The Waisted Rectangle^©, SchmidPreissler’s view of the market for consumer goods in the First World; has two market segments, the alpha- and the omega segments, where products for the satisfaction of wants (ά) and needs (Ω) are placed. Luxury- and premium products are to be found in the alpha segment, premium economy and economy products are in the omega field.

A person may be without wants; needs, however, are a part of life. Nourishment, a roof over ones head, the chance to move about freely, security and the preservation and retrieval of health, are needs. Products and their brands which satisfy needs are most likely chosen and purchased under rational considerations. This is why in connection with the Waisted Rectangle^©, they are called economy products and –brands.

Economy products are products produced industrially and in large quantities. The quality mostly depends on the achieved price. The mass production influences the pricing, as well as logistic advantages, the form of point-of-sale and the rate of turnover.

Economy products will have a grand future, first because production technologies are getting better, faster and more secure. The development of markets from national to supranational markets which are emerging all over the world, new economic space, the European Union, Nafta and ASEAN are examples for brand new sales potentials.

Economy products are high-capacity and the enlightened consumers of the knowledge society know and cherish that. The ways and means of communication in the 21st century help along in making economy products successful.


The Premium Economy Segment

Subsequently, we want to deal specifically with the premium economy segment, which offers trade and industry as well as service providers great chances of success

In the premium economy segment, premium economy products are placed with strong brands. They show premium as well as economy characteristics. Economy products most often deserve the title top or they were formerly premium products who have discarded their exclusivity in order to find customers on a broad basis. Wherever their origin lies, they are carried by strong brands and what distinguishes them, most of all, is that they are purchased for the satisfaction of wants as well as needs.

Premium economy products and brands are located on the border between wants and needs. The borderline is becoming less and less visible, which burdens traditional premium products for the satisfaction of wants. Many products which were once seen as part of wants can now be found in the realm of needs. Many wants are nowadays part of daily needs. Premium products lose their attractiveness and economy products are gaining in prominence. Supply and demand are aiming at this. Premium products with a high and exclusive value migrate into the luxury segment; many disappear totally from the market. Premium products, which are also offered for the satisfaction of needs, are the true winners of this development.

The future perspective of the premium economy segment with its products and brands, is to be seen quite positively due to the consumption philosophy of people “less but therefore better”, which definitely burdens those economy products with a weaker profile on one side and the luxury products on the other, both with strong brands and clearly defined profiles.

How important the premium economy segment already is can be seen from the following examples:

Airlines are putting emphasis on the premium economy segment and distinguish themselves from charter carriers. They are combining the traditional premium business of the business class with that of the luxury class.

On the pharmaceutical market, the premium economy segment is being introduced through the growing business with generics.

Fragrance used to be a product for the satisfaction of wants, but nowadays it belongs to the daily needs, just as well as tooth-paste and the pleasure of a cup of coffee.

In men’s fashion it is all concentrated on the premium economy- and the luxury segment. The economy segment is irrelevant and the premium segment lies in deep agony.

The premium economy segment is the winner of the changes in the economy segment. More and more vendors are realizing that the pricing argument has lost its attraction. In Germany, the European country of discounters, the ruinous pricing battles of recent years have brought absolutely nothing. To the contrary, the bigger the rebates, the lower the net price, the more restrained the customers acted.

On the other hand, and this speaks for the premium economy segment, those businesses are successful, even in extremely difficult economic times, who add a premium character to the economy products and who create their offer accordingly. The examples are:

Aldi, the discounter known for its low prices is continually adding products to its product range, which have to be seen as premium economy products. Examples are Barolo and Brunello wines.

The automotive industry is also living off the premium economy segment. They get their quantities and earnings by selling the lower classes with accessories which were once only sold in cars of the upper class.

The German Beiersdorf AG has developed a cosmetic product line out of its simple Nivea hand lotion, which is globally seen as one of the most profit-yielding products and is located in the premium economy segment.

While low prices and lowermost calculated products without consultation and service have influenced growth in the PC business for years, a company developed the opposite strategy. They connected premium thoughts with economic efficiency, consultation and service and became in only a few years a global leader: Dell.

When it comes to people’s expenditures, consumption is playing less and less of a role. Health, pension funds and education are areas where more and more of the money flows and this development is going to continue. Of course, money can be generated out of this behavior, but not in the same way they are endeavoring to participate in the economic impact of consumption.

The consumer goods industry and in the same sense retail and service providers have to adapt to the changes in market structures. He, who wants to be successful tomorrow, has to concentrate on the premium-economy segment and if they have what it takes, the luxury segment. Brands play hereby a leading part.