Commodity defined.
Useful but unspecialized (ouch). A good or service whose wide availability typically leads to smaller profit margins and diminishes the importance of factors (such as brand name) other than price.
Falling into a commodity trap is a short race to the bottom. Unfortunately, it’s a situation brands across categories find themselves in, especially in times of desperation to meet goals. 2024 has been full of surprises, and we continue to see pressure squeezing certain categories, as many established buyers are in “wait and see” mode to make bigger purchases. Especially in the home kitchen and bath market, the mindset of many companies is “survive to 2025” as my colleague Abby Killorin wrote about recently.
But as Seth Godin said in his book (Linchpin: Are You Indispensable?),
“In a world that relentlessly races to the bottom, you lose
if you also race to the bottom.”
At Ramey, we’ve seen time and time again how breaking out of a commodity trap and laddering up to a premium position (across any category) can yield category-high profits. We’ve defined four spheres that make up a premium brand, and when mapped with the right strategies, they’ve proven to elevate our client partners.
Innovation
A premium brand has an entrepreneurial mind-set, with a focus on disrupting a category with new innovation and a unique mindset. You’ve likely heard the phrase “innovate or die” but it’s true. If you are in a category that has somehow avoided dramatic changes or profound disruption, then hang on because it’s coming. During these times, it truly demonstrates who will race to the bottom out of desperation and who will thrive.
Innovation starts with having a deep understanding of your customer’s journey. It starts with the beginning, having clarity on the initial need state or intent to purchase trigger options that may start their buyer journey. From there, through first-party research, understanding not only what they are thinking at each next step but also how they are feeling allows you to garner key insights that can spur new product development and innovation to solve real customer challenges. Those insights allow you to offer a product or service that solves real pain points or carve out a unique offering that meets your customers’ needs. That may also mean you are two steps ahead of where the customer is, solving problems they haven’t yet identified. If you are lucky, your innovation also forces your competition to react to your last move, while you are already pushing forward with your next.
Quality
A premium brand offers best-in-class products and services, bringing more value, and an above-and-beyond mentality to its end-users. We believe a major part of your brand experience is the perceived value of your product and your customer’s experience with it. Good marketing and building a brand is not ever going to overshadow a less than ideal product experience, plain and simple. To build a premium brand, superior craftsmanship is necessary and expected. The other aspect of quality is delivering on that above and beyond mentality. To create an experience and a brand service offering that is premium in and of itself. From high-touch concierge services to a loyalty program that is meaningful and memorable, quality for a premium brand goes well beyond the product itself.
Mission
A premium brand creates a purpose-built offering to serve specific communities. The first thing that might come to mind here is a brand who has a corporate social responsibility component that is deeply seeded into its brand. That certainly is one aspect of how we define mission, and it has a necessary place among premium brands. However, we also believe that the best premium brands have a very clear picture on who their product is intended for and how it best serves them. By strategically focusing on a very specific or unique community, a brand can provide more value and more meaningful connection with its audience.
When we began working with Hestan Commercial, we were working with a group of dreamers ready to do something different. You might call that innovation, but these folks were also on a mission. To take a category that had largely remained stagnant and stand for something bold and different to a specific group of people – chefs.
Stature
Finally, a premium brand leads its category in market share, brand stature, and financial performance. As an agency for premium brands, we know first-hand how vital it is to create a brand presence that aligns with the product or service, and also the customer it’s intended for. From the positioning, to the visual expression, and the little nuance touches in between – it’s important to get it right, and to stand out. This alongside, the other aspects of making a premium brand successful, ultimately are demonstrated in the results. Whether that’s striving to be the category leader in market share or for your specific purpose-built community, a premium brand holds itself to a high degree across key performance indicators and financial performance.
As a result of living into this premium strategy, we know that a premium brand – across any category – can realize up to 60% of category profits. Said another way, a premium brand is not just a marketing ploy, it’s truly a business strategy. Whether you are a category pioneer trying to maintain your position or a young company with a vision to lead your category, up is as high as you can imagine. Let us help you get there.
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Important footnote:
This piece was intentionally written as an overview and a setup for what’s to come. Stay tuned for this series to continue, where I’ll take each of our four premium spheres, and go into more detail with examples (both existing clients and other category leaders) to demonstrate how each showcases living into a premium position and avoiding a commodity trap.
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