"EXPENSIVE" Vs "PREMIUM"

It's astonishingly different - the difference between 'expensive' and 'premium'.
And a really recent example comes starkly to mind.

Now here you are in the parking lot in the basement of a mall headed towards the lift. And what are doing? Well, what you always do - stare at the cars in the parking lot. There are all kinds, but your eyes linger a bit longer on the newer makes and models. The difference is in the caress of your glance, which settles a little longer and caresses the metal of the better looking car - a more premium looking car. And now there is the Fiat Linea. You look at it again. And again. And longer. Without doubt a premium looking car in its appearance, but actually priced lower than its appearance suggests. Now what does that mean. To understand this, we need to imagine the concept testing stage of the Fiat Linea, that the marketing department would have done before launch. Now if a consumer was shown the Linea (before it was launched) minus its logo and asked a question like this - "Now here you see this car. It is from a leading car company and we won't tell you which. Now tell us just by looking at it, what do you think would be the price". Chances are, that the consumer would compare it with the other good lookers on the road in his mind and say something like "Rs 14 lacs". Now that is Rs 6 lacs more than the Linea's real price!This is what makes the Linea a 'premium' car. So what's an 'expensive car', you might ask. Take the example of the Honda Jazz, minus its advertising of 'Why so serious'. And imagine the same concept testing before launch.The consumer is again asked to guess the price. Chances are he will say something like - "Rs 6 lacs" for this 'two box' car. Now that is Rs 2.5 lacs less than its real price!Its easy to tell the fate of these two brands and models of cars. One doesn't need to an astrologer or a marketing pundit.So let me stick my neck out and say it. The Honda Jazz will flop and the Fiat Linea will succeed. And that's because the Linea is genuinely 'premium' and the Jazz is tragically expensive.But that's just one side of the argument.

Sometimes the price doesn't matter AT ALL.

You are interested in buying a house of Rs 50 lacs in a certain colony and the brokerage is 2%. Where is your focus? On the price of the house and how much it will appreciate or on the brokerage? Further, if the broker reduces his brokerage to 1 %, would you buy two houses!?Now lets look at one more example. A 'Mesiterstuck laptop bag' from 'Mont Blanc' costs Rs 68,350/- only. The 'only' is ironical! But its not too surprising, considering the fact that the 'Mesiterstuck Business card holder' from Mont Blanc costs Rs 7,050/ (only!) and the 'Urban Walker Cool Blue Keyring' from Mont Blanc costs a mere Rs 19,100/- Now who buys this, you might wonder. So let's close our eyes and imagine this consumer. A laptop bag of Rs 68,000 must contain a laptop of Rs 2 lacs minimum. Now that should be a Mac. The bag should hang from a shoulder clad in a suit worth Rs 1.5 lacs. The cuff links would naturally be Mont Blanc again. So they would be "Indent" from Mont Blanc of Rs 17,800/ (only!). And the goggles (oops! Sorry 'shades') would be "Indent" again of Rs 18,100/- only and so on and on and on.Actually premium pricing is the easiest to do. This man who buys Mont Blanc buys everything at 17 times the price many of us can afford (laptop bag of Rs 68,000 is 17 times Rs 4,000). So he treats Rs 17 the same way we treat Rs 1.So now, if we like the Honda City of Rs 10 lacs and buy it, he will naturally buy the Rs 1.70 crore Bentley. To us this car is 'expensive', because it is outside the realm of possibility, not because it is not desirable.So we call it 'luxury' but can't buy it.

Finally it is simple maths.
We all buy a formula, whenever we buy any product. Perceived Value divided by Price. And if the product is more less a commodity, then what? On this, next time! Over the weekend check out the number of people inside a Bose Store divided by its square feet area. And then check out the number of people in Jumbo Electronics divided by its square feet area. And guess what you will find? That not only is the population density greater in the Bose store, the average price too is much higher. Now that is the way to check the perceived value divided by price!But go and see the two stores for yourself.