The premiumization trend is taking over the American economy as businesses pump up prices to attract a higher-income clientele.
Key Details
- Premiumization is the practice of companies emphasizing the luxury version of their products that they then sell at elevated prices.
- The goal is to attract high-income customers in the hope that the company can sell fewer products for a more significant profit.
- This trend is taking hold in everything from the auto industry to Krispy Kreme donuts.
Why it’s news
By focusing on producing premium products and selling to higher-end clients, fewer companies will be considering the needs of middle-class consumers. For example, in 2017, customers could choose from around 36 car models that sold for less than $25,000. Last year, those same customers only had ten models to choose from.
Premiumization could also have the added effect of continuing to push inflation higher as fewer products available pump up prices.
So far, there’s limited information available on how sustainable this premiumization practice could be. Last year, Six Flags provided fewer discounts to customers and simultaneously upped ticket pricing. The amusement park brand saw a 22% increase in guest spending, but its overall profits declined around 10%, The Hustle reports.
Some examples of premiumization…
- Krispy Kreme original glazed donuts sell for $12.99 per dozen. Its limited-time special deal of Reese’s Salty Sweet Dozen is $17.49.
- A single-day ticket at Six Flags Magic Mountain costs $54.99 and does not include parking prices, meanwhile, the Diamond Pass costs $159.99 and features perks such as parking, line skipping, and food discounts.
- In the food industry, certain flavors such as toffee, chutney, smoke, and sweet potato are growing in popularity as a perceived “premium” flavor, according to spice and manufacturing company McCormick’s Fona.
- A five-pound bag of Purina Pro Plan for adult dogs costs around $20 on Amazon. A similar food in the Purina One line costs about $16, and the Dog Chow version costs about $6 at Target.