strategy+business is published by PwC Strategy& Inc.
 
or, sign in with:
strategy and business
Published: November 30, 2004

 
 

The Superpremium Premium

In 1970, the Clean Air Act required the industry to stop using tetra-ethyl lead to increase octane, and to switch to unleaded fuels that did not upset the performance of the catalytic converter, the prime tool for reducing vehicle emissions. At the time, leaded products accounted for 98 percent of all gasoline sold in the U.S. Amoco, with its early lead in what had been a niche segment, championed the move toward unleaded gasoline.

Still, this discontinuity in the U.S. fuel market threatened Amoco’s primacy by promising to commoditize unleaded gasoline. But Amoco had another advantage: By virtue of an extra refining step, its unleaded fuel was clear, and lacked the brownish tinge of other premium fuels. Amoco launched a marketing campaign that highlighted this key difference, renaming its premium product “Crystal Clear Ultimate.” In some markets, the company altered its pump mechanism so consumers could see the transparent fuel.

Because cars are a “high involvement” product for so many owners, that visible functional differentiation resonated emotionally with a sizable consumer segment, and gave Amoco two more decades of leadership in the premium fuel category — leadership that held even as improvements in automobile engines and the institutionalization of unleaded gasoline made premium fuels less distinct from regular gasoline, and ever less necessary for cars. Our own April 2004 survey of 2,400 fuel buyers showed that the overwhelming majority of premium fuel buyers still believe their vehicles require premium fuel, and see the purchase as “doing the right thing” for their cars.

Although overall consumer demand for premium fuel products is falling in the gasoline industry, Amoco has maintained its category share in regional markets where Crystal Clear is available. Additionally, BP, the owner of the Amoco brand, is still able to capture a price premium because of the brand’s legacy strength.

The conclusion is inescapable: Even when categories become commoditized, consumer loyalty to a once-distinct product can linger and continue to create value for the brand’s owners.

Translation Barrier
The Amoco story shows that premium-plus marketers must find ways to convert their briefly held, differentiating attribute into a sustainable psychological commitment from consumers. The way to do this is to break down the “translation barrier” between functional differentiation and emotional loyalty, building strong relationships with key consumers.

In our experience across product categories, crossing this translation barrier requires marketers to engage in four activities:

  • Distinction. Embed the differentiated product with demonstrative cues, such as packaging, taste, or significantly distinct “rituals of use,” that reinforce the product’s uniqueness to the consumer and, potentially, to those who interact with him or her.
  • Communication. Build brand credibility and support word-of-mouth promotion by seeding the market with “brand zealots” who can influence the consumer at the point of purchase and attract other likely zealots to the brand.
  • Tangibility. Focus the launch in retail environments that support the brand’s positioning and form part of the differentiated experience, so the memory of the consumption moment reinforces the brand’s image and aligns it to the consumer’s self-image.
  • Price. Select a price point that supports the credibility of the differentiation.

The four-point premium-plus translation strategy is replicable even within a category. For evidence, simply explore that laboratory of superpremium branding, the vodka market.

The top four superpremium vodka brands — Absolut, Skyy, Ketel One, and Grey Goose — followed some version of the four-point plan to turn short-term functional differentiation into longer-term psychological commitment. Each had a significant point of difference in the then-current market; each employed packaging to reify its differentiation; each established a price point well above the mass-market price; and each had a retail strategy that physically touched consumers and/or retailers. (See Exhibit 1.)

 
 
 
 
Close
Sign up to receive s+b newsletters and get a FREE Strategy eBook

You will initially receive up to two newsletters/week. You can unsubscribe from any newsletter by using the link found in each newsletter.

Close