Premium products reflect one's status

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