Opportunities in Premium Personal Care: Trading Up Trends

Table of Contents

• Overview
  • Catalyst
  • Summary
  • CONTENTS
• Table of figures
• Table of tables
• THE FUTURE DECODED
  • INTRODUCTION: A number of factors are influencing premiumization in personal care
  • TREND: Economic conditions and the growing ' mass class' have a major impact on trading up and luxury purchases in personal care
    • Favorable conditions have led to considerable up-trading in personal care among mass market consumers
    • Many countries have seen economic growth but personal care products have not fully benefited
    • The number of high net worth individuals (HNWI) is growing steadily worldwide and is a driving force behind high-end luxury personal care purchases
    • There are more mass affluent individuals but the rate of growth is slower than among HNWI
    • Higher income shoppers are less likely to shop on a budget
    • It is important to not be complacent even if you are targeting core luxury shoppers
    • Key takeouts and implications: a growing economy has facilitated premiumization in personal care, but the current downturn threatens to limit growth
  • TREND: The search for value is widespread especially since luxury/premium products have become more accessible
    • Luxury/premium is becoming more relevant to mass-market consumers leading to higher expectations
    • Additional access to better quality products has created a sense of entitlement among many consumers
    • Price-led value is a hugely important factor in purchase decisions and store selection and will become increasingly influential in personal care
    • Bargain hunting gives consumers a sense of satisfaction and increasingly has status value
    • Rapidly declining consumer confidence will further re-enforce the allure of ' good value' but does not necessarily equate to wholesale changes in FMCG consumption
    • Key takeouts and implications: industry players will have to work harder to convince consumers that price premiums are worth it amid a strong desire for good value and declining consumer confidence
  • TREND: The importance of image and appearance is a key premiumization driver in personal care
    • Consumers' considerable interest in looking and feeling good is heavily tied to self-esteem enhancement
    • Consumers' interest in looking good is arguably exacerbated by modern society
    • ' Personal branding' and the growing industry supporting this concept exemplifies the emphasis that individuals place on image
    • The growing proportion of individuals having cosmetic surgery, or considering and having cosmetic surgery, reflects an image conscious society
    • Consumers' interest in glamour has assured the longevity of advertising with ' beautiful people'
    • Attitudes to looking good vary by country across Europe, North America and Asia Pacific
    • Key takeouts and implications: image conscious consumers create premiumization opportunities for manufacturers and retailers even in the context of a difficult economic environment
  • TREND: Premiumization in personal care is expected to continue to drive market value especially in the emerging markets
    • The recessionary environment will make mid-market positioning even more precarious
    • Emotionally involving personal care categories will see less down trading if recession occurs because consumers will pay more for a product of service that they are passionate about
    • An increase in private label personal care purchases is also expected in the years ahead
    • Consumers are more likely to revert to home personal care solutions products if recession hits
    • The emerging markets will offer protection against potential weaknesses in market performance in developed western markets
    • Consumers already have established patterns of buying premium fragrances
    • Consumers are looking for multiple benefits from make-up products and this has facilitated additional prestige in the category
    • Consumers' trading up in haircare is influenced the growing popularity of professional products
    • Skincare is an emotionally involving category for many consumers and is becoming synonymous with premiumization
    • Premiumization in personal and oral hygiene is less established than other categories
    • Key takeouts and implications: consumers are still willing to spend premiums for products that make them look and feel better
  • INSIGHT: Premiumization is influenced by the consumers' emotional involvement with the product and a number of important product characteristics
    • Premium is still a high price related to extraordinary factors perceived and experienced by consumers
    • Consumers are skeptical of the product quality benefits offered by premium/luxury brands
    • Key takeouts and implications: establishing a luxury/premium positioning involves a strong understanding of how consumers perceive brands according to five key criteria
  • INSIGHT: Packaging is the most pertinent extrinsic quality cue and can significantly impact consumers' quality judgments of personal care products
    • Color is an important intrinsic and extrinsic attribute shaping consumers' quality judgments
    • Packaging creates and enhances product positioning and creates preconceptions of quality standards
    • Product appearance judgments can also be influenced by the retail outlet from which it is purchased
    • Consumers' perception of ' premiumness' can also be influenced by the provision of product information including word of mouth
    • Numerous examples illustrate personal care brands leveraging ' intrinsic and extrinsic quality' cues to facilitate a more premium positioning
    • Key takeouts and implications: industry players must establish whether the intrinsic and extrinsic quality attributes of brands/products are perceived favorably, especially in comparison to competition
  • INSIGHT: How consumers use and experience personal care products has additional weighting especially as luxury becomes ' experiential'
    • The experience of scent is extremely powerful in shaping perceptions and forging an emotional connection with personal care consumers
    • Product efficacy is a vital route to premiumization in personal care
    • Though consumers expect convenience as a matter of course, it can still be a route to premiumization
    • Consumer trends indicate that more emotional rather than material forms of consumption may be emerging as consumers become more pre-occupied by experiences
    • Numerous examples illustrate personal care brands offering ' experience quality' based benefits to facilitate a premium positioning
    • Key takeouts and implications: experience based quality will become even more important in creating a luxury/premium positioning
  • INSIGHT: Credence quality influences trust, involvement and willingness to pay for premium personal care products
    • Details surrounding ingredients and production methods are particularly important because of the crossroads characterizing personal consumption trends more generally
    • ' Professional quality' and ' professionally recommended' credentials are linked to efficacy and therefore an enhanced willingness to pay price premiums
    • Alternatives to cosmetic surgery are becoming increasingly credible to attract luxury/premium consumers
    • Regionalism, origin and authenticity form a basis for premiumization in personal care
    • Socially responsible personal care products have the potential to command price premiums
    • Numerous examples illustrate personal care brands offering added value ' credence quality' benefits to facilitate a premium positioning
    • Key takeouts and implications: ' credence quality' reflects myriad consumer trends impacting consumer markets in general, not just in the personal care industry
  • INSIGHT: Many consumers will pay more for products satisfying status needs
    • Product conspicuousness is related to two similar but distinct patterns of consumption: ' status consumption' and ' conspicuous consumption'
    • Ethical/sustainability led consumption behavior increasingly has status value
    • The cult of celebrity has imbued many personal care brands with added status and popularity
    • Numerous examples illustrate personal care brands offering status enhancing benefits for appearance and brand conscious personal care shoppers
    • Key takeouts and implications: status conscious shoppers are more willing to pay premium prices so industry players need to understand what status means to a target consumer
  • INSIGHT: Uniqueness and specificity is equated with quality and brand cachet as well as the emerging needs of ' Generation C'
    • Premium personal care consumers want products that are unique and evoke a feeling of individuality
    • ' Premium fatigue' is a threat as consumer expectations continually increase in line with market dynamics
    • A commonplace way to ensure uniqueness in any product market is to raise prices
    • Individuals are looking for more customization possibilities and opportunities for self-expression
    • Numerous examples illustrate personal care brands providing unique benefits, especially through personalization/customization benefits
    • Key takeouts and implications: enhancing the exclusivity of certain premium personal care products is another way to encourage consumers to believe in the value proposition on offer
  • INSIGHT: Hedonism is a major driver of trading up which means brands must leverage hedonic benefits of personal care product usage
    • Pleasure is highly linked with emotions and emotions are linked to loyalty and WTP price premiums
    • Satisfying personal care consumers' desire for enjoyment and pleasure is best served through multi-sensory marketing tactics
    • Research indicates that consumers associate higher priced products with additional pleasure
    • Consumers may seek to de-stress from financial pressures with premium personal care products
    • Numerous examples illustrate personal care brands providing added sensual benefits to appeal to hedonistic consumers
    • Key takeouts and implications: linking beauty products with escapism and indulgence adds another dimension to products especially in a recessionary environment
  • INSIGHT: Consumers are more likely to pay a premium for brands re-enforcing their self identify
    • Consumers' desire to choose products that reflect their self identity is particularly relevant to personal care
    • A consumers' self concept is multidimensional and will be heavily influenced by cultural differences
    • Consumers use natural and ethical personal care consumption as a means to express their values and beliefs
    • Key takeouts and implications: the health and beauty industry is particularly well placed to capitalize on consumers' desire to choose products reflecting their self identity
  • INSIGHT: Aging consumers have become important consumers of premium personal care products but premiumization is a trend with broad demographic reach
    • Older consumers have considerable personal wealth which makes them a potentially important target group for premium products
    • Younger consumers are also an important driver of trading up in personal care
    • Key takeouts and implications: the desire to trade up to premium personal care has broad demographic relevance which creates targeting challenges but broadens the market opportunity
• ACTIONS
  • ACTION: Research to determine how much of a discretionary purchase your brand is and make preparations in recognition that some people are currently trading down
    • Use Datamonitor' s Premium Price Index to help frame your market and consumer assessment
    • Embrace new strategies in recognition that some beauty consumers are going to trade down
  • ACTION: Adopt a ' no-compromises' approach to product quality through formulation and positioning of a premium brand
    • Use the best, most effective ingredients to elevate functionality using natural and technologically advanced formulations
    • Adopt a ' tiered' approach to branding in order to meet demand for both natural and technologically advanced ingredients
    • Protect the long term growth opportunities by making credible functionality claims
    • Source natural ingredients/products from a guaranteed specific area to boost authenticity credentials
    • Leverage heritage and tradition credentials wherever possible
    • Retailers should embrace a more holistic approach to beauty merchandizing and the development of product lines
  • ACTION: Ensure that a luxury/premium brand has an identity that is consistent with a target consumers' self concept
    • Embrace the philosophy of ' lifestyle/attitude branding' to empower premium brands and promote the idea of ' expressive beauty' and self confidence
    • Give consumers opportunities to express their self concept through products and services
  • ACTION: Emphasize the experience associated with a brand' s premium credentials
    • Encourage consumers to consider a premium personal care product occasion as a special time
    • Sell consumers the idea of time
  • ACTION: Continually explore avenues for emphasizing the uniqueness of a premium proposition
  • ACTION: Maintain marketing spend, especially in the current recessionary environment, to justify premium prices
    • Maintain advertising efforts to help maintain differentiation of premium branded personal care products
    • The nuance of the premium personal care product advertising message might have to change during this period of economic uncertainty
    • Be wary of over-reliance on price reductions
    • Maintain a strong focus on innovation and R&D during times of economic uncertainty
    • Use Datamonitor' s strategic reports outlining the key innovation opportunities that arise from consumer mega-trends
  • ACTION: Look for opportunities to extend pre-existing products or launch new premium products into emerging markets
    • Explore opportunities for basic market entry, store expansion and distribution expansion in the emerging markets
    • Use acquisitions and alliances as a means of improving local market understanding
    • Do not assume emerging market consumers to be a large homogenous group
    • Use local personalities as brand spokespeople when expanding into the emerging markets
    • Release products in smaller sizes with correspondingly smaller price tags to target the lower incomes apparent in the emerging markets
• APPENDIX
  • Definitions
  • Methodology
  • Further reading and references
  • Ask the analyst
  • Datamonitor consulting
  • Disclaimer
  • List of Tables
    • Table 1: Per capita GDP, constant, ($), 1995 prices by country, Asia Pacific, Europe and US, 2002-2012
    • Table 2: Personal care spending as a percentage of gross domestic product (GDP), by country Asia Pacific, Europe and US, 2002-2012
    • Table 3: Personal care spending as percentage of private final consumption expenditure (PFCE), by country, Asia Pacific, Europe and US, 2002-2012
    • Table 4: High net worth individuals (000s) (HNWI)* by country, Asia Pacific, Europe and the US, 2002-2012
    • Table 5: High net worth individuals (HNWI)* as a proportion of overall population by country, Asia Pacific, Europe and the US, 2002-2012
    • Table 6: Mass affluent individuals (000s) (MAI)* by country, Asia Pacific, Europe and the US, 2002-2012
    • Table 7: Mass affluent individuals (MAI)* as a proportion of overall population by country, Asia Pacific, Europe and the US, 2002-2012
    • Table 8: The percentage of consumers who seek discounts and express satisfaction from value, by country
    • Table 9: Premium fragrance* market ($ millions) in western Europe, Asia Pacific and the US, by country, 2002-2012
    • Table 10: Premium make-up* market ($ millions) in western Europe, Asia Pacific and the US, by country, 2002-2012
    • Table 11: Premium haircare* market ($ millions) in western Europe, Asia Pacific and the US, by country, 2002-2012
    • Table 12: Premium skincare* market ($ millions) in western Europe, Asia Pacific and the US, by country, 2002-2012
    • Table 13: Premium personal hygiene* market ($ millions) in western Europe, Asia Pacific and the US, by country, 2002-2012
    • Table 14: Proportion of consumers (%) who have, "chosen higher quality food/drink/cosmetics or toiletries for extra indulgence and enjoyment" in the preceding 12 months, Europe and US, 2005-2006
  • List of Figures
    • Figure 1: There are important drivers and inhibitors impacting premiumization in personal care
    • Figure 2: The ' democratization of luxury' is both an opportunity and a threat for luxury/premium personal care providers
    • Figure 3: Good value for money has become the most important influence over grocery store choice globally while price exerts considerable influence in personal care purchases
    • Figure 4: Consumers use personal care products to feel better about themselves
    • Figure 5: Many women associate a desirable image/appearance with additional opportunities and attention
    • Figure 6: Consumers feel under ever increasing pressure to adopt ' appearance management behaviors'
    • Figure 7: Personal branding is a concept that has built momentum in the last 10 years
    • Figure 8: Glamorous advertising remains pervasive in personal care categories
    • Figure 9: Consumer slowdown should compel personal care brands to reconsider their approach
    • Figure 10: Body odor is a key concern for all consumers
    • Figure 11: Manufacturers looking to capitalize of premiumization in personal care must excel more than their competitors in the provision of factors associated with the Premium Price Index (PPI)
    • Figure 12: Premium products being offered at ' discount prices' is an emerging reality in developed markets
    • Figure 13: Packaging design plays a big part in shaping quality expectations, especially when making personal care purchases
    • Figure 14: Brands can be effective ' curators' of wellness advice with well-designed, informative websites
    • Figure 15: Manufacturers and retailers can manipulate intrinsic and extrinsic attributes to help facilitate a premium positioning and/or achieve differentiation
    • Figure 16: Scent can be classified by its ambience and congruency
    • Figure 17: Offering time and effort saving benefits, combined with science-led and natural ingredient efficacy, can help insulate from the escalating private label threat add value to personal care market growth
    • Figure 18: There are various examples of brands offering added value ' experience quality' through scent, improved performance and convenience to facilitate a premium positioning
    • Figure 19: Beauty innovation is at a crossroads between technologically advanced science led products and natural formulations and there is increasingly a convergence between the two
    • Figure 20: Consumers will pay a premium for authenticity as they seek to ' re-connect with the real'
    • Figure 21: Products offering the combined benefits of natural and technologically advanced ingredients appears to be a growing trend as does the proliferation of professionally positioned products
    • Figure 22: Status and conspicuous consumption are equally valid themes in premiumization but require different approaches
    • Figure 23: Status and conspicuous consumption are equally valid but require different approaches
    • Figure 24: Collaborations with celebrities, fashion designers and co-branding are common routes to inflating the status of personal care brands
    • Figure 25: Four key personal benefits as well as the additional ease of customizing have driven the trend toward more personalized consumer packaged goods
    • Figure 26: Offering consumers additional possibilities by which they can co-create and self-customize will be more commonplace and will come to be an expected product feature by shoppers themselves
    • Figure 27: Sensory attributes have a significant impact on hedonistic positioning
    • Figure 28: Consumers are embracing brands that reflect their self concept while many global women embrace the philosophy that beauty can be achieved through interpersonal factors, not just appearance
    • Figure 29: A consumers' self concept is multidimensional and will be heavily influenced by cultural differences
    • Figure 30: A consumers' self concept is multidimensional and will be heavily influenced by cultural
    • Figure 31: Premium image and high functionality are irresistible propositions
    • Figure 32: Using the best ingredients to elevate functionality involves resolving the crossroads between preferences for natural and technologically advanced ingredients
    • Figure 33: If regional links are used to position a product, the connection should be clear
    • Figure 34: Sunsilk' s ' Life Can' t Wait' campaign helps to establish a stronger personality for the brand
    • Figure 35: Spa treatment-type products offer consumers a relaxing premium personal care experience
    • Figure 36: Convenience can be incorporated into premium personal care
    • Figure 37: Situational and personally adaptive beauty solutions is an emerging area in personal care