Premiumisation is in. Data from research agencies proves that. The ASP rise in double digit proves it as well. For sure, go for it, but first decide what is your thought on premiumisation for your brand. It could vary for different brands.
Premium segment has four sub-segments - entry, mid-premium, premium and super premium.
What is it that your brand is looking at when thinking of premiumisation - Is it presence in the entry premium segment or an upgrade to the next premium segment in positioning or a reasonable presence in the super premium segment or a simple increment in the ASP that's higher than the standard industry increase.
For me it should either be an upgrade to the next segment beyond their current median (in simple terms, the segment above the one where they sold the maximum devices in 2023) or an increase in the ASP higher than that of the industry.
Let me put some facts on the table to take a practical approach towards premiumisation.
All brands sitting in the entry premium segment or below today should not look at moving to the super premium segment of which Samsung and Apple have 90% share. Of course, presence of at least one device in this segment by Xiaomi, Realme and Oppo is required with minimum volume expectations just for positioning.
Brands in the entry premium segment must understand that the contribution of the mid-premium, premium and super premium segment was just 15% of the market in 2023 up from 10% in 2022. If we remove the super premium segment, which will be the most difficult to crack with Apple gaining fast and Samsung going strong and their share of 90%, it is the mid-premium and premium which should be the target.
Assuming that the 15% figure of mid-premium moves upwards to 20% in 2024 basis the 5% growth in 2023 as well, at least 2% will go to the super premium. The balance of 3%, which is 4.5 million devices approximately based on a projected market size of 150 million, will go to the mid-premium and the premium segment. This is not a very high number and with the older Apple iPhones, Samsung, OnePlus and Vivo going strong, one is competing against the best. Just to share, 35% of the mid-premium segment is controlled by OnePlus which is getting more aggressive and will only gain. The other major brands are Samsung and Vivo. While Samsung will try and gain ground, the only other brand which due to external reasons can falter is Vivo. But what is the volume Xiaomi and Realme can fight for in a market size of 4.5 million competing against the best.
For brands which have grown based on pricing or democratisation of technology, it would be a tough task to jump two rungs from a median of entry premium to even premium. Super premium for them is a long shot as explained above.
While the push of increased WOD and manned stores may be a strategy to driving the sales in the premium segment, it is not going to change the scenario much as in the higher segments it is more about brand perception and natural pull rather than push.
On the pull side marketing, both ATL and BTL, cannot change things overnight and may not necessarily deliver the anticipated results. One cannot position a Suzuki highest end car at the same level as the lowest Audi or BMW model. Brands take years to get built and positionings especially upwards are not easy to change.
Having said that, it would be important for a brand to decide their concept of premiumisation from the ones mentioned above and start taking baby steps to move up the ladder holding their share in the segment in which they are strong. Nothing is impossible. Take it as a test match (no Bazball), and not a T20. 😃