Decoding consumer perceptions of premium products with rule-developing experimentation Alex Gofman and Howard R. Moskowitz Moskowitz Jacobs Inc., White Plains, New York, New York, USA Marco Bevolo Eindhoven, The Netherlands, and To ˜nis Mets Centre for Entrepreneurship, University of Tartu, Tartu, Estonia Abstract Purpose – This paper aims to summarize the results of an empirical project to understand the perceptions of consumers of the future high end products in the USA. This project was a precursor of a larger global project on the topic. Design/methodology/approach – The approach utilizes the consumer insights-driven process, rule-developing experimentation (RDE), introduced by the senior authors and developed in cooperation with Wharton School of Business (University of Pennsylvania). The empirical part was conducted with qualified US consumers (middle- and upper-middle class respondents). Based on a series of in-depth qualitative interviews with global leaders of luxury and premium companies, star designers and thought leaders, five dimensions of high end offering were identified, with each dimension having a unique set of four factors (elements). The second part included a quantitative survey based on RDE (modified conjoint analysis) conducted in the USA with 373 qualified middle- and upper-middle class respondents to discover the driving forces behind their perceptions of high end. Findings – There are four distinct consumer mindsets towards future high end products. The segmentation is based on a disciplined experimentation afforded by RDE and produces a more targeted understanding of the consumer mind. Practical implications – The paper provides insights of what might drive the consumer perception of high end products in the near future. The pattern-based consumer mind-set segmentation creates actionable directions for corporations in answering today’s big question “How can brands migrate from being cost-driven commodities to higher margins and profits?” The answer is in the high end. Originality/value – The approach offered here could help designers and brand managers to efficiently create better products that consumers like and perceive as high end. This will result in higher margins and help marketers to differentiate their respective products from the competition. Keywords Premium products, Consumer behaviour, Perception, Optimization techniques, United States of America Paper type Research paper An executive summary for managers and executive readers can be found at the end of this article. Introduction According to Beccaria’s theory of luxury, social classes tend to emulate the classes immediately above and below them (Camcastle, 2008). An increase in the luxury consumption in one class trickles down to other classes fostering proliferation of luxury and near luxury goods and services (Hagtvedt and Patrick, 2008). Building on this foundation, Silverstein and Fiske (2003) argue that more and more consumers on different social levels will aspire for higher standards of living and will look for the luxury and near luxury attributes. Many scholars, such as Moskowitz et al. (2005), believe that success of a commercial proposition is a result of better and deeper insights into the customers’ mind, their perceptions and preferences, predilections, etc. Silverstein and Fiske (2005) explore the premium market in the USA and point to the critical importance of consumer understanding. What features to put in a product to make people want to buy it, even at a higher price? What messages to put in advertising to create the “premium” feeling? How to engineer this process related to consumer perceptions? Millett (2006) identifies the problem that consumers frequently cannot articulate exactly what they need, want, or like if asked directly. Research in Green and Wind (1973) and Hauser and Rao (2003) points out that it is very difficult for consumers to articulate their needs and desires and researchers have to use other means to understand their motivations. This supports arguments of Kiley (2005) that The current issue and full text archive of this journal is available at www.emeraldinsight.com/0736-3761.htm Journal of Consumer Marketing 27/5 (2010) 425–436 q Emerald Group Publishing Limited [ISSN 0736-3761] [DOI 10.1108/07363761011063321] The authors’ sincere gratitude goes to Dr Jerry (Yoram) Wind of the Wharton Business School (University of Pennsylvania) for his guidance for and encouragement of this project. The authors are thankful to Suzanne Gabrione (Moskowitz Jacobs Inc.) for her help in working on the text. 425