Private Label Popularity Means Retailers Must Compare Products Carefully & Price Competitively

The "Great Recession" and the recent ailing economy brought new opportunities for supermarkets, drugstores, and "Club" stores to reach out to consumers increasingly eager to save on everyday purchases. One of the simplest strategies for consumers to trim costs was to switch to cheaper brands, also known as generic no-name brands. Historically, private label solutions (vs. national brands) provided consumers with average savings of 23%. Whether you were talking about jam, cold remedies, shirts, or linens, products featuring nationally-recognized name brands used to cost more than their generic store-brand or private-label counterparts. At least they used to.

As private label solutions became more popular and accepted, the price gap between the two declined. Figures say that only 5% of private label categories provide savings of more than 50% to consumers.*

 

We also now know that many of those “generic” store-brand foods were actually made by the same companies that produce the name-brand products, coming out of the same factories, with the same ingredients… and, studies showed that more than 90% of consumers believe private label solutions offer the same or better value versus their national brand counterpart, and more than 80% believe the quality is the same or better. That's why the assumption that higher price meant higher quality faded.

And, because sales of store-brand products are often more profitable than those of national brands, major chains have been putting more effort into bringing generics to the marketplace.  Even special staffs to deal with this important business subject.  

Bottom Line For Your Bottom Line:

There's no doubt that private label is here to stay -- and, in order for retailers to prosper, it is critical for them to understand -- and address -- product comparables and competitive pricing of private brands and national brands.

In order to identify opportunities to win over/grow shoppers into medium or heavy buyers; to increase sales and strengthen customer loyalty; and to get the right products to the people in the right place at the right time, and at the right price, national and private brand marketers must:

… Forge strategic collaborative marketing partnerships;

… Conduct in-depth analyses of customer purchase attitudes and behaviors;

… Collaborate to optimize in-store inventory management programs at the store level based on unique needs and wants of key and target consumer segments.

... With increasing profit margin in mind, the challenges include accurately identifying comparables, performing competitive analysis, and then executing competitive pricing.

Yeah, there are solutions for that: Pricing intelligence on comparable products and competitive pricing. Existing sophisticated intelligence solutions take attributes of private brands/private labels, establish comparables (which is very difficult) and make price comparisons for you. This intelligence procedure includes experts on staff who apply technical and human judgment -- and manually fill the gaps to be sure that the comparison is accurate and correct. 

BONUS COPY ON CONSUMER REACTIONS TO PRIVATE LABEL 

Here are some consumer reactions highlighted in a 2010 “Private Label” report -- opinions worth considering when retailers think about how best to serve their customers today.**

• Did consumers no longer assume that a brand name meant top quality? 57% of consumers agreed with the statement “Brand names are not better quality.” (In 2011, the figure had inched up to 64%.

• What kinds of consumers compared private label and name-brand products? 77% of all consumers reported scoping out both private-label and name-brand products before making purchases; 9 in 10 women were far more likely to compare store and name brands. 

• Did women and men think differently about generic health-and-beauty products vs. name brand products? 74% of women preferred name-brand skin and hair-care merchandise while only 56% of men said they preferred name brands.

* Were brand name purchases more important for certain product categories? Product categories in that particular study included batteries, ice cream, milk, cereal, cookies, snacks, and laundry detergent. When it came to laundry detergent, 69% said they preferred name brands; while only 26% of consumers reported preferring name-brand milk to house-brand milk.

* What did they say about generic over the counter medicines? 68% of shoppers said they preferred the generic store-brand versions of cough syrup, aspirin, and other meds; presumably because they believed the ingredients were virtually identical to those in the pricier name brands.

References:

*IRI's Times & Trends report, Private Label & National Brands: Paving the Path to Growth Together, cited in Balancing the Private Label Price/Value Equation, retailwire.

**Brand Names Just Don’t Mean as Much Anymore By Brad Tuttle in Time Business & Money. 

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Mauricio Barberi

About Author

As CMO of Upstream Commerce, Mauricio leads all branding, marketing communications, public & analyst relations, web presence, social media, demand & lead generation and sales enablement programs. He has over 20 years of experience in B2B technology marketing and product development. Previously, Mauricio was SVP of Global Marketing at TradeCard (acquired by GT Nexus), a leading innovator in Cloud-based supply chain management solutions for large retailers and manufacturers; SVP of Worldwide Marketing at CGS, a $200 million software and services provider, where he revitalized the BlueCherry suite of software solutions for the retail & apparel sector; SVP of Marketing at Mobius, a NASDAQ-listed digital archiving and records management company; and VP of Marketing & New Products at C3i, a CRM services firm and Siebel partner. Mauricio earned an MBA from Harvard Business School and a S.B. in Mechanical Engineering from Massachusetts Institute of Technology.
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