The 4 brand categories and common mistakes

What are the 4 brand categories and why is it important to know about them, and choose the one your business belongs to?

The brand categories are:

  • Commodity
  • Mainstream
  • Premium
  • Luxury

One of the most important decisions a business owner needs to make is to decide where in the spectrum their brand will be. A brand cannot be in all categories. Many have tried, and it almost never works the way they want. And ultimately, it’s very expensive to try to be in every category, hence the important question is: where will you position?

First, let’s talk about the differences between these categories.

Commodity brands

Commodity brands are exactly as the category says: commodities. These are products that everyone needs, and often the brand itself is not known. Of course, we all have different needs and prefer to buy products from different categories, but commonly, the commodity brands could be things such as toilet paper, toothbrushes, or socks. The brand doesn’t matter, a family with 4-6 members is consuming these products all the time, hence oftentimes they don’t care about the brand itself.

Commodity brands are priced low. The market is huge, but so is the competition. Small businesses have very little to no chances to compete in this market because they lack the volumes and capacity of big players. That’s why selecting this category is not a profitable choice for small businesses.

Mainstream brands

Mainstream brands are like commodities – low-priced and available for everyone, but the difference is that these products and services are not commodities, meaning that not everyone needs them. Certain furniture brands like Ikea definitely fit into the mainstream category – they are priced low making them available and accessible for the mainstream market, but again: a Billy shelf is not really a commodity.

The mainstream market is based on availability and accessibility. Mainstream brands are designed for volumes and the marketing efforts, as well as budgets, are designed to attract hundreds of thousands if not millions of potential buyers.

Again, this is a very difficult category to compete in, unless of course, you have deep pockets. The mainstream seems like a good idea because of the huge customer base, but in reality, it takes a lot of resources to stand out in this market.

When we help our clients to decide the category and pricing vs required volumes for their products/services, we use our Ca/Pri model which shows the correlation between price and delivery capacity. It clearly shows that when your price is low, your volumes need to be high, and vice versa: when you have high-end prices, you don’t necessarily need to sell big volumes and still have a great, profitable business.

4 brand categories: CA/PRI MODEL - pricing principle by Avenue Method.
CA/PRI MODEL – a pricing principle by Avenue Method™

Premium brands

A premium brand is all about the client experience and quality. Premium brands focus on being different compared the mainstream ones, and they focus on high-quality work and innovation, they are customer-centric and have unique benefits that characterize the whole experience.

Premium brands charge a premium price for their services and products, but the price is highly aligned with the quality of work, and that’s why clients happily pay the price. Premium clients feel that they deserve to buy at the premium market, and they appreciate the high touchpoint, highly detailed approach that premium brands offer.

Luxury brands

While both premium and luxury are found at the high end of pricing and quality, there are a few major differences between luxury and premium, even though many use the terms interchangeably.

Luxury brands are not accessible to people who are not in certain circles, even if they have the money to indulge in the experience. Luxury brands are based on heritage, often by invitation only, offering an exquisite experience for the buyer where the benefits, features, and even the quality are not the most paramount.

Common mistakes brands make

One common mistake is that brands try to be everything to everyone, not really committing to a category. A brand cannot be in all categories. Some brands pull this off successfully but they often have a strategy to make jumps upstream or downstream, but never more than one jump in either direction.

Example:

A premium interior design service business might want to go mainstream with a product line. That is a great strategy because it’s not the same type of service. But, a luxury brand that tries to jump to offer mainstream products is just shooting itself in the foot. One solution is to create two completely different brands that have no or very little connection between them.

Many of our clients execute the one-jump strategy well when they want to scale up their businesses, particularly when going international. A luxury artist selling high-end paintings to the selected ones might launch a home decor collection or art prints collection, but the price point is still premium, not mainstream.

More harm than good

I’ve also seen this cause more harm than good. A well-known Swedish creator who already had a successful home decor line in the premium category was approached by a mainstream store chain that wanted to launch cooperation. In theory, this could have been a great way to build brand recognition nationwide. But, since the mainstream collection was a copy of their premium collection, albeit a lower quality of fabrics, the mainstream buyer couldn’t tell the difference. This resulted in their premium brand losing its value.

Of the 4 brand categories, which one should you start with?

If you ask me, it’s always premium. It’s available for everyone to enter because, unlike its near-cousin luxury, the premium doesn’t require you to be born in certain circles or invest big money into your initial marketing. It’s about taking your business seriously, showing up as a pro, and setting up the necessary elements for premium brand success!

Our capability

If you want help defining your brand, and figuring out your positioning, messaging, pricing, product suite, and delivery excellence, have a look at our programs and get in touch!


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