UK: British consumers trading up to premium products says Datamonitor
British consumers are increasingly trading up to quality food, drink and personal care products, according to market research organisation Datamonitor.
This is reflected by the growth of the specialty products such as hand-made, origin specific food, drink and personal care products for which spend is expected to exceed £4.5bn (US$8.2bn) in the UK by 2009, an increase of 30% when compared the level of spend in 2004.
"The growing taste for luxury is set to become more pronounced as consumers continue to experiment, self-reward and seek out satisfying experiences with rich flavors, textures, and variety", said Daniel Bone, Consumer Analyst at Datamonitor and author of the report 'Developing Products With A Price Premium,' in which the findings are outlined. "For manufacturers, consumers' growing desire for quality means concentrating on new product development and marketing the luxurious aspects of products," he said.
Consumers' interest in premium products is being spurred by rising incomes, an overall trend towards indulgence and the growth of key demographic groups such as older consumers and singles are all helping to spur the growing interest in premium products.
As many as 83% of UK consumers expressed the view that it is important "to be open-minded about trying new products and experiences" and 62% agreed with the statement "you have to take risks to get rewards". 73% of Brits surveyed also indicated finding new excitement and sensations as 'important' or 'very important'.
According to Datamonitor this indicates that adventure-seeking values, risk taking and values which place a high importance on new experiences as playing a big part in influencing consumer purchases of and trading up to premium products.
The report forecasts UK consumer spend on specialty food, drink and personal care spending will increase from £3.4bn in 2004 to 4.5bn in 2009.
Increased accessibility has fuelled what has become known as the 'democratization of luxury'. Many middle and lower income consumers aspire for more and are prepared to buy items that suggest they are moving in the right direction. In recent years, the trend for 'accessible premium' brands has emerged, reducing the high entry barrier that the industry once maintained for premium products.
Brands such as Walkers Sensations, one of the most successful FMCG launches in recent years. They are a prime example of how mass market consumers will trade-up to higher quality, more sophisticated products providing the marketing communications to appeal to the broadest possible audience. The growth of discount chains has also been crucial in providing consumers with the opportunity to sample premium goods because they increasingly stock luxury brands at discount prices.
But consumer expectations and how they perceive premium offerings are also shifting. "With more exposure to higher quality goods, consumer expectations are rising and in consequence they are harder to please. The bottom line is that premium and value increasingly co-exist in the market-place, which in many instances have increasingly polarized between premium and low-cost offerings," said Bone.
Although consumers' willingness to pay premium prices is influenced by complex criteria such as 'coolness' and hedonistic sensory attributes, there are other simple factors that are equally important. Datamonitor found that overall 50% of European and US citizens were willing to pay up to 10% more for time-saving products and services, compared to 41% of consumers in the UK. That a further 17% of UK consumers are also willing to pay over that, it suggests that simply having enough time is becoming a luxury in itself.
UK consumers are also willing to pay a premium for enhanced efficacy with 36% willing to pay up to 10% more for cosmetics and toiletries containing active ingredients, and 19% also willing to pay over that. This, according to Datamonitor, suggests manufacturers continued foray into functional products could provide highly profitable. The report suggest marketers need to respond to this desire in a way that says, while material items are not important to well-being it is better to have a few quality material items than to squander resources on many low quality items.
"With rising consumer expectations, manufacturers must ensure premium products support all aspects of consumers' lifestyles in order to justify a premium price." said Bone.
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