📖 Glossary

Premiumization — Can Brands Actually Move Upmarket? The Evidence

Premiumization sounds appealing — charge more, serve better customers. But the Ehrenberg-Bass evidence says growth comes from penetration, not from trading up. Here's what actually works.

·6 min read

Definition (≤25 words). Premiumization is the strategy of repositioning a brand — or launching new products — toward higher price points, higher quality, and more affluent customer segments.

TL;DR. Premiumization is one of the most seductive strategies in marketing: charge more, serve "better" customers, improve margins. The appeal is obvious. The evidence is cautionary. The Ehrenberg-Bass Institute has shown that market structures are remarkably stable over time — brands tend to stay in their price tier, and growth comes overwhelmingly from penetration (getting more buyers), not from extracting more value from fewer customers. Premiumization can work, but only when it creates genuinely new demand or when sustained brand building has earned real pricing power. Most premiumization efforts fail because they chase a smaller, more selective customer base while abandoning the penetration principle that actually drives growth.

Why is premiumization so appealing?

The logic is intoxicating. If you could serve the same number of customers at a higher price point and a better margin, your profitability would improve overnight. If you could attract a more affluent, more loyal, less price-sensitive customer base, your price elasticity problems would evaporate. Premiumization promises exactly this: move upmarket, shed the bargain-hunters, and build a more profitable business on a better class of customer.

This narrative is reinforced by a broader cultural obsession with "premium" as a virtue. Premium implies quality, aspiration, status. It feels like growth in an upward direction. Boards love it. Consultants sell it. Brand teams want to work on it — because premium projects are more glamorous than the grinding work of defending volume in a competitive mid-market.

But the evidence — grounded in decades of consumer panel data — tells a more sobering story.

What does the evidence say about market structure and price tiers?

The Ehrenberg-Bass Institute's research, synthesised in Byron Sharp's How Brands Grow (2010) and extended in Romaniuk and Sharp's How Brands Grow 2 (2016), reveals a pattern that most premiumization strategies ignore: market structures are remarkably stable over time.

Brands tend to occupy consistent positions within their category — in terms of both market share and price tier — for years, even decades. The Dirichlet model, which describes the competitive structure of repertoire markets, predicts this stability with striking accuracy. Brands gain and lose buyers in patterns that are broadly predictable, and dramatic repositioning — a mid-market brand successfully moving to premium, or a value brand moving to mainstream — is the exception, not the rule.

This does not mean brands never move upmarket. It means that when they do, it is harder, slower, and rarer than the strategy decks suggest. And the mechanism that makes it possible is not a new logo, a fancier package, or a "premium" brand campaign. It is sustained investment in mental availability — the slow, expensive, unglamorous work of becoming the brand that more buyers think of in more buying situations.

Why does penetration — not premiumization — drive growth?

This is the core Ehrenberg-Bass finding, and it is the single most important challenge to the premiumization thesis.

Across categories and countries, the data shows that brands grow by increasing market penetration — getting more people to buy them, however infrequently — not by increasing the loyalty or spending of existing customers. This is the law of double jeopardy: larger brands have more buyers and slightly higher loyalty, but the loyalty difference is small. The dominant driver of brand size is the number of buyers, not the depth of each relationship.

The implication for premiumization is profound. If growth comes from reaching more buyers, then a strategy that deliberately narrows the target — serving fewer, more affluent, more selective customers — is working against the fundamental growth mechanism. A premium brand, by definition, appeals to a smaller segment. It may be more profitable per customer, but it grows more slowly, because its ceiling is lower.

This is why genuinely premium brands tend to be small. They occupy a niche — profitable, perhaps, but structurally limited. The brands that grow large do so by being accessible, affordable, and widely relevant. The tension between "premium" and "large" is not accidental. It is a direct consequence of how markets actually work.

The important caveat: the premium brands that do grow maximise penetration within their price tier. Premium does not mean exclusive. The most successful premium brands — automotive, electronics, groceries — have the highest penetration among premium competitors. They are bought by many customers, not cherished by a few. Double jeopardy operates even within the premium segment.

When does premiumization actually work?

The evidence does not say premiumization is impossible. It says it works only under specific conditions — and those conditions are harder to create than most brands assume.

Condition 1: Genuine new demand. Premiumization succeeds when it creates demand that did not previously exist — a new category, a new usage occasion, a new buyer segment that was not being served. A genuinely innovative premium product that opens a new market is not the same as repositioning an existing mid-market brand with a higher price tag. The former creates growth; the latter usually just loses existing customers without gaining enough new ones.

Condition 2: Earned pricing power. Premium prices require premium brand equity. And brand equity — the kind that sustains higher prices — is built through years of consistent, emotional brand building that creates strong mental availability, distinctive assets, and positive associations. Les Binet and Peter Field's IPA Databank work consistently shows that emotional brand-building campaigns are associated with improvements in pricing power. A brand cannot simply declare itself premium. It must have earned the mental availability and emotional resonance that make buyers willing to pay more.

Condition 3: Portfolio strategy, not brand repositioning. Many successful premiumization efforts are actually portfolio extensions — a parent brand launching a premium variant or sub-brand to capture additional demand without abandoning its core position. This can work because it preserves the penetration base while testing the premium tier. But even here, the premium variant must reach new buyers to justify the investment. If it merely cannibalises the existing customer base — trading them up at the expense of volume — the net growth effect is minimal.

Where people get it wrong

  • Confusing aspiration with strategy. "We want to be seen as premium" is not a strategy. It is a desire. Without the brand equity, distribution, and product substance to justify premium pricing, the aspiration is hollow. Customers do not pay more because you want them to.
  • Abandoning the penetration base. The most common premiumization failure is a brand that moves upmarket and quietly stops serving — and speaking to — the customers who made it successful in the first place. The result is lost volume without sufficient premium gain, and marketing ROI that deteriorates.
  • Assuming fewer, better customers is a viable growth model. The Ehrenberg-Bass evidence is unambiguous: growth comes from penetration. A strategy that deliberately narrows the customer base is betting against the dominant growth mechanism in virtually every consumer category. It can work for niche businesses, but it does not scale.
  • Thinking premium positioning reduces price elasticity on its own. Pricing power is a result of brand building, not a feature of premium positioning. A brand with weak mental availability that charges premium prices is simply elastic at a higher price point — and vulnerable to any competitor that offers similar quality for less.
  • Ignoring category norms. Every category has a price structure — a range that buyers consider reasonable. Premiumization that pushes a brand outside that range without an overwhelming reason to believe will encounter resistance that no amount of creative can overcome. The category defines what "premium" means, not the brand.

In practice — an evidence-led approach to pricing and positioning

  1. Grow through penetration first. The most reliable path to growth in any category is to reach more buyers. Before pursuing premiumization, ask whether the brand is maximising its penetration potential within its current position. Most brands are not.
  2. Build pricing power through brand building. If the goal is to charge more, invest in the emotional brand campaigns that the IPA evidence shows improve pricing power. This is the 60% side of the 60:40 rule, and its payoff includes the price elasticity improvements that make premium pricing sustainable.
  3. Use portfolio strategy, not brand repositioning. If premium demand exists, test it with a variant or sub-brand rather than risking the core. This preserves the penetration base while exploring the premium tier.
  4. Measure cannibalisation honestly. If a premium launch is simply converting existing customers to a higher-priced product, the net growth effect may be negligible. Track whether new buyers are entering — not just whether existing buyers are trading up.
  5. Be realistic about market structure. The Ehrenberg-Bass evidence says market positions are stable for a reason. Moving upmarket is slow, expensive, and uncertain. It may be the right strategy — but it should be undertaken with clear eyes about the probability of success, the time horizon required, and the investment needed.

So what?

Premiumization is the strategy that every brand wants and few can sustain. The appeal is understandable — higher prices, better margins, more aspirational customers. But the evidence is clear: growth comes from penetration, market structures are stable, and pricing power is earned through years of brand building, not declared through a rebrand. The brands that successfully charge premium prices are the ones that invested patiently in mental availability, emotional resonance, and distinctive market presence — not the ones that simply decided to be premium and raised their prices. Before chasing the premium dream, ask the harder question: have you done the boring, fundamental work that makes premium pricing possible? If not, premiumization is not a strategy. It is wishful thinking with a higher price tag.

Evidence & sources

  • Sharp, B. (2010). How Brands Grow. Oxford University Press. — penetration, double jeopardy, market structure stability.
  • Romaniuk, J. & Sharp, B. (2016). How Brands Grow 2. Oxford University Press.
  • Binet, L. & Field, P. (2013). The Long and the Short of It. IPA. — brand building and pricing power.
  • Ehrenberg-Bass Institute — publications on the Dirichlet model, double jeopardy, and brand competition.
  • Dawes, J. (Ehrenberg-Bass Institute) — published research on market structure and brand stability.

Definition type: DefinedTerm. Reviewed: 2026-07-09. Written by Andrei Tarnovski for Boringly Effective. Fundamentals over fashion.