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INDUSTRY INSIGHT Source: IRI analysis, COVID-19 Shopper Survey, May 2020, n = 5566. Question: Which of the following describes how you’ve been choosing where to shop for groceries and other household essentials during the past month? (Please select all that apply.) Source: IRI analysis, IRI Shopper Panel Psychographic Survey, 2017-2020, latest year fieldwork 5–25 March. What underpins a premium proposition? Technical, functional, and emotional benefits meaning the ‘what’, ‘how’ and ‘who’ product cues matter “I am willing to pay a premium price for better quality” Trending down as Australians set stricter priorities and reduce their spending, but still nearly half of shoppers Premium sweetspot Functional Technical • Best ingredients • Best processes • Upscale design Emotional • Status • Esteem • Experience • Superior performance • Ethical ethos • Sensory appeal What? Ingredients How? Technique Who? Human Touch forces will have a less significant impact on industry premiumisation outcomes moving forward. The sustained success of a premiumisation strategy is built on the willingness of shoppers to accept the premium value proposition. What makes it more challenging right now is that the spate of bad news, especially around joblessness and speed of economic contraction, is driving household confidence downwards to record lows. Economically sensitive Australians will be looking more closely at price, promotions and value across all retailers. Shoppers will be eliminating, postponing, decreasing, or substituting purchases. Some consumers will still seek premium products during a recession, but we’ve seen a reduced willingness to pay a price premium for better quality in 2020 compared with any of the past five years. And additional frugality will propel the embracement of private label. Hardly the narrative of premiumisation. So, what can be controlled against this challenging backdrop? Ongoing analysis of FMCG successes globally and locally reveals the recurring criteria that underpin both the tangible and intangible benefits that give a consumer a reason to pay more. The criteria is wrapped up in the rational benefits (what the product is technically and how well it performs functionally) and emotional benefits (how the product makes consumers feel about themselves and how it makes them feel and look to others). The best premium brands unite these themes, augmented by telling the brand’s story/positioning: how the product is made, the philosophy behind it, what makes it stand out, what makes it special (what, how, who). Shopper willingness to pay As we navigate a recession, industry stakeholders must use pricing to help maintain and strengthen brands. If premiumisation is a genuine longer-term strategic play, volume objective should be de-emphasised alongside the avoidance of a broad-brushed approach to cutting price. On the contrary, a successful premiumisation strategy requires doubling down on efforts to sell at an intended price point – particularly in the early phases of a product/ brand lifecycle. Account for inherent brand equity and the ability to maintain pricing levels where possible. And determine what products are truly sensitive to pricing, and the trade-offs shoppers will make among those that are. Investigate potential product and positioning opportunities to reduce price elasticity. Compare the benefit and effort of these positioning opportunities against potential cost reduction opportunities. If you would like more information about how IRI’s analytics expertise can be utilised to help take control of your pricing strategy, including a pathway to premiumisation, please contact us on ask@iriworldwide.com.au About Daniel Bone Daniel is a recognised thought leader and experienced speaker at conferences in the FMCG industry and senior client engagement. He leverages more than 14 years of industry experience, bringing to life insights across drinks, food, beauty and household sectors globally. About IRI IRI is a leading provider of big data, predictive analytics and forward- looking insights that help FMCG, OTC healthcare, retailers and media companies to grow their businesses. With the largest repository of purchase, media, social, causal and loyalty data, all integrated on an on-demand cloud- based technology platform, IRI helps to guide its more than 5000 clients around the world in their quests to remain relentlessly relevant, capture market share, connect with consumers and deliver market-leading growth. For more information on how IRI can provide data and insights to grow your business, visit IRIworldwide.com.au, or phone 02 8789 4000. AUG, 2020 RETAIL WORLD 35