Aspiration Creates Loyalty

Questions I asked myself…

1. Why would a company bother selling two products that are very similar but with different price points?

2. What is the actual difference between the two brands, other than minor aesthetic nuances?

3. What is the difference in manufacturing cost between the two brands?

Neff has a cost premium over Siemens justified by minor innovations such as “Slide&hide“, a feature where you can slide the oven handle underneath itself to create a more premium if not slightly more convenient experience. In short, this is a neat party trick perfect for showing off to your dinner guests, but you would probably never use it when nobody is looking.

Neff advertises and positions itself as “premium” for passionate home cooking enthusiasts who value leading edge technology. Such technology therefore gives it permission to charge a premium, although in my case, I personally couldn’t justify paying the extra for the slightly better features.

Neff products have more limited availability compared with Siemens, giving the perception of scarcity and exclusivity.

I concluded that there was no meaningful difference between the two brands, other than the parent company being very savvy in creating a perceived premium between the two brands, elevating Neff to a more aspirational brand for those who want to appear more exclusive, successful and tech forward.

Sometimes creating exclusivity may only required a marginal increase in cost, however when done correctly, can enable you to charge a premium that’s far higher than your increased investment, giving your team or business an opportunity to enjoy greater margins.

Another thought that came to my mind was that I was close to buying another Neff, as I wanted the same experience, and even though I didn’t in the end, I still purchased a product from the same parent company.

They still gained my repeat business but via a different brand in the same family. This lead me to think that having a multi-tiered approach to product quality meant that customers who aren’t prepared to pay extra for an upmarket brand, would still opt for the next best thing, allowing for customer retention.

So, now that I was aware of this formula, I wondered who else took this approach and how well it worked for them? 🤔

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The Audi Premium

German carmaker, the Volkswagen Group appear to adopt a similar tiered approach by segmenting their offerings into multiple levels from the more budget-friendly Cupra, Seat, Skoda and Volkswagen brands, to the more premium Audi, Bentley and Porsche offerings.

The most intriguing relationship is that between the Audi brand and the less premium yet highly competent Volkswagen and Skoda. Whilst there are certainly differences between Audi and the less premium brands, the differences are less significant than you would imagine.

Audi shares many parts with most of its less premium stablemates, with minor improvements to comfort, ride and interior materials differentiating their quality.

In summary, Audi’s are slightly more expensive to build than an equivalent Volkswagen or Skoda, however, the premium price tag they charge over their siblings is much higher.

Such a price increase is difficult for consumers to quantify, as they know the car has more premium features but can’t gauge the value of the features, allowing Audi to charge a higher % relative to the increased production cost.

Apple’s Perceived Quality

Since it’s launch in 2007, the price of the iPhone has steadily risen to the point where the highest spec ‘Pro’ versions can cost in excess of $1200. The standard variants are also not cheap when compared to similar Android phones. The price has risen steadily in line with the gradual improvements to functionality such as higher quality displays, and features, such as the app store.

Apple enjoys healthy gross margins of 37% (2023 - 2024), whilst iPhone accounted for 51% of Apple’s $391B FY24 revenue. You might be forgiven in thinking that iPhones were exclusive, given their premium design and user experience, however, there were 227million iPhones sold in 2024.

Apple appears to marry premium materials and design with incredibly intuitive and aesthetically pleasing software, all of which combine to create a masterful and appealing user-centred experience.

Creating a software services platform that connects all hardware together with useful features such as apps, music and TV only increases the stickiness of the Apple ecosystem, to the point that it’s incredibly difficult to leave the “Apple bubble”.

In addition, the relatively modest improvements between the standard and Pro versions, compared to the meaningful increase in prices would lead you to believe that the standard versions are the highest sellers. In fact the reverse is true. The more premium and more exclusive iPhone Pro Max also happens to be the biggest selling version of the iPhone.

It’s clear that Apple have mastered the art of creating a premium and personalized experience giving them permission to charge higher prices enabling mass adoption, all whilst making the user feel part of something exclusive.

There are a few take aways from exploring how aspirational features can lead to greater user adoption.

• When developing products, there are seemingly nice-to-have features which can actually become critical to gaining user adoption and retention, such as how easy it is for a user to navigate an operating system. These features are often overlooked when project timelines are tight, whereas they can contribute meaningfully to a product’s overall success.

• Premium software must perform the essential function it was meant for, however it should also have the user at the centre, and make their life feel more enjoyable. Just like physical products, software can feel premium, giving the creators license to charge a premium. Next time I look at a backlog I’ll certainly consider what methods I’m using to prioritise features and whether I’m considering user engagement and premium experience enough.

• The amount of time, effort and resources spent on developing a feature for a product does not directly equate to the perceived value to the user. If done correctly, efficient and thoughtful effort applied can create outsized benefits, when applied on the right functionality.

• Products can be enhanced and given an aspirational image through marketing, however the underlying product itself still needs to be of a high quality with some unique features in order to command a premium and be seen as aspirational (such as Neff’s sliding door).

• There is still no substitute for listening to user feedback, adapting and refining products to get the right fit and understand what features and functionality matters to them.

References & Further Reading

Expert Tips for High End product Development

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