Sales of “premium” products – defined in this case as those that cost at least 20% more than the average category price – are seeing above-average growth in many fast-moving consumer goods (FMCG) categories, according to a recent report [download page] from Nielsen. But consumers perceive these products as being more than just about price, per the study.
Asked to identify which of several attributes make a product “premium,” a majority (54%) of respondents from around the world cited its production with high-quality materials or ingredients, while another 46% pointed to it offering superior function or performance.
By contrast, fewer than one-third (31%) said that a “premium” product is defined by its being expensive. Instead, attributes such as the product having a superior design (38%), coming from a well-known or trusted brand (38%) and offering or doing something no other product provides (37%) are more likely to be associated with the term “premium.”
Looking at how Millennials (21-34) and Boomers (50-64) define “premium,” the survey results indicate that:
- Boomers are more likely to point to high-quality materials or ingredients, and also rank its uniqueness relatively higher; while
- Millennials are more apt to cite superior customer service and scarcity.
Within the US, the study highlights four categories with strong potential for premium products:
- Personal care, where premium products are 26% of the category and grew by 8% from 2014-2016;
- Home care, where premium products are 23% of the category and grew by 2% from 2014-2016;
- Food, where premium products are 13% of the category and grew by 8% from 2014-2016; and
- Beverage, where premium products are 9% of the category and grew by 7% from 2014-2016.
Premium products have emotional resonance with consumers, per the survey’s results, relating primarily to self-esteem and perceptions/status. For example, around half of more say that buying premium products makes them feel good (52%) and confident (50%), while more than 4 in 10 also note that buying premium products shows other people that they have good taste (45%) and are successful (41%).
These emotional drivers seem to resonate most in the Asia-Pacific region, but have less of a grip in Europe and Latin America. Interestingly, these emotional and social reasons are cited by almost twice as many Millennials as Boomers, with the younger generation’s preference for these drivers true across all regions.
Millennials are also more likely than their older counterparts to pay a premium for a variety of attributes including “green” ones, including the product containing organic/all natural ingredients (47% and 31%, respectively) and it containing environmentally friendly/sustainable materials (44% and 29%, respectively).
Finally, as for the information sources that are most likely to encourage consumers to try a new premium product, recommendations from friends and family are the most influential for consumers, followed by their own research. In most markets, TV advertising holds more sway that online ads, though that’s not true in Europe.
About the Data: The report’s results are based on a Nielsen survey conducted March 1”“23, 2016, which polled more than 30,000 online consumers in 63 countries throughout Asia-Pacific, Europe, Latin America, the Middle East/Africa and North America. The sample includes internet users who agreed to participate in the survey and has quotas based on age and sex for each country. It is weighted to be representative of internet consumers by country.