Designer Lemonade or How to make more money by making you products more difficult to use

Last weekend I met up with some friends at a local Italian restaurant. When the waitress asked me what I wanted to drink I asked for some lemonade, forgetting that the British version of the drink is completely different than the American one (think lemon juice with soda water). When the waitress returned she held in her hand an interesting object: A can of San Pellegrino (an upscale brand of carbonized water) covered in a blue wrapping paper. "What's this?" I asked the waitress, having never before seen a can of soda covered in foil. "Ahh, it's their newest product," she answered, admiring the can, "isn't it beautiful?"

And then it struck me: She was right. It was beautiful. And in an instant the can of lemonade ceased to be just a can of lemonade. It was now a luxury item. And I wanted it.

That a can of soda would become a luxury item was surprising in itself, but the fact that I actually enjoyed peeling off its blue aluminium foil before I drinking its contents was alarming. Had I fallen in the luxury trap?

If I did, I wasn't alone. According to recent research from the Boston Consulting Group, new-luxury goods already represent about 20% of consumer goods annual sales, and the segment is growing 10-15 percent annually.

"In an instant the can of lemonade ceased to be just a can of lemonade. It was now a luxury item. And I wanted it."

Aren't these "new luxury" goods simply a case of more and more people willing to spend more and more money for essentially the same things? Think about the meteoric rise of "mass prestige" brands such as Starbucks, Diesel Jeans and Victoria's Secret.

Offering products that aren't that functionally different from the competition, these brands manage to get people to "trade up" from their current brands and spend twice as much (if not more) on brands that better reflect their lifestyle and aspirations.

What's driving people to embrace these super-premium brands? It could be that they've become more sophisticated. It could be that they have more disposable income. Or it could be, as one marketer of luxury goods claims, that "consumers are lost not just in products, but in life".

I doubt San Pellegrino's new lemonade will help anyone find their way to Nirvana, but it does teach us about an important segment of the market - that which is willing to pay a lot more for just a little bit extra.

Ziv Navoth helps organizations improve their performance by creating a unique and valuable position in the marketplace. He is the Managing Director of Verve! (www.verve.nu) and can be reached at ziv@verve.nu.

Copyright 2006, Ziv Navoth. Feel free to print, quote, or forward, so long as you credit me.