Strategic Trends: Premium vs mass (Part 1): The rich who don’t spend their money
So much strategy has been written about premium vs crowd and their ability to pay. There is thoughtful analysis of their behaviour, spending habits, and how both are changing. There is also a special focus on what happens to these two polar opposite groups of buyers in times of crisis, and obviously a special topic now in the post-pandemic era. But all the writing discusses the fact that there is actually a division of places and that everyone has to accept whether they are currently part of the premium or the mass. We know that just because you have a lot of money does not mean that you are a premium customer, but you read less about that now. It is very difficult to find information on what happens when a household or a person with a low income or ability to pay wants to belong to the premium world, because they have a premium consumer attitude, but they do not have the money to live up to it!
The rich and the premium
This is a very simple direction. Given a household that is premium in its ability to pay, it can afford to buy premium products. In fact, they not only have the ability but also the incentive to buy, i.e., they spend their money on these products. It is very important to note that, when we talk about business strategy, these two conditions must be fulfilled simultaneously in order to fill the concept of premium. Namely the existence of the necessary financial means to spend and the motivation to spend that money. Just because someone has a lot of money, but keeps it in a bank or, to use an even more mundane example, buries it in their garden – and let’s not pretend that there aren’t people like this even though it’s 2022 – does not make them a premium customer, because they are basically hoarding. They are not willing to show their money to the outside world under any circumstances, so they can only be premium buyers for a few economic segments, although even there they do not achieve this position in the traditional way, because they never apply for it, but simply seeing the amount of money behind them, they are “courted”, nice and carefully, by representatives of the relevant sectors, into this invisible wealth. The emergence of this behaviour has long been linked primarily to ill-gotten wealth, and in some countries, this has been entirely correct. In less-than-pristine economies, people obviously did not brag about tainted money, or if they did, it was a serious problem for local – read non-existent – democracies. So, this phenomenon does exist, and although it may be directly related to the development of the premium market, it is not the reason why, at a global level, sometimes very wealthy households choose not to spend their wealth, not to become a traditional part of this market.
The honest rich
If you look at the democracies with real checks and balances in the world, such as Germany, Switzerland, Austria, or even the USA and Canada – not just the rule-following regions – you can clearly see this phenomenon there, and it is much more pronounced than in the non-democratic regions mentioned above. Not surprisingly, our purchasing decisions are essentially dictated by our personality. What we are willing to spend on, when, and how much we are willing to spend, will surely be determined by a combination of our personality traits at the end of the line. Some people do not spend, but some family members, children, and grandchildren do, and not all of them. This is also a question of personality. There are personality types for whom the life serum is the premium, there are those for whom it is a waste of money, and there are also those who are completely neutral on the subject. This, when we are strategising, should never be forgotten! If you look at the RISE system approach to defining manager personality that is increasingly used today, the Supporter personality type is the one that will never be part of the traditional premium market. This is because the type that seeks stability, to blend in with the crowd, rejects everything that the traditional premium market holds as a value. For them, reliability means that the product has a very large number of customers, and the product becomes “high quality” in their eyes because it is liked by the masses. But the premium is premium precisely because it has either pricing or genuine unique knowledge, or in the best case both, which clearly distinguish it from mediocrity, and make it stand out from the crowd. Just think how many people are proud to have a limited edition of their car, their phone, their house, their particular suit made in the world! And then think how this theory is in stark contrast to Supporter thinking. But can it be said that a Supporter will never buy a premium product? It is not true in this form! You just have to wait for the premium product to “break even”. There is a good example: the brilliant strategy of Apple. But in the meantime, we have to acknowledge that the Supporter rich cannot be counted on as buyers in the true premium market. Then we just have to understand what has to happen for a premium product to become a mass product in their eyes.