Premium POV

Premium Brand Trade-offs, Part 2

In this two-part post, we’re considering the trade-offs made by premium brands as they manage growth. Typically, as premium brands expand, they become less premium while becoming more accessible.

In the last post, we looked at how Chick-fil-A has successfully maintained an appropriately premium position in fast food while growing. In part two of this series, we look at Godiva, a premium brand whose growth may threaten the premium perception of its brand. Perhaps your premium brand, like Godiva, could be more profitable if it had a wider appeal to a broader, less affluent consumer base. But what will aspects like increased distribution, more promotion, and lower prices do to your brand perception? As a marketer, you want to understand what those trade-offs will mean for your premium status and long-term value.

Godiva: Growth that could compromise the brand
Twenty years ago Godiva represented a generous gift for someone special rather than a luxurious self-indulgence. Over the past decade they’ve invested heavily in expanding the brand by selling in more outlets and with smaller, more affordable unit sizes (“approachable premium,” they call it). While their premium score in the Boxed Chocolates category is among the highest scores in our 2016 Premium Brand Index, the consumers they’re attracting aren’t making the depth of trade-offs that they did in 2011. Their household penetration has also declined slightly in the past five years.* Consumers no longer have to spend $35 to $50 for a box of Godiva Chocolates at Nordstrom or one of Godiva’s stores; rather, casual shoppers can pick up a bite-sized indulgence for a few bucks on their way out the door of Target or Walgreen’s. Last week I saw Godiva on display in a low-end, discount department store. Not premium.

So what trade-offs has Godiva made? They’ve acquiesced being the luxurious brand that was exclusive and a little elite, which is perhaps a smart move financially in the wake of so many emerging craft chocolate brands in the U.S. from 2013 and beyond. They’ve also had to relinquish some quality control, perhaps even freshness, as less-premium outlets like Walmart and CVS won’t be as careful about managing expired inventory as are Godiva-owned stores. This accessibility has driven the closure of 29% of U.S. stores, according to Statista. While the brand is expanding globally, particularly in Asian markets, their U.S. growth has been among less-premium consumers, and U.S. sales appear stagnant, at best.

Now that I can find Godiva anywhere, these compromises also take Godiva off my gift list if I’m really looking for something unique. Time will tell if Godiva’s newfound approachability will mar their long-term value as a luxury brand. For now, they’ve maintained sales by trading being a luxury gift for being a small indulgence. The more accessible they are, the more they’ll be perceived as a mainstream brand closer to Hershey’s, Mars, or Nestlé.  The locations for purchasing Godiva are now different, and that’s likely to have some long-term impact on how the brand is perceived.

In summary, follow these three tips as you consider your premium brand’s trade-offs:

  • Ask the reasonable from your consumers—Take an objective, data-driven look at what sacrifices in dollars and experience you’re asking of your consumers; a measure of consumer trade-offs is helpful here.
  • Understand the costs of accessibility and growth—Being more accessible usually means becoming less premium; be sure you know what being accessible will do to your brand’s perception and pricing.
  • Determine the sweet spot—Dialing in to that magic zone of volume and margin may be easier to forecast with quantitative data about premiumness and trade-offs; know what your threshholds are for saying “no” to the deals that offer volume at the expense of profit.

So what will your brand trade-offs be? And will short-term profit cost you in long-term brand value?

For other posts related to this topic, see Effectively Building a Premium Brand, Just How Premium Should Your Brand Be?, Premium Brand Trade-offs: Part 1, and view our webinars on Getting the Most out of Google and Getting the Most out of YouTube.

Next topic in this series: Balancing Innovation with Speed-To-Market

*Mediamark Research Incorporated, 2016 Doublebase Infocume

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