Nielsen Offers National Brands Private Label Protection
By Tom Ryan
Writing in Brandweek,
Tom Pirovano, director of industry insights,
The Nielsen Co.,
listed ten ways for marketers to protect their brands from private label – including
packaging changes, line extensions and cause marketing.
The first suggestion
involved touting “Health Claims” such as “Now with More Calcium.” Mr.
Pirovano wrote, “First
look for claims you can make without reformulations. Then consider
adding nutrients to add perceived value.”
The second emphasized
using “Unique Packaging.”
He noted Dean Milk Chugs’ success in a category dominated by private label.
Mr. Pirovano also said older shoppers may appreciate
packaging that is easier to open, re-seal and read.
For the third, “Line
Extensions,” he pointed out that the soda category has only 6.1 percent
private label share. Wrote Mr. Pirovano,
“Every year we see many new soda flavors, but very few really ‘new’
brands. In most stores, private label is left with limited SKUs
and shelf space.”
The remaining seven tips
follow:
Promote a Cause: Avoid
just donating a percent of profits to a cause. Focus on building brand
awareness and getting customers involved.
Odd Ounces: Shifting
a 12 oz. package to 15 oz. makes comparing prices to store brands harder.
Offer Your
Own Value Brand: Mr. Pirovano pointed out that the
hair care category (only 2.2 percent private label share) has worked
this strategy particularly well.
Local Ties:
Remind shoppers with packaging labels when a product is grown, processed
or warehoused locally.
Differentiate Yourself: Do
more to show “why it’s worth more than the store brand.”
Green Sizes: Formerly
known as “value sizes” or “club packs,” larger sizes
provide a value as well as a green message since most large pack sizes
use less packaging.
Keep Innovating: Whether
packaging, labeling, health claims or new flavors, changes “make your
brand difficult to copy” and “give shoppers a reason to spend
a little more on your brand.”
Discussion Questions:
Which of Tom Pirovano’s suggestions do you
think are generally most effective for national brands looking to hold
market share against private labels? Do you have additional suggestions
of your own?
National manufacturers have the ability to build a story around their brands that private label lacks. That story can resonate with consumers in a way that private label cannot. Stories are the natural way humans communicate. The more effective the story, the more effective the brand communication.
I have been doing a lot of research on PL lately and I do agree that names have to do something. House brands are now the value leader and we are in value mode with our customers. This list is great but Private Label is already diverging from national brands. Groceries are creating new products and categories that have no national or regional competition. Merchandising focus is also in favor of the house brand. I’m seeing more pages devoted to the house brand in weekly circulars.
I have one concern about pack size. Increasing pack size may not necessarily help the national brand as the price will go up. That could instantly turn off customers right at the shelf. Not only is the national brand more expensive, but now it’s also even more expensive than the generic. I would focus more on merchandising and facings then fighting on price.
Tom Pirovano’s suggestions for national brands looking to hold market share against private labels all are valid, and most are fairly traditional and time tested. Health claims definitely make a difference where OTC drugs and other HBC products are concerned. But probably the two most important are unique packaging to differentiate from a knock-off type of private label competitor, and new innovations and line extensions, to stay ahead of the private label imitators.
To protect themselves from PL, national brands must have a unique story to tell that overshadows PL’s lower pricing, shelf positioning, and PL’s quality equality. They must recognize that one shining quality in a NB product lends luster to another, so they should hammer away about it. But they must also be mindful that that same shining quality can’t always hide some glaring defect such as little differentiation for a higher price.
National brands deft adjustments in such circumstances will speed continued acceptance with consumers in the future. Otherwise, PL will win more future skirmishes.
The brand marketer has an equity that can be used to communicate the value message. On the shelf, brand leaders call out features that differentiate. Good packaging with the right positioning can make an important difference. Shoppers often compare Brand against PL carefully in the aisle, looking at cost/serving and features. For example, Brandowner labels often describe convenience/usage/storage features based on their understanding of the category shopper–PL labels generally feature attractive graphics. Key is keeping consumer value proposition in sharp focus.
Some of these have clearly been validated over time. Others should be tested. Some I am skeptical about…e.g., odd ounces. In the full write-up, he suggests even going metric. One of my colleagues (from Lithuania) suggests you could go even further–put the info you don’t want the consumer to understand in Lithuanian. Intentionally confusing your consumer is a slippery slope.
Building a story is indeed the principal salvation of brands–so long as the story is based on a discernible, meaningful, differentiating fact. But I disagree that it is an inherent advantage national brands hold over store brands. Who tells a better story today than Trader Joe’s?
The only sustainable competitive advantage any national brand has is to continuously out-innovate and out-market EVERYONE else. And in the case of store brands, that means overcoming the inherent advantage their owners can provide in-store. It is a tall order that will keep getting taller as more retailers make the transition from merchant to marketer.
The old method was change. Any National Brand that went years without any change, be it formulation or packaging, was ripe for copying. Today, this is still true but it is not enough, although packaging changes are very important. Real new products are the only answer. Line extensions are rarely the answer, as they mostly cannibalize the original product’s sales. The other real challenge is consumer communication. Mass media is dead for most target markets. Just as it is dead for target consumers.
I think the time has come to move away from the “compete against” mindset if for no other reason than it may prove futile in some categories! Private labels are reformulating, repackaging, remarketing, and renewing more frequently and more significantly than ever before; so much so that shoppers are mistaking more and more private brands for national brands.
It’s time for national brands to work contextually and long term; analyzing synergies and associative interplay between their brands and private labels by-retailer and even by-store (since brand profiles are no longer universal). “Us against them” isn’t going to raise the bar or ingratiate brands to the retailers that house them.
On the side of Own Brand I would use proverbs to tell the Own Brand story. Appeal to a need of common sense. I believe brands are in trouble if Own Brand makes a play on wisdom and practicality. The wise man saves 50 cents on an equal item and reinvests that 50 cents in knowledge for his children. Why pay extra for the same product that you will only experience for seconds in your life? Only a fool is deceived by paying extra for the same product in a different package.
The aspects of this article which concern me address the continuing belief that confusing the consumer is an appropriate marketing mechanism. If all the effort and creativity that have gone into trying to make products difficult to compare had been spent on actual benefit enhancement, maybe the brand would be better off. That being said:
1. Promote a Cause: has to be done with integrity and be sustained. As a marketing gimmick, it’s a bad idea.
2. Odd Ounces: Bad idea. Confusing consumers is not appropriate.
3. Value Brand: Price tiered product assortments are intelligent, and if you can obtain the shelf space, worthwhile.
4. Local ties: I haven’t seen a shred of evidence that this is actually something that demonstrably impacts MOST consumer behavior, fresh produce aside.
5. Differentiate: Yes, that would be good. Irrespective of private label. Hard to do in essentially commodity categories.
6. Green sizes: I am not aware that consumers have made this connection between larger pack size and less packaging material. While true, I am skeptical of the awareness level.
7. Innovate: Well, yes. But not for the sake of change. Ask the soft drink companies what packaging changes do when poorly executed to brand values. Innovate to deliver value.
Overall: I appreciate the effort behind these comments. However, I believe that brands would be better served by keeping it simple, and having/developing points of difference which intrinsically matter to the consumer, and then publicizing them.
People need to realize how much of the loyalty, brand value and recognition of major labels comes from historic and multi-generational use of the product in homes–not just current advertising, packaging and marketing. Many brands have been solid for decades because consumers are used to those products being around and reach for them almost automatically–in the fridge, in the cupboard and in the medicine cabinet. Each time one of those doors is opened is in essence a re-advertisement and reaffirmation for the specific product. The Betty Crocker mix that is always used for everybody’s birthday cakes, the “only” acceptable mayonnaise or peanut butter for use on a family’s sandwiches, and the favored cereals from when we were kids are just a few examples.
In 2009, as these products are replaced on tables and in cupboards by more and more generic and private labels, the major brands are losing not only immediate share and revenue, but also the self perpetuating in-home advertising they have so benefited from in the past. To survive, they must do whatever is necessary to make sure they continue to be loaded into grocery carts and bags to earn a new generation’s loyalty.
Tires with zero death crystals. I’m reminded of a recent Head & Shoulders shampoo commercial in which a character speculates on ways to promote products by claiming they have no (insert a terrible ingredient here).
Innovation, of course, is the purview of national brands, and is the best among the seriously limited suggestions listed here. Their R&D labs introduce almost all product advances, which store brand manufacturers follow if the national brand tests are successful.
But, a major “tip” that Mr. Pirovano amazingly overlooked is advertising. Who among us doesn’t know that the major difference between national brands and store brands is advertising? National brands do, and store brands don’t. How could he miss that? It’s the key!
One way we’ve seen real differentiation for brands is the development a subculture of loyalists who converse about the brand via independent vehicles. One way is to use the Web to post comments, blog personal stories or even co-develop new products with the help of consumers–worldwide.
Kettle Foods has done most of their new product development with the help of consumer advisors. Kraft Australia found, through some innovative Web tools, that although 98% of their Vegemite brand sandwich spread was sold in that country, there were more than 1.5 billion posts in 38 languages around the world touting the virtues of Vegemite. A true cult following. Starting these kind of social networking conversations is cheaper and more effective than most other marketing schemes. And, it is one of the best differentiators against private label products.
I tend to agree with Ralph, and will take it a step further to encourage national brands to let consumers be a part of developing a new version of the brand-relevance story. The story is a journey that both satisfied and dissatisfied consumers will tell if you let them, and then you listen, interact, innovate and continue to listen. That story becomes the basis for innovation and marketing, because it’s inherently authentic, timely and real. Building brands is an activity done best with consumers, not just for consumers.
Remember the National Lampoon’s “Buy this magazine or we’ll shoot this dog?”
There are lots of ways to innovate with packaging, particularly if the new packaging is easier to open, more portable, and easier to read. (I’m always amazed at product packaging with 4-point type, which nobody over 30 can read.) Make a better product, and the customer will buy it.
I am interested to get comment on a particular issue here in Australia that others maybe have faced. The issue relates to PL and manufacturers’ brands in the regular white milk category. When product differentiation is not strong and price between the two is at an extreme the manufacturers brand has nowhere to go but down. What options are open to the manufacturer to stem this tide?