While the news talks about falling consumer confidence, there is one area of the economy that is going strong, and that is the affluent end of the market. People in this class have money and they are willing to spend it to get the “best” and to show that they have the money to afford the best.

To take advantage of this growing trend and growing number of people in the affluent class, you should consider adding or developing a premium product or service to your business. Now, before you say, “This doesn’t apply to me,” let me hasten to add that premiumization can be found in all businesses. True, you may have to be a little more creative in some businesses to segment your product or service, but the added profits are worth it. In most scenarios, premium products have higher gross margins and buyers tend to stay with you longer if you match the premium product or serve with a continuity income program (recurring fees). The reason the affluent stay with you longer is because the price is not a factor in their decision making process. What they are interested in is the status they are gaining, be it real or imaginary.

Here are some examples of premiumized products and services:

· Water: No, we are not talking about regular Evian or Perrier; we are talking mega high-end water.

o Evian’s limited-release Palace Bottle, which is only available in high-end bars and restaurants sells for $15 to $20 a bottle and has a stainless steel coaster and a cool shape.

o Bling H20 is bottled water that comes in limited-edition, corked, 750 ml frosted glass bottles, embellished with Swarovski crystals.

o Tasmanian Rain is captured “on the pristine Northwest coast of the island of Tasmania, Australia.” The water is collected “just minutes from where the World Meteorological Organization records the world’s purest air.” The water never touches the ground so that seems to make it better.

o Carlsberg 900 was introduced this summer in Sweden. Carlsberg 900 is “brewed from refined virgin hops and selected crystal malt, and triple filtered with a longer cooler fermentation process to ensure a pure, delicate taste.” It is priced about the same as Champaign.

· Luxury marshmallows: From Dean & DeLuca’s one-pound Boulé Marshmallow sampler of lemon chiffon, passion fruit, vanilla and rose-petal flavors ($28) to Pete’s Gourmet dipped marshmallows, which are $1 each.

· Honey: New varieties are being imported from China and Argentina along with blends from many sources. Since honey’s flavor and color are determined by the source of nectar, there is a huge variety of local and exclusive types of honey, with floral sources varying from tupelo gum tree and Tasmanian leatherwood to cranberry and orange blossom. The Savannah Bee Company, for example, sells its honeycomb jars with this awe-inspiring description: “Filled with honey equaling the life’s work of two bees, each golden cell brims with the concentrated nectar of thousands of rare and remote Georgia flowers.”

· Chocolate: Chocolate companies are now charging top-dollar for wasabi-infused bonbons from San Francisco to Singapore.

While the food and beverage sector definitely leads the premiumization trend, there’s much more going on:

· The Hasbro FurReal Friends Butterscotch Pony seeks to “fulfill every little girl’s dream of having her very own pony.” From Hasbro, “Butterscotch is a miniature Shetland pony, with a fur coat and mane that feel just like a real pony. Butterscotch also has built-in sensors all over her body, which enable her to respond to children in lifelike ways. If talked to, she will cock her head toward the speaker quizzically and blink her eyes. She will also react to petting, showing her enjoyment by rubbing her head against a child, twitching her ears, and swishing her tail. At over three feet tall, Butterscotch is more than strong enough to support a rider up to 80 pounds in weight.”

· Toilet Paper is making its entry into the premium market by Renova selling its Renova Black, promoted as the first fashionable toilet paper. The toilet paper is priced at about $5 per roll. Renova Black is also available as Renova Red, Renova Orange and Renova Green.

· Air travel is hot for premiumizing its product. We are not talking just the first-class seats but true flying “apartments.” Airlines like Emirates with first-class private suites, Singapore Airlines with 12 suites on board each new Airbus 380 and Jet Airways’ Sutie in the Sky have taken first-class to new levels. You have to see these suites.

· Airline terminals are catching the premium bug as more passengers want to escape the masses and flue de jour that may be flying around. First-class terminals are being created to make life (and layovers) a little easier. Cost is going up, but so are services and convenience.

· Hauzen is Samsung’s new premium home appliance brand. Products include a washing machine, Kimchi Cooler (if you have to ask, don’t worry, you won’t like it!), refrigerator and air conditioning systems.

· Baby furniture. Combining functionality with style, not only do the next generation of parents want their babies to be comfortable, they want them to get used to style. Everything in this product area is being premiumized from strollers to cribs and rocking chairs.

· Lenovo now offers the ThinkPad Reserve Edition Laptop, encased in leather. The Reserve Edition has some decent enough stats, but the real interesting spin is that it is being sold by invitation only. Invitations increase premiumization and selectivity and, of course, exclusiveness.

And just in case you have not been convinced that all categories can be premiumized, we saved the best for last.

· Car Radiators. A British company, Feature Radiators, now produces, “The best contemporary designer radiators (including stainless steel radiators), traditional cast iron radiators, electric radiators and towel rails on the market. With over 150 radiators on display in our showroom, expert advice, unrivalled customer service and nationwide delivery, Feature Radiators has been recognized as the UK’s leading radiator specialist.” You will be happy to note their radiators are available in classic white and silver metallic.

Admittedly, we have tried to take a little extra time and give you some of the more interesting types of products and services that are moving into the premium category. We hope we have been successful in convincing you that this trend is growing both here in the United States and throughout the world. By taking the time to analyze your own product or service line up, you have the opportunity to boost your revenues and or profit margins by adding a premium product or service to your lineup.

Most businesses focus their attention on the products that they offer.  What do they look like? What is the design? What is the best price we should offer it for? But these are questions everyone asks.  This is true not only when you are developing a new product, but as you continue to market old ones.

 

More important than the product itself, however, is the system that surrounds the product.  When Apple began to consider the development of digital MP3 players, there were many competitive products in that space.  In fact, Sony should have been the hands-down leader in the marketplace. What the businesses that offered digital players were not focusing on was that it wasn’t just the ability to play music that customers were interested in, nor was  another digital player the real opportunity in the marketplace. 

 

The real problem with digital music was the overall difficulty in managing one’s own music.  The producers of digital players were thinking about the hardware, not the real problem.  They should’ve been thinking about the overall system.  MP3 owners had trouble locating, buying, downloading and managing their music library.  The unique thing that Apple did, in order to make the iPod so successful, was to integrate all of the music management operations into one easy–to-use system.  Yes, the iPod was cool looking and the presentation for it was modern and hip, but the product wasn’t just the iPod.  The product was the whole system: the iPod, iTunes and even the integration of all of the tools within the Mac itself. Where the other MP3 player producers had seen a unique new piece of hardware in which they could have a competitive MP3 product, Apple saw the big picture — creating the music system around the product.

 

The concept of system creation is certainly not new.  The very essence of the franchise industry is centered on the process of designing easy to use systems that anyone can follow.  The story of McDonald’s is a prime illustrator of the theory of system success.

 

McDonald’s wasn’t the first seller of hamburgers or milkshakes.  However, what Ray Kroc did that others had not done before him was to create a system that allowed the different operators to deliver to the consumer the exact same product, no matter who was cooking the hamburger or shaking the milkshake. The result today, based on the initial design of a system and the perfection of that system, is the reality of thousands of McDonald’s throughout the world.  Amazingly, because of the system you can go into any McDonald’s, wherever you are and the consistency of the products will always be the same.  McDonald’s may not make the best hamburger, but they do have one of the most consistent systems in business history.

 

These two examples highlight the theory that great success is more attributed to the system delivering the product than it is to the product itself.  As a business owner, you should establish a specific methodology within your own organization to periodically review products and ask yourself the question,  “How can I create a standardized system that effectively markets and delivers this product over and over in a successful fashion?”  This doesn’t mean that you run out tomorrow and change all of your marketing and sales processes.  If you do, you will probably face disaster.  Instead, look at some of your products that may be underperforming and begin to make changes to create a marketing and sales process that constantly delivers the same product in a manner that gives your customer new benefits that they want.

 

The other opportunity for each of us in business is to take a broader look at the marketplace we are in, to see if there are other products that we could add to our mix that would be better delivered to the consumer with a system.  Let’s look at the pizza industry for an example.

 

 There have been many changes over the years to the pizza industry as it grew from mom-and-pop restaurants serving pizza to the major chains of today.  In many cases, these chains became successful because they created systems that were attractive to the consumer.  Many years ago, Domino’s bought market share from the mom-and-pop restaurants as well as chains such as Pizza Hut by delivering pizza in 30 minutes or less, or it was free. In this case it was not the pizza that was changed; it was the system surrounding the product that was altered.  If we revisit the pizza industry today, we see that there is little distinguishing one pizza offering from another.  While there may not be a great opportunity to make a new pizza that is more attractive to the consumer than the ones being offered, there is probably another opportunity for the system surrounding the pizza.

 

One such example can be found in a restaurant called Diana’s Gourmet Pizzeria.  Diana takes aim at several standards of delivering pizza to the consumer and creates a new type of system around it in the process.  First, she introduces the concept of “personality” into the system.  Diana promotes herself as well as the pizza.   She adds personality to the pizza and by doing so carves out a position that makes competition difficult.  Yes, you can buy pizza, but the only place you can buy Diana Coutu’s pizza is at Diana’s Gourmet Pizzeria. Diana even offers a simple but effective guarantee to pizza, “You’ll love our pizza or it’s free.” 

 

In addition to the personality Diana has injected into the pizza industry, she has also added other unique marketing ideas to her system.  Diana offers membership levels and royalty rewards programs.  For example, if you are in a silver membership plan you pay $25 a month, but you get $30 in credit each month to order pizza, gold members pay $50 a month and get $65 a month in pizza and platinum members pay $100 a month and get $130 a month worth of pizza.  Additionally, if you are a platinum member, you get exclusive access to a private telephone number that no one else gets that gives your call priority access and bypasses the regular queue system.  Most importantly, your order is moved to the front of the line, ahead of all other orders.  If you have ever waited for your pizza order to be taken and processed, you know that this is one area of the system that many people will love.

 

Diana also takes her pizza system to a new level by writing a monthly newsletter called The Pizza Press that is delivered to her customers and prospects.  The newsletter adds the personality of Diana and her family, while at the same time gives advice about pizza and the all-important coupons. I predict it won’t be long before someone takes note of the unique system  Diana has created to deliver product and takes it worldwide.

 

The next time you think about adding any product or service to your business, think about a unique system to structure around the product that delivers it in a manner that is both unique and beneficial to your customer.  If you create a system, you will find that leveraging the product is easier and the opportunities for rapid growth of the product are dramatically increased.