Premium mass products have suffered from recent discounting at the hands of retailers
Premium beauty and toiletries products are vital to gain and maintain consumer interest... but they also swell margins for retailers, says Herbie Dayal
Brand managers, marketers and retailers often talk about products being ‘masstige’ or ‘premium mass’. These terms are used to indicate products which firstly differ favourably from basic products by some characteristics, secondly are therefore higher priced and thirdly are still available on the same shelves as the basic products.
The main characteristics separating premium mass from basic can be hard or soft or a combination of both. Hard differentiating characteristics are tangible and can include enhanced formulations, better fragrances and more ergonomic packaging (King of Shaves shaving formulations being a classic example of this). In recent times more and more importance has been placed on ‘natural’ products or organic products or simply products with less ‘nasty’ chemicals. Soft differentiating characteristics are based on perception rather than tangibles – these could include brand names, brand values and attitudes (to fairtrade, to the establishment, to packaging, to life in general). In other words how cool is the product in its attitude?
The creation of brands with premium mass appeal usually comes from smaller companies and performs two valuable functions in the supply of toiletries. First of all it maintains a high level of interest and buzz about what are otherwise fairly mundane products. Nobody talks about a basic washing product. They will however talk about the latest shower gel that is 97% natural and presented in humorous and innovative packaging from a brand speaking a language with which a segment of consumers can easily identify; just Google ‘I love Naked Bodycare’ and you’ll see exactly what I mean. This buzz is what keeps consumers coming back to spend time looking at retailer shelves.
The other hugely important function of differentiated premium mass products is to help category managers grow their business – not just by unit volume but also by unit value and margin. These products promote trade-up, inviting consumers to spend more on differentiated products. A 200ml bottle of shower gel can be bought for a few pence yet a huge number of these shower gels are sold at £3 - £5 each. At KMI Brands we specialise in premium mass products. Some of our products provide retailers with more margin per single unit sold than they would make with the sale of say six or seven units of a competing but basic product.
A real driver for the growth of premium mass products has also been the meteoric rise of alternative marketing platforms made available through digital media. Bloggers, followers, tweeters, social groups et al are much more likely to read and write about more differentiated and interesting products, especially those they feel they have discovered and which they want to share with their online communities. While many premium mass product companies could not compete in the hyper expensive world of conventional marketing (dominated in our industry by the likes of P&G, L’Oréal and Unilever) they can compete effectively in the digital media space – where brand authenticity, interest, integrity and overall tweetability replaces cash as a means of buying consumer mindspace.
Although it is obvious that retailer profitability would increase with each higher priced, higher margin product sold in substitution for a lower priced, lower margin product, curiously this has not always been recognised by retailers. In the past too much emphasis has been placed on volumes shifted and especially on volumes shifted in comparison to the competition. This insistence on volume market share growth has led to the intensive price promotional activity in which three-for-twos, BOGOFS etc have become the norm and premium mass products are increasingly sold at mouthwatering discounts. What’s the point of creating interesting products that can command a premium if they are going to be discounted most of the year? The margins required for innovation, more attractive packaging, better formulations and an overall better product just get discounted away, bringing a worse result for all. Retailers earn less margin, brand owners earn less margin and ultimately consumers will see less brand innovation. Promotions do not grow overall sales across the country – they merely make the same sales at lower prices.
On 1 March 2010 consultancy firm McKinsey said: “The recession has caused a lasting preference shift of consumers towards more basic products.” It went on to say that in some categories of packaged goods consumers were trading down and it (McKinsey) felt they would not trade up again. Back in 2003 Michael Silverstein in Harvard Business Review wrote: “Every masstige product is a candidate for death in the middle,” meaning that the positioning is subject to competition, both from mass products below and from luxury products above. However, we all have competition. As long as there are consumers willing to look at and pay for differentiated products there will be companies out there making products for them. Without this our toiletries and beauty industry would be a very dull place.
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