The Psychology of Premium

I wanted to share some of the insights from an absolutely brilliant article by Kelly Mackenzie on the Psychology of Premium. 

I always say VALUE = PRICE plus BENEFIT and sometimes that BENEIFT is perception! 

Kelly says that people don’t pay premium prices by accident. There’s psychology behind it. If I put a generic bottle of water next to an Evian bottle, most people know they’re buying the same category of product. 
 
Yet some consumers are happy to pay two, three or even four times more for one over the other. 
 
The difference is far more than the water itself. It is the 5 P’s around it helps us make that decision. Because premium brands shape expectations way before someone experiences the product. 
 
They create value through the signals they send. 
 
Things like… 

• Packaging that feels considered 

• A story people can buy into and an experience 

 Stunning packaging design that communicates quality 

•  Distinctive branding that’s easy to recognise 

• Pricing that reinforces exclusive perception 
   
  Each of those choices influences how people feel before they’ve even taken the first sip. That’s the psychology of branding. 
   
  People want to buy more than your products. Some will buy confidence, status, trust, identity, and the expectation of a better experience. But only when every touchpoint reinforces those expectations, will people become far less sensitive to price. 
   
  That’s why premium branding has commercial value. It changes perception before it changes purchase. Think Louis Vuitton, Chanel, Gucci, Hermes, Porche, Ferrari and the premium they can command. 

Of course, not all categories do not lend themselves to this extreme premium-ness, but there are still brand cue differences in every category – loo paper, tinned tomatoes, cheese, clothing! And it is the marketers job to create differentiation and value, even when it is smaller!