Chapter 4a
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Private Label From Private Labels to Store Brands Chapter 4 • Brand Managemen t System • On Building A Brand • Managing Across Brands
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Transcript of Chapter 4a
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From Private Labels to Store Brands
Chapter
4
• Brand Management System
• On Building A Brand
• Managing Across Brands
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Agenda
• Extent of problem.
• How to combat private label threats.
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Strategies for Combating Private Labels
Quality
1/Price
Provide More for the MoneyInnovate
NATIONAL BRAND
PRIVATE LABEL
Reduce Price Gap
Do Nothing
Make Premium Private Label
Introduce Value Flanker
Source: Stephen Hoch
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Strategies for Combating Private Labels
• Do nothing– Wait for economy to improve– Retailers are sufficiently diffuse, their
power is low– In small categories with little potential
return, retailers not likely to invest in private label
– However, share loss may occur
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Strategies for Combating Private Labels
• Differentiate– More for the money– New and improved– Advertise– Eliminate weak brands and focus on
strong
• Better retail support
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Strategies for Combating Private Labels
• Reduce price gap– Lower costs– It is often not profitable for retailer to close price gap
(mfr brand loses high margin, store brand loses volume)
• Me too strategy– Fighting brands (Kodak Funtime Film)– Protects brand (+)– Cannibalization (-); Revenues do not cover product
introduction costs (e.g., advertising and slotting fees)
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Strategies for Combating Private Labels
• Make a private label – Can test formulations as a P.L.– Can increase price on premium brand w/P.L. entry– Can formulate to target competitor, not self– Can obtain cooperation on shelf positions (P.L. to
right hand side of competitor - as 90% right handed)– Key threat: retailer owns customer, threatens to drop
you without price concessions
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Summary
• Solutions to the private label problem– Do nothing– Better retail support– Differentiate– Reduce price gap– Fighter brands– Can’t beat ‘em, join ‘em (source the private
label)
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Store brandsWhat are store brands?
Store brands are products that stores put their names or brands on.
- Better selection, value and saving (generic brands)
- Items: fresh, frozen food, canned and dry foods, snacks, beauty care, drugs, cosmetics, etc.
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Store BrandsContinues….
- Store brands as good as or better than national brands
- Shoppers no longer can distinguish between national and private label brands---- they don’t care to know the difference.
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Where do store brands come from?
• Store brands become an important ally in how they provide their families with high quality and value.
• They are major retailers and wholesalers that own their own manufacturing facilities and provide store brand products for themselves
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Continue……
• And they are also regional brand manufacturers that produce private label products for specific markets.
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Store brands meet all standards and requirements
• Store brand products are tested and analyzed for quality and safety by independent companies before they reach the shelves just like national brands.
• Packaging and label the product to meet the store’s specification. (Unique identity and packaging)
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Continues….
• Store brands are more innovative. The development of multiple tiers of products targeted to different consumer segments. (Only this kind of products sold in their favorite store.)
• Store brands represent choice and opportunity to purchase relatively to savings
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Continues…….
• Stores have become more actively involved in developing more products to make stronger impression with their customers.
• Overall, store brands are not cheaper they are just LESS expensive to market than national brands are.
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Store brands: The smarter choice
• Food and non-food grocery products: Estimated $32 billion in annual savings for the store brands (U.S.A markets)
• Marketing tax: (tax on advertising and promotional costs (media) in national brand makers lead to higher prices).
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Continues….
• Consumers’ new habits and familiarity are now built to reach loyalty of store brands.
• Overall, with top quality, unique items and solid savings, store brands add up to a smarter choice for consumers.
