PL Buyer: Private Label Should Follow National Brands’ Lead on Marketing
Through a special arrangement, what follows is a summary from a current article from Private Label Buyer, presented here for discussion.
Dave Nichol, the former president of Loblaws Supermarkets and one of the key visionaries of its highly acclaimed President’s Choice brand, famously talked about the “brand tax” of national brands. Essentially, Mr. Nichol was referring to all of the marketing related expenses — TV advertising, celebrity endorsements, promotional campaigns, etc. — that added to the cost of its goods, and represented no tangible benefit to the consumer.
Loblaws, he argued, focused on product quality and delivering superior value to savvy shoppers who purchased Loblaws’ No Name and President’s Choice products. This marketing strategy was highly successful and was, in fact, a catalyst for the entire private label revolution.
While the concept of the “brand tax” remains relevant — and retailers need to maintain the price gap and margin advantage of their private brands over national brands — the need to market private brands has grown significantly, not necessarily to close the perception gap with national brands, but rather to differentiate from other retailers’ private brand programs.
One of the best examples of this was demonstrated last summer, when Loblaws ran its “Canada’s Biggest BBQ Event.” Through our audit of the North American private label landscape, we have identified a number of other retailers that are doing a great job marketing their private brands, including: Wegmans, H-E-B and Publix. And it’s no coincidence that these three retailers also possess incredibly strong overall brand equity.
So why don’t more retailers undertake significant marketing initiatives of private brands? Most cite the fact that they have no resources or budgets to market their private brands. This baffles me — a private brand can in many cases represent millions if not billions of dollars in sales, and can be one of the most influential consumer touch points of the business. Can there be any more deserving investment of marketing funds?
To supplement marketing budgets for private brand campaigns, we are encouraging our clients to get funding support from vendors of private brand programs.
Think about it — national brands provide funds for marketing of their products at retail. Why can’t private label vendors ‘invest’ in the marketing of the brand in which they participate? It’s a win-win situation, both in terms of the immediate benefits of potential sales lifts and longer-term brand equity building. But vendor support of marketing efforts cannot be perceived as simply a cash grab; vendors should have the confidence that a well-crafted, results-oriented marketing plan is in place, and that investing in the marketing of the private brands through which they sell their products won’t be wasted, or simply turn into a brand tax.
Discussion Questions: Should private label suppliers help fund the marketing costs of retailers’ PL programs? What are the pros and cons of such support for both PL suppliers and retailers?