25th - 26th SEPTEMBER 2019  |  OLYMPIA

How to sell more premium products by thinking smaller

Ad Age 06 Dec 2019 03:00

The essence of marketing higher-priced products is changing the paradigm of how customers view your product. 

What’s the difference between a $400 pair of sunglasses and a $10 knock-off pair? Surely the more expensive sunglasses give you x-ray vision or something, right? But no. The difference comes down to the basics of branding. 

The most successful luxury brands tether their products to a lofty and aspirational ideal that appeals to their customer base. Customers might just be buying a pair of sunglasses, but they’re paying for:

• Community: In the minds of luxury consumers, their products separate them from one pack and qualify them in the greater community of luxury goods enthusiasts. To some degree, the product serves as an immediate identifier that a person meets a threshold of “belonging” to a certain community. 

• Exclusivity: Luxury products are often viewed as trophies for certain communities. Think of why people are paying more than $500 for pairs of sneakers. 

• Value retention: Luxury products tend to retain their value over longer periods of time and go to extremes to do so. For example, Burberry burned $37 million worth of its goods in 2018 to prevent them from being sold cheaply in an effort to protect its brand. 

You might be thinking, "But this is Marketing 101!"

Sure, the concept is fairly easy to grasp, but it becomes extremely complex (and valuable to answer) in the realm of digital marketing, where most brands are a few successful campaigns from lucrative and consistent profitability. 

How can a new brand go from commodity to luxury? Building a brand capable of selling higher-priced products from scratch can be incredibly expensive and time-consuming. However, there are some strategic moves that can accelerate the process greatly. 

Focus on your primary defining 'luxury' feature.

Products with higher price tags are masters of alchemizing a basket of features into an intangible brand. 

If you’re a new brand thinking of launching a new product, you’d be keen to uncover that single defining aspiration or feature your audience craves, and chisel down from there. 

For example, let’s say you want to market something to the artisanal crowd. You’ll likely choose to prioritize features such as the products being handmade and rare over a feature such as delivery speed. 

You will ensure that every part of your marketing funnel hits on what the audience you have in mind wants. Ultimately, every touch point you have with your customer needs to further establish your brand as one that is capable of delivering on the aspirations it emphasizes. 

Seek brand value parity.

A simple shortcut is to establish brand value parity by riding the tailwinds of a movement and leaning on celebrity and expert endorsements. 

For example, organic and gluten-free goods are regularly priced higher than their counterparts without necessarily always having to reiterate the “It’s better for you!” message often shared by the organic and gluten-free communities. These marketing messages can further accentuate and champion what appeals to this community and, in the process, make some relative sales.

The more aligned a high-priced brand is with a movement, the less friction it will have in communicating the value or worth of its products. The bulk of the educational and marketing effort is already done by the movement, and these brands are able to score easy layups. 

Another popular strategy for higher-priced brands is to use celebrity endorsements to “rub off” on their aspirational qualities. 

For example, brands often partner with celebrity athletes to manifest a sportier and relevant image. Tennis legend Roger Federer signed a nearly $300 million deal with Japanese apparel company Uniqlo, a move that’s going to install the relatively new clothing company in an enormous international market. 

Internal pricing psychology

Many entrepreneurs get tripped up on how to price their premium products, but you don’t have to pull teeth to land on a number that works. 

When in doubt, circle back to your business goals. 

1. Where do you find the balance between building a multi decade-long brand and keeping the lights on by the end of the year? 

2. How much of your budget can you allocate to marketing and promotion? 

3. How many products can you anticipate selling?

If you get tripped up, it’s a healthy exercise to simplify your sales goals as much as possible. For example:

• 1,000 products at $5 equals $5,000 

• 1,000 products at $50 equals $50,000 

• 1,000 products at $500 equals $500,000 

• 1,000 products at $5,000 equal $5 million 

It’s a matter of finding your customer acquisition cost (CAC). Let’s say you want to test the $500-per-product price point. You run a series of Facebook ad campaigns and find that each sale costs you about $300 in ad spend, leaving you with $200 in profit before the cost of goods sold and other expenses. 

This is going to take some experimentation, but ultimately you’ll need to form a baseline for what the market is willing to pay for the product and brand you’re communicating. Then, it’s a matter of optimization to drive down your CAC, testing a higher price point or both. 

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