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Thursday, January 24, 2019

Success of pricier ice cream offers retailers ‘premiumization’ lessons

AS the Philippines begins to see a growing middle class, the country manager of a research firm said that local retailers ought to know how to package their products and services to attract consumers who are upgrading their lifestyles.

AC Nielsen Philippines Managing Director Stuart Jamieson, speaking to members of the Philippine Retailers Association in Cebu last Wednesday, said retailers are seeing changing consumers in the country and that it is now an attractive marketplace.

Jamieson said more people now have discretionary funds and retailers ought to take advantage of this, rather than just trying to attract the low-income segment.
He said that 99 of out of 100 clients he talks to have a marketing strategy aimed at dominating the D-class because it is the largest segment.

Seeing better times for the Philippines and more people with increasing incomes, he said this strategy may not be the best for their future. “It may be the biggest sector now, but that sector is shrinking.”

Jamieson said there are better jobs available such as those in business process outsourcing and that these jobs are not just available in Manila but also in second- and third-tier cities. Remittances from overseas Filipinos have also allowed more families better incomes. These jobs provide for families and allow them to change their lifestyles, trying things out for the first time.

Consumers that used to choose the cheapest, most basic items can now afford to pay for more and try things they were unable to when they were earning less.

Retailers, Jamieson said, should consider this and offer more premium items for this market.

He also clarified that “premiumization” is not just jacking up prices to make the buyers feel they are more affluent because they can afford to pay more. Premium items offer more value for the higher price. Their studies show that 43 percent of consumers are willing to pay for innovative new products.

“Don’t tell them it is more expensive. Talk about value proposition. The price will look after itself,” he said.

He cited examples that showed the Philippines is ready for premiumization, showing the success of higher priced ice cream bar Magnum.

Switching, however, could be tricky and he warned them to pay attention to their customers, train their staff to be observant, and learn customer preferences before making any changes.
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