CPGmatters: Target ‘Switchers’ to Grow Store Brand Sales

Through a special arrangement, presented here for discussion is a summary of a current article from the monthly e-zine, CPGmatters.

Results of a new study by Buxton, the customer analytics company, in collaboration with Meijer, the Midwest retailer, suggest that targeting "switchers" is the right strategy to grow store brands sales.

The study identified three distinct consumer groups: shoppers who buy private label items whenever possible, those who switch back and forth between private and national brands, and those who exclusively buy national brands. Various coupon offerings in the baking and snacking nut categories were used to target each group to test for effectiveness in category acquisition, switching to private brand purchasing, and increasing the buy rate.

It turned out that identifying switchers paid off well. With their flexible attitude to try products in exchange for a good deal, they showed a higher coupon redemption rate, a greater sales lift, and a greater repeat purchase percentage. Some of the study results were as follows:

Acquisition: Moving customers from non-nut buyers to purchasing private brand baking and snack nuts at Meijer turned out to be the hardest challenge. The coupon redemption rate was much lower than that of the other two strategies, as was the lift in sales. In other words, prompting shoppers to change stores and purchasing habits (for a specific item or in general) is the hardest challenge facing food retailing marketing and merchandising professionals.

Switching: Shoppers who buy some national and some private brand items proved the most susceptible to a good deal. The campaign targeted customers who already purchase baking and/or snack nuts at Meijer to purchase private-brand baking and snack nuts, specifically. The dollars-off coupons were redeemed at a very high rate and switchers recorded a 56 percent sales lift for baking nuts. These findings underscore the importance of targeted marketing, allowing retailers to allocate their resources to those shoppers most likely to purchase private-brand items.

Buy Rate: The third strategy focused on growing sales among current buyers of private-label nuts — including private-brand loyalists and switchers. While the campaign managed to increase sales and achieve high coupon redemption rates among both groups, switchers were yet again most susceptible to the offer with a 31 percent sales lift for baking nuts and nine percent for snack nuts.

Buxton officials say the study makes the argument to change promotions from one-size-fits-all to targeting high-value customers using segmentation and household-level analytics. By focusing on switchers, retailers can generate the most bang for their marketing buck — a shared goal for retailers of all sizes.

BrainTrust

Discussion Questions

Discussion Questions: Do you agree that targeting switchers is the best strategy for driving PL growth? What’s the best way for retailers to target switchers to benefit their private label business?

Poll

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Bob Phibbs
Bob Phibbs
12 years ago

I believe Groupon proved — once again — there are cheap people out there looking for a price. This has nothing to do with “switchers.” If Tiffany’s offered a deal on diamonds, who wouldn’t take them up on it? If Zales had a deal on diamonds, those in the market for diamonds would buy the deal. Those who are Tiffany’s customers don’t buy on deals.

in the grocery world, I don’t think I’ve seen a Johnsville fresh sausage product without a discount — often competing on price against private label. They look like a good “deal” because of their previous brand equity.

If you want to be the company changing the cheese to attract customers each week, go ahead. But if that customer’s “switch” is contingent on deals, where does the profit come in…much less loyalty?

Ben Sprecher
Ben Sprecher
12 years ago

In our experience, there are several even more effective strategies:

1) Targeting existing buyers of PL with “reach” or “up-sell” style offers to get them to buy more or to re-purchase sooner.

2) Targeting lapsed PL consumers to get them to buy again.

3) (in some cases) Targeting shoppers who might not shop the category at all, but who buy related products.

#3 doesn’t always work for all products, but it can be a powerful way to grow PL *and* basket at the same time. The goal should always be loyalty, not just the quick win. And marketers should be thinking about running many small experiments to figure out which tactics work best at their chain for each category, product line, and SKU. The challenge: such experimentation is prohibitively time-consuming and complex without the right digital marketing automation platform. This is where many retailers fall short.

Gene Hoffman
Gene Hoffman
12 years ago

While targeting switchers can drive PL growth, and Meijer will probably find that true, the best way to grow PL solidly is to provide private labels that are consistently better than their competition in quality, packaging, innovation and value. Hey! That’s sounds like a good roadmap for CPG companies too.

David Biernbaum
David Biernbaum
12 years ago

Targeting “switchers” is one way to grow store brands, and if it’s planned out and executed effectively within the domain of marketing professionals, it works.

Dan Raftery
Dan Raftery
12 years ago

Switchers have traditionally been the most responsive to targeted marketing. In some circles they are known as “occasionals,” which means their purchase index in the subject category is below average. The general rule of thumb is that any promotion that touches the most frequent buyers (high purchase index) is a reward for loyalty, which is a long-term retention strategy. Short-term sales lifts are certainly nice, but the long-term benefits of conversion are not considered in this discussion. They should be.

John Boccuzzi, Jr.
John Boccuzzi, Jr.
12 years ago

The study is very interesting and should help retailers with their Private Label campaigns moving forward. Retailers that use Catalina and/or end-of-receipt coupons should be able to target switchers easily. I also know of some retailers that use a company called Spire, LLC to target national brand coupons to specific shoppers using loyalty data. I think it would be very interesting to use some of that space to target switchers with PL brands in categories they are known to switch.

Roberto Orci
Roberto Orci
12 years ago

Targeting switchers makes sense — with one caveat. Solve for how your brand fills the need the consumer is looking for (hence the switching.) While promotional pricing is a factor, your target is likely to have preferred brands. Addressing that part of the equation will result in trial followed by repeat purchase.

Mark Heckman
Mark Heckman
12 years ago

I think Dan Raftery makes a solid point. While “Switchers” are intuitively very good promotional targets, I am not convinced they will remain loyal to PL or any other single brand for very long. To keep a “Switcher” from switching yet again the next time another brand in the category promotes, price shielding of store brands and a strong PL promotion schedule will likely be needed.

Kenneth Leung
Kenneth Leung
12 years ago

Switchers are good for a short-term boost to make a target revenue number; you are trading margin for revenue. For private label, targeting switchers makes sense because the audience is price sensitive and generally lacks brand loyalty in the first place. The question is, what will the brand manufacturer do in coexistence with the store strategy? After all, in grocery, I don’t think I have seen a store that ONLY carries store brands.

Yvette London
Yvette London
12 years ago

So what’s the news here? That switchers are willing to switch? Important to remember that switchers are not loyal. Short term lift, yes. Maybe get trial, yes. But hard to convert to loyals. You may get moved into their consideration set, but next brand in that set who runs a deal gets the sale.

Matthew Keylock
Matthew Keylock
12 years ago

Getting the measures of succes right is key too. I like Ben Sprecher’s guidance. I’d also be sparing with the phrase “switchers” as this can be confused with trying “switch” competing brand loyals which is not a great strategy.

Ralph Jacobson
Ralph Jacobson
12 years ago

PL products arose out of the need to have a better value available for shoppers vs. brands. There are just as many shoppers whom are satisfied simply on a better price regardless of quality, as there are value shoppers whom demand quality as well as good pricing. Targeting these demographics entails deep consumer insights to know preferences, sentiment, etc., so utilizing the tools available out there will help take the gut feel out of decision making when it comes to determining the best way to target these people.