Premiumisation and Automotive: The Path to Top-line Growth

A growing quest for automotive options

Consumers can spend more on the things that matter to them, while cuttingback – often significantly – on those that do not. Understanding these prioritiesis the difference between commanding a price premium and becoming acommodity. Automakers succeeding at this aspect of premiumisation giveconsumers ample choice over models and trim levels.

Premiumisation is lessabout what we own, moreabout who we are

In the wake of the global financial crisis, with lavish displays of wealth out offashion, consumers are spending more on products that can make them better– healthier, more unique, more efficient, thriftier, etc. This is driving demand forproducts that allow consumers to demonstrate betterment, and services thathelp consumers achieve their goals. Automakers are increasingly highlightinghow their vehicles serve as a means of consumers achieving what they want intheir lives, rather than an end in and of themselves.

Technology is theaccelerator

Whilst technology is giving consumers more options than ever, it is alsocreating more pressure to optimise those choices. Technology drives demandfor premium products while creating new means of selling and finding them.Technology applies to automotive companies in three areas: the sale, thedriving experience, and after-sales service.

Consumers give maximumloyalty and money tocompanies that serve aspartners

In today’s hyper-connected world, consumers are increasingly consumingpublicly. This value-based consumption rests on three principles: aesthetic,ethical, and emotional appeal. Technology gives companies more opportunitiesto develop strong bonds with consumers, but also exposes them to anincreased risk of public scrutiny and backlash.

Explosive growth of newplayers means today’spremium is tomorrow’scommodity

The rise of e-commerce and discounters means any premium product (and itshealthy margin) is now a target for upstart players able to reach a wider cohortof consumers than ever. While the automotive industry has traditionally hadhigh barriers to entry, the rapid advancement of technology has enabledmainstream automakers to more quickly than ever include the features thatonce differentiated premium products.