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The relationship – and even the tension – between value and values is something that has been a core subject for debate and discussion here on MNB over the past few months, especially as the economy has worsened. Customers are making decisions they didn’t need to make just a few months ago, and both retailers and manufacturers are working hard to figure out how to position themselves.

And so, it has been intriguing to learn about a concept that the folks at Management Ventures Inc. (MVI) call “the New Premium,” which they describe as the idea that for at least some shoppers, a key part of what makes a product more valuable is not in the product itself, but in the values of the company that makes it and the way it aligns to a host of personal and community values that shoppers believe are important.

Because some people may believe – rightly or wrongly - that at this point in economic history such values concerns are falling by the wayside, MNB thought that it was an appropriate time to engage John Rand, director of retail insights at MVI, in an exclusive e-interview about the subject.

MNB: Let’s start at the beginning: how do you define the “new premium”?

John Rand: Any brand or product that achieves a preferred positioning which displays to a greater or lesser degree all of the following three attributes:

Transparency in how the product or brand is created
Preservation of self or the planet as one of its primary or ancillary benefits
• A sense of enriched purpose for the consumer (personal, social or both) that comes from the brand experience.

There are some “new premium” examples that aren’t particularly new – many natural and organic products fall into this realm (though many fail to deliver significant enough impact on the three areas above, which leaves them falling flat). This may be one of the reasons that “all-natural” petered out, and that organic may be at risk – the attribute “naturalness” is not what the shopper was buying, but the broader and inter-related connection between the three variables outlined above. Removing the transparency and purpose and leaving only the physical attribute deconstructs the premium positioning and left the consumer with a different product, but not a different story or a different dream.

Today, the move back to locally produced food is another example – local farm produce may be “better” or not, but what really drives the discussion is a larger framework of decision, relating to environmental or social concerns. Increased environmental concerns, food safety, wellness issues - all of these topics drive certain consumers to make certain purchase decisions, based less on price and more on other considerations.

The reason MVI (a retail analysis company, we are not a branding agency) has been so interested in this is because this definition of the New Premium lends itself well to a retailer developing a premium brand strategy – attributes and inspiration don’t require a multi-million dollar launch. In fact if you look at many of the great product-based new premium brands today – Burt’s Bees, Kashi, Amy’s Kitchen, Glaceau’s early days, Whole Foods, Trader Joe’s, Seventh Generation, etc…you see very few of them were foisted on consumers with an enormous marketing budget behind them – they earned their premium status by relentless, integrated and consistent delivery against the three attributes outlined above.

MNB: You’ve written that “you cannot gain share of wallet until you can gain share of values.” At a time of economic decline and/or uncertainty, to what extent do you believe shoppers are thinking about values other than low price?

John Rand: Shoppers will temporarily move down their needs hierarchy when times are tough and/or uncertain - we can see in the recent slowdown at Whole Foods that this happens. At the same time the attribute-driven nature of the new premium may give it more holding power and a faster recovery than a more straightforward trade up. We are pretty skeptical, for instance, that folks on a budget suddenly don’t care about the safety of their food, or the quality of the environment, or think that their health is less important. Diabetics are still trying to manage their diet even when money is tight, parents still want their children to eat healthy food, and no one who has decided to use re-usable shopping bags out of concern for the environment just reverts to plastic bags because they are worried about their mortgage. The new premium mindset is unique because premium is not necessarily derived from being more expensive than the everyday – simply in more consistent and integrated delivery of the three key attributes.

MNB: Would it be your suggestion that aspirational or values-oriented customer priorities developed during times of prosperity will persist even in tough times? And is it important to have this component of your offering – whether you are a retailer or a manufacturer – so you are positioned correctly when the hard times end?

John Rand: We have to remember that the New Premium is not necessarily about spending more – sure, some areas of decision here may carry a price – but there are some people for whom “new premium” behavior is deciding to return to family home cooking instead of take-out not just because it saves money but because they want to re-connect with their family (purpose), eat healthy (preservation) and create a meaningful story around mealtimes (transparency). Compact fluorescent light bulbs, which are sort of the entry-level product for people trying to reduce their carbon footprint, actually save money over time, and even though the initial cost is more than an ordinary bulb, it is a matter of a very small amount of money. But it is quite clear that people are willing to spend a little more for something that aligns to something they value.

MNB: I’ve been fascinated by Walmart’s telling its “green” manufacturers that it doesn’t just want “green” products, but also wants to know the narrative behind the products so it can communicate that story to shoppers. Is this a good example of the “new premium” at work? What does it say about the trend when a behemoth like Walmart is acting on it?

John Rand: Walmart is clearly attempting to tell an integrated story around sustainability that links transparency and a broader sense of purpose to the core preservation attribute of environmental sensitivity. Their objectives are multi-headed here – to legitimately use their scale for good, to save money and to enhance their core brand.

What Walmart has tried to close with increased transparency, first with its supplier partners and now more recently with consumers, is an authenticity gap – they have used the web in particular as a way to “let consumers in”, “see behind the curtain” and understand specifically what Walmart is trying to do. Do they have a long way to go? Sure.

What does this say about the new premium? That well executed it can invert the historic perceptions of what premium is and who can purvey premium to consumers – pretty exciting stuff!

MNB: Can you give me some other examples of retailers and manufacturers communicating the “new premium” to their consumers? Is there one surprising example that most people would not think of?

John Rand: There are so many examples, thankfully – when I read on MorningNewsBeat about how some retailers decided not to sell cigarettes anymore – that’s New Premium thinking. I noticed Country of Origin labeling on items in HEB’s Central Market a couple of years ago, even though it was not required at the time – that’s New Premium thinking. Tesco has started asking a third party company to measure the carbon footprint of items in certain categories and is starting to ask for labels to include that information – New Premium. The retailers that have started to label their shelves with improved nutritional information to guide consumers, such as the Guiding Stars from Hannaford and now also Food Lion. Safeway’s Food Flex website is a terrific example – where shoppers can use the website to calculate the long term effects of making a diet change on their weight or their cholesterol or other health and wellness factors.

On the supplier side, a host of brands stand out here that all mean something quite different. One of the first brands that caught our eye here was Method – there is such a tight integration between what the product stands for, how it was created and what it is that even though its preservation credentials might be a little slight it clearly comes from this brand family. Many of the brands mentioned above are classic examples of this – and there are some retailer brands like 365 at Whole Foods that may articulate aspects of this more clearly than many supplier brands.

The most interesting piece on the supplier side has been, so far, the lack of development of these types of brands by major CPG manufacturers. Acquire? Yes – Odwalla, Stacy’s, SoBe, Glaceau, Kashi, Burt’s Bees, Iams, are all examples of these types of brands that are today part of major CPG brands. But few have successfully developed this type of brand internally – Clorox with Green Works is one of the few. Why? Control – so much of the new premium is about letting the brand be a conversation with consumers rather than a loud broadcast, and, today, most CPG companies are not well constructed to have this type of patient conversation. A brand you can argue has reinvented itself around the new premium (with some missteps) has been the work Unilever has done with Dove….transparency and purpose have been skillfully interwoven into the brand’s core preservation values in a way that hasn’t been without bumps in the road, but has certainly been very interesting.

MNB: It would be my perception that a retailer like Trader Joe’s is very good at the “new premium, because it is about values and value…but that a store like Aldi is not, nor should it be. Am I correct? Are there natural limits on what kinds of retailers and products should focus on establishing the “new premium”?

John Rand: Well, I am not so sure that I agree, frankly. Trader Joe’s has an excellent reputation for treating its associates well, for being a pretty good citizen, and for providing great products at a fair price. Aldi has exactly the same reputation; it just does so at a different price point. It shouldn’t be very surprising they act in much the same way – after all, they are two parts of the same company.

There is nothing about having core values that are important that is limited to a higher income levels. It is important to remember that outside the USA Aldi is a terrific example of the New Premium – its transparency comes through rigorous product quality testing, it has been an environmental and sustainable farming leader for years and the sense of purpose comes from an intense passion for hunting for great value – its positioning is more similar to Costco’s here than to Aldi’s traditional US low-income profile. In many ways, Tesco’s Fresh & Easy’s brand aspiration is a new premium-style brand loosely based around Aldi’s core premise, but aimed at a broader consumer demographic.

We see no reason why attributes of New Premium thinking couldn’t pervade every business, whether supplier, retailer, or something else entirely. The key here is the integration between the how, what and why – we suppose that this type of integration might result in a New Everyday, or a New Discount as well!

MNB: You’ve said that transparency is part of the equation…but alone is not enough. What do you mean by this?

John Rand: We see several steps as necessary to create an effective New Premium brand, whether a product or a store.

First, of course, you have to express the Why, the purpose of the distinction – this product or this store is standing for something, something that is either personal or social in its value and importance. But just saying it is not enough. As any market will tell you, you have to create Trust, and Trust flows from three things at the same time – Transparency, Consistency, and Authenticity.

This is not something that happens without work, without diligently creating and supporting a pattern that leads a shopper to believe in you and your product, you and your store – to Trust that what you say and what you do are aligned and reliable and to believe it is not a veneer of insincerity but really something you stand for and will stand behind. So Transparency is a necessary step – but you then must be Consistent and dedicated to whatever you are trying to make a part of your New Premium until it is Authentic.

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