As another example, take Steinway pianos. Their music room grand could cost as much as $80,000. To the wealthy entrepreneur who wants the nicest piano for entertaining and to make a furniture statement, it’s a luxury item. A $40,000 alternative could functionally do the trick, but there’s no status with the lesser alternative. However, to the music teacher who views the piano as a necessary tool, the Steinway is a premium choice. In this case the “share of wallet” in relation to household income is likely opposite that of the fountain pen example above. Yet the secret ingredient to marketing to premium and luxury consumers has to do with the “function index,” and how strong that factor is to influence purchase.

This topic becomes really fascinating when considering brands in categories that are much more commoditized, such as grocery items, home furnishings, and even pet care. For more information on premium brands, or information on how Warren Douglas can index premium brands in a specific category, visit the Warren Douglas website.

Because my firm specializes in premium brands, I’m compelled to establish a concrete definition of a premium brand (and, I’m picky about consistent terminology within our shop). By Warren Douglas standards, a premium brand has two do two things to be premium within its category.

1. Charge a category-appropriate premium—I know I just used the word “premium” to define itself, but here it literally means the higher price a consumer pays. If a brand is truly premium, its price point should reflect its value within a tolerable range of consumer acceptance, but at the high end of the comparison spectrum.
2. Meet customer expectations—This means a brand consistently delivers what the consumer expects for having paid a higher price at the point of sale. Whether the expectations are freshness, customer service, packaging innovation, or taste, a truly premium brand will prioritize the consistent delivery of meeting those expectations, lest they lose their ability to charge a higher price.

Consider a brand that does one of the above, but not both. Simply charging more without delivering on expectations won’t compel the customer to buy again at that price. Also, meeting expectations alone doesn’t make a brand premium. A private label brand might compel a consumer to expect less than it would from a name brand; it can deliver less than its competitor and still meet those lesser expectations, but it’s not premium. I think you’ve got to have both.

1. They see their spend as an investment. Whether they’re building, remodeling to sell, or just upgrading, these premium consumers want what they spend to add value to their home, which is still perceived as a solid investment.
2. The benefits bring immediate gratification. Although conservative these days, consumers recognize that they’ll see the benefits of making good choices and enjoy those benefits on a daily basis.
3. Fear of regret drives indecision. Nobody wants to un-plumb a kitchen faucet they’re not happy with, nor do they want to replace it after its warranty has expired. The biggest fear, though, seems to be overall dissatisfaction—not necessarily because of a faulty product, but simply product that does not live up to the premium consumer’s expectation.
4. Differentiators are not obvious. While look and design continue to be a strong influence in product selection, there is a lack of rational differentiators at the point of sale that premium shoppers seek to support the direction driven by their emotion.
5. Word-of-mouth builds brand equity. Still the biggest influence on brand preference is the experience from a trusted friend. Home brands that can create brand advocates through builders, contractors, and consumers will stand the best chance of garnishing sales in this slow economic trough.

There is hope, however, and the premium brands who play their cards right today could find themselves coming out of the economic slump quicker than even their lower-cost competitors. Here are some thoughts on how to play those cards:

1. Keep prospects engaged —The fact that buying has slowed so much in home furnishings and remodeling means that customers have time to make their decisions. This means they will research more, compare more, and will likely avoid making financial commitments. This is the premium brand’s opportunity to engage the customer in meaningful dialogue, and if your brand is well-positioned, it could mean you have more opportunity to disqualify your competitors. If you have a retail storefront, you should be working hard to get face-time with your prospects, having them frequent your store.
2. Don’t forget to deal —Since many customers want to avoid big financial commitments right now, they may feel that actually buying is far off in the future. However, even premium buyers like a good deal, as an earlier Premium Chatter post suggests. Allowing your sales team the appropriate negotiating power on the prospects who will matter most allows your brand to turn the negative economy into a strategic opportunity. But you have to be selective and careful not to discount to a level that erodes your brand’s perceived value.
3. Put on the customer’s shoes —With sales being slow, your brand may have the time now to focus on things that have needed repair for a long time. For instance, try shopping for your own product, consider the competition, and evaluate whether or not your brand can command the price you’re asking in today’s economy. If not, use this down-time to clean-up your brand’s position and articulate your superior differences.
4. Don’t do nothing —For many home brands (even premium ones), spending has stopped because sales have stopped. While we don’t recommend  spending in a "business as usual" manner, doing nothing is very risky, and could prove fatal for your brand. If you’re not in a financial position to take advantage of the great media buys that abound today, develop some appropriate, low-cost ways to keep the conversation alive among prospects who are shopping. When you consider what a great investment a person makes in his/her home, their patience in this category is wise for them; your brand’s challenge is to rise to the top of their mind for preference in your segment. When they do purchase, they’ll be happy, satisfied, and a vocal champion on your behalf. But you’ve got to do something to make that happen.

Marketers of premium brands should not lose sight of the fact that, even in home furninshings and remodeling,  people purchase because of an emotional benefit as well as a rational benefit . The emotional benefit is the biggest driver in impulse buys when project timelines and healthy budgets are pushing consumers to purchase. However, current economic conditions allow a lot of time for the rational part to influence their decision. Will this extra time to consider the rational benefits of your brand talk your prospects out of choosing you over the competition? The premium home brands that will emerge as winners will justify a higher price point and win the sale by satisfying both the emotional benefits and smart, well-articulated rational benefits.