are attributes attached the your company, not the premium brand.
  • Be patient. Stand alone brands are built in time, especially in today’s crowded environment.

These tactics should work in both a business to consumer and business to business environment and should greatly diminish the risk of brand cannibalization.

Do you currently manage a premium brand? What challenges do you experience?

Image credit: Credit Score Geek