How brands can drive premiumization with Instacart Ads

For many CPG brands, premiumization represents a critical strategy used to drive long-term success. Moving customers from entry-level to premium offerings is extremely valuable mainly because they have higher margins. But premium products are also more defensible against private labels and they can elevate consumer perceptions of the brand itself.

To successfully launch premium products a lot has to go right. 

There’s all the R&D work that goes into innovating a premium product. The logistics of making it and getting it to the shelves. Once it’s launched, you need to decide on a strategy to pursue to signal to consumers it’s a premium product. 

There’s lots of ways to signal that. Distributing the product only to higher end retailers could work. Or even where it’s displayed in the store can work, like how some salad dressing brands put their products next to the fresh lettuce instead of the condiments aisle. Demonstrating that the product is superior can make the price premium feel like a good trade-off, like how an organic or better-for-you version of a product can command a higher price. 

What role can lower funnel advertising play? Can it shift consumers up a brand’s portfolio towards premium offerings? We ran a test with a non-food brand, looking at their tiered product portfolio which included everyday variants and a premium version. 

The results were significant and directionally clear.    

Sponsored product ads drive premiumization

In a controlled test, sponsored product ads drove a 8.5% lift in premium product purchases. That lift was driven almost entirely by acquiring new consumers to the premium product and not just prompting existing premium buyers to purchase more often - showing that the sponsored products were acquiring new consumers for the premium SKU. 

The habit forms — and holds

The final finding of this study showed that sponsored ads not only accelerated the path to purchase, with exposed users reaching their first premium buy about a week sooner, but changed long-term consumer behavior. 

The study tracked a fixed cohort of consumers over a full year post-exposure, and the gap between consumers who saw these ads and those that didn’t continued to widen over time. By month 12, consumers who had been exposed to ads generated approximately 14% more cumulative premium product GMV than those who weren’t exposed over the same period.

This suggests the ads and subsequent purchase started a behavioral shift that persisted as the consumers introduced to the premium product through the sponsored product ad were more likely to keep reaching for it.

Ads are doing two things simultaneously: converting more consumers to the premium product, and getting those conversions to happen earlier. Both matter for lifetime value.

Put this strategy into practice with the Grow objective

Now available in open beta in Ads Manager, the Grow objective is built to execute this strategy at scale. This ad campaign is optimized to identify and target consumers most likely to trade up to a premium SKU, try a new product from your portfolio, or deepen their engagement with your higher-value products.

Whether you're looking to shift consumers toward a premium shampoo line, introduce current buyers to a larger-format or variety-pack option, or move category share toward your highest-margin SKUs, the Grow objective gives you a path to get there.

Reach out to your Instacart Ads representative today to learn more and launch your first Grow campaign. 

^{Prior results do not guarantee future outcomes.}
_{This post contains third-party claims and advertisements. Instacart does not make any representation as to the accuracy or suitability of any of the information provided herein by our third party advertisers.}