Premium Brand Trade-offs, Part 1
The topic of consumer trade-offs generates tons of conversation, but not enough focus is given to the notion that brands make trade-offs, too. If you’re responsible for stewarding the growth of a premium brand, it’s imperative to fully understand the implications of your brand’s trade-offs. In this two-part post, we’ll look at two brands who are managing to stay premium as a result of the trade-offs they’re making during growth.
Chick-fil-A: Growth without compromising the brand
As a premium fast-food brand, Chick-fil-A has expanded in an amazingly successful manner. According to our Premium Brand Index, Chick-fil-A had a premium score of 50.1 in 2011 with household penetration of 15.8%. I’m sure you’ve noticed that the brand has increased their brick-and-mortar presence significantly in the past few years. With growth of a premium brand, we typically notice a drop in the premium score as a brand becomes more accessible. Usually, this is a result of attracting customers with lower income and lower mindset as a part of that growth. But not Chick-fil-A.
In 2016, Chick-fil-A’s premium score had only dropped to 48.8, yet their household penetration has grown steadily year after year to 22.5% by 2016. This happened with no value menu, being closed on Sundays, and with lines so long at peak times that cars and people often wrap around the building. The consumers they’ve attracted largely include consumers with higher incomes, according to our data; the average household income for the Chick-fil-A consumer, even after factoring inflation, is 3.1% higher in 2016 than in 2011 according to MRI*. That’s amazing considering their household penetration grew over 40% during that same time. Their prices, although higher than their burger and burrito competitors, remain with an easy premium tolerance for fast food. The long lines somehow get serviced quickly with an “It’s-my-pleasure” attitude. It’s easy to see how Chick-fil-A, an accessible brand, qualifies as a premium brand in the fast-food space.
What are the trade-offs?
It may not be apparent that Chick-fil-A is making any trade-offs, but indeed, they are making deep ones.
- They’ve traded off not being open on Sundays. This is a huge sacrifice for franchisees, but the brand’s commitment to Sundays off is a cultural differentiator that drives demand six other days a week.
- They’ve said “no” to value menus, remaining committed to charging fairly and fully for quality food. They even upcharge for healthier options like substituting fruit for fries.
- They’ve resisted the temptation of growing too fast, too soon. Many business interviews and management presentations by their leadership attest to Chick-fil-A’s commitment to becoming operationally sophisticated before scaling too quickly.
- They’ve intelligently deployed their brand’s expensive technologies, including a fantastic app and tablet-handy order-takers who stand outside when lines are long. Wow—through that long line in 4 minutes, really?
- Their extensive customer service training and leadership development show up in a way that’s obvious by the smile that serves you at the counter.
All of these trade-offs (what they’ve said “no” to) have come at a cost that’s actually an investment that builds value in the brand overall. It’s not just about the food for Chick-fil-A. Their pay-off for the trade-off, according to our data, appears to be significant growth among higher income consumers who are less price sensitive. They’ve also managed to attract many less-affluent consumers who are willing to make personal concessions when they’re at Chick-fil-A, according to means and mindset scores in the Premium Brand Index. Nicely done.
What trade-offs is your brand making? What kind of return do you expect from these sacrifices? Most importantly, will that yield be sales alone, or sales plus intrinsic brand value like Chick-fil-A?
Next topics in this series: Premium Brands Trade-offs: Part 2, and Balancing Innovation with Speed-To-Market
*Mediamark Research Incorporated, 2016 Doublebase Infocume