Elektrolux, Miele and Bosch-Siemens expect troubled waters ahead. Premium products are more and more frequently under pressure. Now the market for household appliances has been gripped.

So far, Swedes and Germans dominated the market for household appliances in the Premium segment. Italians, Eastern Europeans and Asians had their market in the Economy and PremiumEconomy segment of our picture of the market, the Waisted Rectangle 2004© where there is no center, but only two large segments, one for wants, where the Luxury and Premium products are located and one for needs, where Economy products are located which are solely chosen under the consideration of price and PremiumEconomy products, where a strict cost/performance ratio guaranteed through a brand is influencing the buying decision.

Aside from a partial saturation of the market, the manufacturers of premium household appliances do not succeed in presenting the Premium value convincingly, whereas the Italians, Eastern Europeans and Asians are upgrading their products and brands from the Economy segment to the PremiumEconomy segment.

The Premium manufacturers are no longer convincing, because they increasingly produce under the same conditions and with the same components as their successful competition, but they do not demonstrate that when it comes to pricing.

If the Premium manufacturers do not undertake a new positioning of their products and brands, they will be caught in an existential crisis sooner or later. The president of the Chinese Haier Group expressed during a recent continental tour a deep respect for the competitive edge in regards to the image of the Premium manufacturers, at the same time he said, when his company is going to draw level with them.

There is simply no branch where the marketers of Premium products and brands are not faced with the problem to make the jump into either the Luxury or the PremiumEconomy segment. Only a few are going to be an exception. This is related to the fact that wants are generally increasing. However, they are being satisfied with products from the PremiumEconomy segment due to the strictly calculated cost/performance ratio. On the other hand, they are being satisfied by products from the Luxury segment, due to the high immaterial value of luxury brands in connection with a corresponding quality.

The financial press mentioned a German Premium ladies’ fashion manufacturer who has been trying for some time to break into men’s fashion; with suits starting at € 500, shirts costing about € 150. The question, if this business is going to be successful is answered by an expert in the trade: “It is the big question, if a customer who is going to spend that much money, isn’t going to prefer to go to Armani.”
The road from Premium to Luxury segment isn’t far, but extremely steep and rocky. And the road from Premium to PremiumEconomy segment isn’t exactly a slide into cheap prices. To the contrary, for a large number of Premium products, this road leads to new strengths. No matter in which direction the positioning is moving, the brand is playing a deciding role.

If you are interested in learning more about the SchmidPreissler model of the sales markets, the Waisted Rectangle 2004©, let us know.