What’s worth paying more for? Tash Walker explores the hidden truths FMCG brands might be missing
What’s worth paying more for? It’s the burning question that countless FMCG brands strive to answer, particularly as many are struggling to justify premium positioning.
In October, data from Kantar showed many of the UK’s biggest brands are failing to justify their pricing strategies.
As consumers question the value of premium, and the cost-of-living crisis continues, it’s no wonder FMCG brands are turning to discounting.
Businesses are fighting competition from every possible direction: discounters across multiple categories from sports (such as Sports Direct) to food and drink (Lidl and Aldi) have opened up a new front of permissible everyday low-cost value. Similarly, retailers like Amazon, Shein, and Boohoo have introduced new fronts, leveraging low production costs in countries such as China and Indonesia. As a consequence, prices can be overly competitive for brands with a more traditional supply chain.
In this world, it can sometimes feel depressingly like there is no floor at which prices will stop going down. And yet, just like politics, we are seeing deep polarisation occurring when it comes to pricing.
In 2024, higher-end M&S was voted Britain’s most popular supermarket, and Lululemon – which charges around $168 (£132) for a pair of leggings – had its biggest year in 2023 (growing by 18 percent year on year) and at the time of writing, was forecast to grow again in 2024. These are just two examples of many: almost every category is showing prices at the top end climbing higher and demand growing.
Yes, inflation, the cost-of-living crisis, the lingering effects of the pandemic, and local and global disruption have created a race to the bottom in many categories. However, the truth is people are parting with their hard-earned cash for premium products.
So, how can FMCG brands make sure they end up on the right side of this conversation, as a brand worth paying more for?
First, it’s about understanding that people are not consistent. It’s time to ditch the narrow view that people fit into one shopping segment. They shop across multiple price categories to balance their baskets, buying from both M&S and Lidl, or buying a Dior foundation but also a Boots own-brand face cream, for example.
If brands embrace the diverse reasons why people really spend their money on premium products, they’ll find that consumers can find real value in almost anything. We live in an age where everything from tampons and toilet roll to bin bags have been made desirable.
So, when building a strategy for premiumisation for your FMCG brand, these are the big challenges to consider.
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We’ve got to re-think why people buy premium goods in the first place
Premium buying behaviour during times of uncertainty is often explained away by the concept of ‘treating’. People often talk about the Lipstick Effect: coined because data showed that buying something small – like a lipstick – is an affordable way of consumers making themselves feel better during tough times.
In other words, it’s an external reason (good or bad) that prompts you to buy something fancy.
But this behaviour doesn’t ring true today. The merge between being a consumer of objects and a consumer of social media has shaped a new version of identity which is highly performative.
In FMCG, we’ve always talked about consumers, but now people make choices based on how they use products to portray an image to the world.
Basically, in 2024, people have – to use the current vernacular – ‘main character energy’. They constantly have half an eye on the performance of their lives – how does it look to others? How are they perceived online? This is what defines how people think about identity now.
And this impacts how we shop. If you buy it: then you are it. You feel the part. You are ready. It describes who you are.
A recent report from Waitrose found that premium varieties of olive oil, sea salt and sardines “are now middle-class status symbols”. Demand for premium extra virgin olive oil has grew by 15 percent in 2024, while sales of Cornish salt flakes were up by 79 percent year on year, according to the upmarket supermarket.
Food now has a cultural cachet. While you can still buy much cheaper versions of everything, staples ranging from sardines to chickpeas, nuts, honey, vinegar, you name it, are among the foods that are already becoming premium.
Buying something premium today isn’t a response to an external factor, it’s a projection of how you want to be perceived by the world. Buying an object or brand becomes an entry point to be able to express your lifestyle and identity. It’s ripe for brands to tap into.
So, stop thinking about people as consumers and start thinking of them as characters.
Consumers buy things to treat themselves occasionally. Characters use the brands they buy to construct their identities.
Shopping choices framed through the lens of main character energy are much more charged. When it comes to buying a product or brand, people are thinking about their audience.
In that world, Lululemon’s success makes a lot more sense.
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Occasion is the single biggest influence on whether someone will pay more for an item
Think about it: you’ve got friends coming over for dinner. It’s going to cost you much more than just your average mid-week meal, right? Of course, because you are placing emotional attachment to that night even before anyone has arrived. And with emotional attachment comes value.
You want the night to go well, you want your friends to think you are generous.
And there is the truth: people spend more on specific baskets than they do on general ones.
In behavioural science, this is called affective forecasting. A great example of this comes from the world of frozen pizza. Researchers for a study by the Ehrenberg Bass institute in 2019 interviewed consumers just after they bought frozen pizza in a supermarket. People were asked about the intended consumption of the pizza and the study found that buying for a special or social occasion corresponded with paying higher prices.
For a routine or non-social consumption, 80 percent bought below the median price, while 63 percent of those buying for a special or social consumption bought above the median price.
In other words, occasion really mattered when it came to how much consumers were prepared to spend. It taps into the first point: people make choices based on what it will say about them, and occasions are where they show their friends, family or colleagues who they really are.
It’s why it’s so important to recognise the inconsistencies and complexities that make up everyday life. Understanding this is key to understanding how and why people will pay more for a product.
It’s clear that some things are worth spending more money on, even if people don’t have as much disposable income right now. What it boils down to is simple – people aren’t just looking for things which are cheap – they are looking for things which give them lots of value, some of which might be cheap, some of which might actually be very premium.
As a brand, if you can tap into this, and appreciate the why and the when, then you have a much better opportunity to break out of the discounting doom spiral.
Tash Walker is founder of The Mix Global
