As a brand owner making products in the consumer space, we tend to think that our product is superior and there’s no reason why anyone wouldn’t use us if they’re already buying similar products. It’s a thought that I had whenever I see my friends buy drug store brand lashes instead of the ones from doe. They’ve tried it before, they tell me it’s a better product, yet when they need to buy again, they go for something that’s cheaper and breaks after a day.
My friends and others just like them are well within what I thought my customer demo is. They love makeup, wear lashes, and are women between age 18-28. It puzzled me why despite having a product that is better than other brands on the market (in my opinion), some people still reach for other options.
It wasn’t until I chat with a good friend of mine, Lindsay McCormick from the CPG brand Bite that I realized I had it all wrong this whole time.
I had this misconception that premium products are meant for people that can logically afford it with their income.
In theory, if a car cost $74,000 and using the 20/6/10 rule (20% down, finance over 6 years, 10% of monthly income), after accounting for maintenance and insurance cost, the vehicle would come out to ~$1,186. This means the person buying this $75k car would need to be making $142k a year to reasonably afford the car.
How many of us know people that drive a luxury vehicle making under $100k? I bet we can all think of a few. The reality here is that these people simply just care more about the byproducts of driving a luxury vehicle (status, access, safety, features) more than some other aspects of their life. Maybe instead of having a travel budget, they stay in and get a nicer whip.
This isn’t a knock on anyone, and candidly I did the same thing when I was younger. What this is supposed to illustrate is that our assumption of what people would spend money on can’t be based on a broad assumption, it needs to get a bit deeper.
At the end of the day, I realized that people will spend more money on more expensive things simply because they just care that much more about it. They’re willing to compromise on other expenses to spend more for the things that they love.
So let’s get this straight and clear – Premium products are NOT only for premium people.
Instead, premium products are for people who HAVE a premium desire.
Let’s look at another example – lululemon.
lululemon markets their activewear at a higher price, around ~$100+. Does that mean their customers are more “rich” or “premium”? Nope, not really. Sure, some of their customers may have a higher income than others, but it does not mean people who realistically shouldn’t spend money for a pair of premium yoga pants don’t buy from them. It is more about their priority. People who have the aspirations to follow the brand’s lifestyle or the comfort of their activewear will purchase them. Sure, there are other brands with similar products that are more affordable, but the people who are buying Lululemon care so much about the brand that they’re willing to pay a premium for it.