Premium products reflect one's status

Jacky Mussry, Contributor, Jakarta

One Saturday on an uncrowded street in Jakarta, a flashy, sporty red car caught my eye. The waist-high vehicle was none other than a Ferrari.

My enjoyment lasted only a few seconds before it accelerated out of sight. I caught a glimpse of tremendous satisfaction painted all over the driver's face. Who wouldn't be elated pulling away in a Rp 3.5-billion dream car in Indonesia?

However, what made me reflective the next second was the fact that this was happening not in a rich country, but right here in Indonesia, where, according to the World Bank's data for 2002 the annual income per capita is just US$710.

In neighboring countries, meanwhile, such as Thailand, which has recovered from its economic crisis, the per capita income is US$1,980, and in Malaysia it is US$3,540. Brunei's and Singapore's figures are, of course, much higher: about US$ 20,000.

The super-rich in Indonesia, who can afford premium products like Ferraris, are estimated at less than 70,000 people in total. Having the purchasing power does not automatically mean they are willing to buy. Hence, it is not surprising Ferrari's sales target is 10 to 15 vehicles annually. However, this illustrates the hugeness of their purchasing power.

The functional benefits of a Ferrari are, in fact, the same as those of a Toyota Kijang -- the favorite of many in Indonesia. Essentially, both are vehicles for your various transportation needs. The feeling or the emotional benefit, in the marketing jargon, is totally different. The owner of a Ferrari, if asked how he or she feels when driving it, would probably say: "I feel good!" just like that song by world-famous soul singer James Brown.

Likewise, a Rolex watch, costing hundreds of millions of rupiah, tells the time just as accurately as a Rp 200,000 Casio. Again, the confidence it emanates is far greater when it is on your wrist during a grand cocktail party attended by celebrities.

In a way, your stature is perfected and you earn recognition.

Of course, a Ferrari can be driven at more than 300 kilometers per hour. But in Indonesia, with heavy traffic, twisty roads and undisciplined drivers, who would perform such a daring act? And a Rolex, among its durability features, can be taken to a depth of 200 meters underwater. How often would you dive while wearing a Rolex?

A question is often asked why certain products are extremely expensive. Pine and Gilmore in their bestselling book Experience Economy wrote that the greater the differentiation of a product, both functionally and emotionally, the higher the possibility for setting a high price by the maker. Indeed the differentiation has to be relevant and match consumer needs, or even surpass them.

Products without distinct differentiation, or "me-too" products in advertising jargon, are simply degraded into commodities. They do not have the "right" to set a special price tag, as the market dictates their price and status. They are merely "price-takers" unlike those with superior differentiation and values, which are "price-makers."

Today, with differentiation of concrete, functional benefits becoming more difficult to establish, major businesses are concentrating on the abstract or context in their products and services.

Content-wise, Hard Rock Cafe and Planet Hollywood, for example, may be similar. Both are restaurants with quality food and beverages. The mouth-watering steak served there may be imported from the same sources in the United States or New Zealand.

What makes the two places different is the ambience, which eventually creates a unique experience for their respective customers. At Hard Rock Cafe, part of the ambience is the informal look of its waiters, who wear jeans and scarves on their heads, a la rockers.

The interior is enriched with memorabilia in the form of musical instruments belonging to renowned musicians. Planet Hollywood, as its name implies, offers "dining in Hollywood" with video and television screens showing Hollywood celebrities. In line with its theme, the walls are adorned with memorabilia of movie stars, both from yesteryear and today.

Both these places are not exclusively categorized in the premium product section. Though considered luxury eating places, to many Indonesians they are still affordable. Evidently, for the people of this country, premium products are divided into two subcategories: the truly expensive for the very few and ones that are still affordable, relatively, that is. Take Dji Sam Soe cigarettes, for instance. Though, for years, this brand has enjoyed premium positioning along with its premium pricing, Dji Sam Soe cigarettes have remained within the reach of many Indonesians, even those in the low-income bracket.

Due to their affordability for many Indonesian city residents, Starbucks and Coffee Bean products -- also within the premium products category -- are enjoying huge sales, although a single cup of cappuccino carries a price tag of some Rp 20,000. The BMW 3-series, priced at around Rp 500 million, can be seen crisscrossing the streets of most of Indonesia's major cities. Again, these premium cars still fall within the pseudo-mass subcategory.

To enlarge the market, even Donna Karan has launched a second line series of products using the DKNY label to differentiate its brand positioning in the minds of its consumers.

Not every person with enormous financial strength is a purchaser of premium products. These extremely wealthy people are basically grouped in three psychographic categories: price- oriented, value-oriented and quality-oriented.

The price-oriented would probably opt for a no-frills airline. For them service is number two, while arriving at the destination on time matters most.

The value- and quality-oriented -- almost overlapping each other -- would not worry about the tuition fee when they send their children to be educated, mostly abroad. Quality of products and services, plus the other inherent values offered by the seller, are their top priority. Ambience, style and all the special extra tidbits make a whole world of difference to them.

The super-rich of Indonesia -- a tiny percentage of its population -- are growing, albeit slowly. To maintain this niche from becoming saturated, marketers of premium products have to be cautious. One example is from the automotive industry. Luxury cars, costing over one billion rupiah, are not enjoying any significant increase in sales this year compared with the boom period of 2000 to 2002.

Many manufacturers of premium products still view the country as having great potential, although some marketers estimate that the 2004 general elections may dampen the buying spirit of the creme de la creme of Indonesian society.

With the implementation of regional autonomy, it will not be surprising to find new billionaires outside Jakarta. Rolex watches and Mercedes-Benz S600, for example, are enjoying huge sales in many large cities of Indonesia, such as Solo and Semarang, Central Java, as well as Medan, Makassar and Surabaya. Reports from other cities are in very similar tone.

Premium products indeed reflect one's status, one's achievements in life, taste and values. Some people buy them for other reasons, known only to them. In societies that are growing more materialistic, as in many Indonesian cities, it seems that evaluation or parameters are based on "exterior elements": that which is purchased, worn or used. --- The writer is partner and head of consulting division at MarkPlus&Co