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 / Winter 2004 / Issue 37(originally published by Booz & Company)


The Superpremium Premium

Absolut focused on its unusual country of origin, Sweden, and used its innovative ad campaign, built around simple wordplay and clever renderings of its cylindrical bottle, to generate years of attention and buzz. So successful was the campaign — it built emotional loyalty even among nondrinkers — that a compilation of the advertisements was turned into a best-selling book in 1996. Skyy’s purported distinction, by contrast, was unadvertised: A word-of-mouth claim that it reduced the effects of hangovers helped it develop an emotionally loyal user base. Ketel One won converts by providing third parties — bartenders — with carefully crafted bar kits that even included a video describing the brand’s history. Grey Goose used sexy and sophisticated on-premise events, led by the former Jaegerettes, whose provocative dress and joie de vivre had previously (and improbably) helped expand the distribution of the sweet liqueur Jägermeister.

These successful efforts to use brand zealots to motivate consumers to switch to premium-plus brands are well grounded in academic research. The importance of “personal influence” on consumer behavior has been recognized at least since the 1950s, when Paul Lazarsfeld and Elihu Katz published a famous study of the same title showing that communication operates according to a “two-step flow,” in which word-of-mouth strengthens media messages.

Tactically, leveraging interpersonal communications is even more critical in premium-class efforts than in mainstream marketing campaigns. Consumers willing to purchase premium-plus brands in a particular category already experience disproportionate utility from the category, which indicates the category is bound up in their identity. When consumers’ judgments have strong, identity-based components, social influence is much more effective than analytical efforts at encouraging individuals to switch brands, according to research by Lisa Bolton and Americus Reed II of the University of Pennsylvania’s Wharton School of Business. (See "Brand Zealots: Realizing the Full Value of Emotional Brand Loyalty," by Horacio D. Rozanski, Allen G. Baum, and Bradley T. Wolfsen, s+b, Fourth Quarter 1999.)

The first three elements of a premium-brand strategy are, finally, reinforced by pricing. Each of the four successful superpremium vodkas chose a price point for entry that was uncluttered and that reinforced its status. Absolut’s launch price was $16 per liter, roughly twice the price of Smirnoff in 1979. Eighteen years later, Grey Goose priced itself at more than $30, 50 to 75 percent more than the current price of Absolut.

Get Scarce
High pricing helps maintain the appearance of scarcity — a challenge that is among the most difficult for mass marketers attempting to launch premium brands.

The desire to “go wide” is seemingly embedded in mass marketers’ DNA. Because of the performance expectations they attach to their investments, mass marketers frequently kill premium-plus brands with too much capital. In many instances, incumbent mass companies have experienced initial success in the premium space only to have the product collapse during its transition onto mass platforms, where large marketers believe the “real growth” will occur. This, ironically, is a primary reason entrepreneurs typically are more successful than established brand marketers at launching premium-plus products: Their capital disadvantages prevent them from overinvesting.

Consider how Boston Beer Company used a low-investment, four-element strategy to launch the Samuel Adams brand, now arguably the most successful of the U.S. microbrews.

The product was made according to a special old recipe, underscoring the new company’s putative heritage and quality and establishing its functional differentiation. At a time when the best-selling premium beer, Heineken, was imported by ship, Jim Koch, Boston Beer’s founder, emphasized in trade and consumer communications the local provenance and resulting freshness of Sam Adams. Though Boston Beer used distributors to transport its product to high-end retail establishments, it also maintained a sales force to sell in at retail, coordinate retail programs, and build tangible enthusiasm among customers. By contracting the manufacturing and essentially making production cost variable, the company eliminated the need to invest in large chunks of capacity before retail sales materialized, and avoided the incentive to push the beer into the market too rapidly. Finally, like most of the microbrews, Sam Adams was priced at a premium over Heineken. All four components worked together to pull the beer across the translation barrier into the market.

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