Kyle Balmer explains premiumization: companies like Krispy Kreme and WD-40 are ditching discounts to push luxury versions instead. The bet is that wealthy customers keep spending in downturns, so selling fewer items at higher prices beats volume. Test it first though, and watch your margins.
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Why are companies pushing premium products with higher prices? The crush the buzz word amongst big companies is premiumization. In non corporate speak, this is when companies position a luxury versions of their products front and center. If you're thinking of Louis Vuitton or Gucci, think again. We're talking about Krispy Kreme and WD40. Krispy Kreme is ending discount offers and replacing them with luxury specialty donuts offers. WD40 is pushing its smart straw product. Why are they doing this? The poorer consumer has less spending power, so companies shift their focus to the rich who who even during economic downturns, continue to spend. Although they expect to sell to fewer people, they expect each customer to spend more. Should you jump on this trend? Test and measure carefully. Be aware of the downsides. For example, how is your profit margin more@crushedcontent.com.