PL Buyer: Turn on the TV!
By Randy Hofbauer
Through a
special arrangement, what follows is a summary of part of the May cover
story, “Spying on the Neighbors,” from Private Label Buyer, presented here for
discussion.
Canadian and European
retailers don’t just settle for the Sunday paper to promote their private
label goods – they come up with clever television commercials, too.
According to Tom Stephens, founder of the Canadian consulting firm Brand
Strategy Consultants, this isn’t something as commonly done by U.S. retailers.
“[This is] because
[U.S. retailers] haven’t had the penetration to throw off the money,” he
said. “You need the money. It’s marketing 101 in terms of if you want
to be in the media, you’ve got to have money.”
Brian Sharoff,
president of the Private Label Manufacturer’s Association, also believes
the money these retailers are making from their private label stretches
a little further in Canadian television advertising than it would in the
United States.
“You can buy Montreal
television for a fraction of what it costs to advertise in Chicago,” he
said. “So it’s affordable.”
Mr. Sharoff also
is quick to comment on how clever Canadian and European retailers’ store
brand advertising is.
Does this prove that
it is important to get excellent marketing personnel in one’s private label
program? Quite possibly. According to Mr. Stephens,
marketing is just as important as sourcing. And one thing European and
Canadian retailers have done to position their store brands well is to
bring in classically trained marketing professionals.
“You know, the
[U.S.] private label buying department was not a place where you would
put your highest-flying people into,” Mr. Stevens said. “Private
label is a combination of sourcing, quality assurance and branding and
marketing. And you don’t find these people at the back of a grocery store
unpacking the boxes in the receiving environment.”
Sainsbury’s and Tesco
have been very active in advertising their store brands, especially on
the food side, Mr. Sharoff added. They’ve put a lot of money into clever advertising
that even features celebrity chefs and famous actors.
Mr. Stephens believes
there’s no question this advertising is being driven by volume. The more
you make from your store brands, the more you have to spend on advertising.
“That’s why Loblaw’s
had an approach that said: ‘We’re going to market
this stuff like crazy. We’re going to be on television every day,’” he
said. “And they built the model with an inherent marketing cost built
into it. But it required volume to do it – you cannot do this without
volume because you just don’t have the money to spend.”
This is something Mr.
Stevens thinks the United States will see over the coming years as volumes
build.
Discussion Questions:
Are many U.S. retailers at a point where they should be more aggressively
advertising their private label brands or does private label development
work differently in the U.S. market than in Europe? Have you noticed
any compelling private label advertising efforts in the U.S.?
Private label has become the quality equivalent or more to national brands during the past few decades. Most cut well or better than their corresponding national brands.
Now, as Yogi Berra might say, PL is a fork in the road and they should take the route to marketing their goods in the Big League. The next decade should be enlightening for PL as it climbs through its new marketing window.
The US consumer for years has looked at Private Label products as “generics.” And the US retailers for years did little to change that image. As long as the product is considered generic, there is no compelling reason to put any marketing spend behind the product.
In Europe, store brands in many cases are perceived to be higher quality than the national brands. This did not happen over night; it occurred due to a proper marketing strategy. But the marketing strategy was not limited to asking how much should be spent on television advertising. Marketing starts with product innovation, and developing a proper product strategy.
Again, for years, US retailers never looked at strategy, other than the strategy being how low can we get the cost of the PL products we need to source. Remember the reverse auctions? Where did brand strategy play a role in that process?
The US retailers finally seem to be getting it, and strategies that discuss product innovation, product quality, and market penetration are finally being implemented. But it will continue to take some time for the US consumer to look at PL the way the European consumers do. Retailers who stick to the strategy will ultimately be the victors.
I don’t think there is anything inherent in PL development that would keep US retailers from driving growth with advertising. And a good advertising person should tell you the same thing. Whether or not it’s profitable is another story.
With the perception of US consumers that private label equals generic, and the cost of mass-market advertising, will consumers buy private label if the prices rise to pay for that advertising?
I constantly hear consumers in focus groups around the country rave about private label brands, be it Safeway, Publix or Stop & Shop. Long gone are the perceptions of the white label generic or even the idea that store brands are inferior. On the contrary, depending on the product, there’s often more brand loyalty for private label as there is for a manufacturer’s brand. To consumers, a brand is a brand is a brand. If the quality is there–and it often is–consumers will pay.
Advertising for private label shouldn’t be seen in a different light than advertising for any other brand. The same rules apply. Build brand awareness with ads that are relevant, compelling and motivating. If they get the spend numbers right, they should expect to see big gains in their bottom line.
For those challenging whether store brands in the US should advertise, I can only ask, “What about ‘brand’ don’t you understand?”
I think we are already seeing some strong advertising for Own Brands here in the U.S. I live in the Michigan market and have seen a number of very good campaigns from Meijer over the past several years highlighting their Meijer label products. One of my favorite spots features a young girl taste testing National Brand spinach versus Meijer brand spinach…this spot has been run for a number of years and keeps coming back as it is an outstanding vehicle touting equal quality for a lower price.
I’m sure there are other examples such as those I’ve seen from Western Family…what could create stronger store loyalty than a consumer preference for your store brand product lines???
My comments are in this article which makes a good case for getting radical with private label.
Name-brand manufacturers are on the run in many categories and need to re-evaluate how they can maintain their relevance. Milk is an example of a category that has become completely taken over by private label, but salted snacks is an example of the opposite. One of the major reasons is that salty snacks are dominated by a single, national player and milk is not. This has allowed for national advertising and marketing in the SN catagory.
Retailers don’t need to be national to advertise their PL products, but just in their marketing areas; a huge difference. This enables all retailers of sufficient size to be able to afford to advertise to reap the benefits of this.
Private Label, Own Brand or Corporate Brand–whatever a retailer wants to call it–they have all come a long way over the last 10-15 years. Daymon Worldwide has built its entire business around providing professional marketing and sourcing services for retailers and their brands.
All of this points to the fact that the world of Private label is dramatically changing and becoming a strong differentiator against competitors like Walmart. You can only buy Simply Enjoy brands at Stop & Shop and as a consumer, I can tell you it is a great product at a fair price.
I don’t believe the US will follow the trend happening in Canada regarding TV ads. The cost of advertising in the US on TV may be cost prohibitive if the retailer wants to keep their margins high and the retail price competitive. That said, look for new exciting and creative ways for retailers to promote their Private Label brands over the next 2-3 years.
Television advertising is still a key signal to U.S. consumers that a brand is legitimate. Call it a throwback or a holdover or whatever you want to, but the days of “but is it on TV?” are still with us. When retailers put their Own-Label Brand on TV, they provide a key signal to consumers that they have crossed the great divide between “Private Label” and “Proprietary Brand.”
In today’s contracting retail environment where SKU and supplier rationalizations are growing at the same time that private label is increasing its representation across and within greater numbers of categories, there must be a Concomitant emphasis on building the marketing and advertising of the private brands. Walmart’s Project Impact is focused on both supplier and SKU rationalization AND private label development at the same time. It is clear that they are taking a close analytical look at their assortments relative to their status within their “win, place and show” framework. This bodes for significant change within categories of products and a shaking out of 3rd and 4th tier brands (and sometimes even 2nd tier brands depending upon the category) and additions of private label.
Private Label’s rise, to a large degree at the expense of other brands, will therefore need to have a solid marketing and advertising program to support it. Europe is just a bit ahead of the US relative to this general retail trend.
With few exceptions, there is a mindset problem in U.S. grocery retailing. They don’t spend any of their own money on advertising. Their objective is to get the manufacturers to pay for flyers, radio ads and even TV ads. If they advertised their private label like a branded product, they would have to use their own money. I suspect someone would get fired just for having that thought.
Will this change? It must! If grocery retailers are going to be successful in upgrading their private label to meet or beat the quality of the brands, they eventually have to tell someone they are doing it.
The willingness of Canadian retailers to advertise their private label relates in part to a belief that this is one of the primary ways a retailer has to differentiate itself from the competition.
By far the heaviest advertiser in this area is President’s Choice (the control label for Loblaws). The products showcased in its advertising serve to build the banner’s reputation as committed to serving a shopper’s need for new tastes, green products, healthier products, cheaper alternatives etc. Their tagline is “worth switching supermarkets for,” consequently, advertising the private label is tantamount to advertising the store.
The common claim that private label and national brands are differentiated by how they are marketed (private label on the shelf; national brands lots of other places) has made me uneasy for some time. As retailers continue to upgrade private label programs; reformulating food, reinventing packaging, creating good-better-best sub-brands in multiple categories, pushing private labels into new categories…it stands to reason that they would back all of those efforts up with television advertising, particularly when shoppers perceive many of these brands AS national brands.
I’m surprised that this isn’t more widespread in the U.S. by now; however, I think it will be in short order. And, for private labels that are backed up by national brand suppliers, those suppliers may increasingly be asked to partner on the no-name ad spend.
The original idea behind private label was that is was less expensive because consumers weren’t paying for the brand names, advertising and promotion like the national brands. Now private label can actually be more than the national brand (if the national brand is on sale). Private label has become more PROPRIETARY and more of a point of differentiation than price based. How things have changed.
It has taken a very long time for PL to just get up to speed with the packaging of their products, so advertising is still a way off. First they had to get the word “generic” out of consumer’s minds (a problem they created). Now packaging has been better. But before heavy advertising can be another step they will need to insure product quality is up to the national brands. If they start to sell a lot of product and people don’t like it, what’s the point?
If your sourcing and manufacturing are great, why not blow your horn? Otherwise, what is the point exactly?
I think it’s high time we in the retail consumer products industry bury the term “generic,” say a prayer over it and put it out of mind. I’m quite certain the consumer has. Store brands, own labels, exclusive brands, private labels–however we want to label them, they are products that require an appropriate level of shopper marketing. Conscious positioning and quality packaging are steps one and two. Marketing–in the world and in the store–comes next.
While the example television ads shown here are artful works of persuasion, they aren’t particularly promotional. For most store brand products, I believe these awareness messages must be linked to in-store messages designed to stimulate action. Here is where the retailer has a distinct advantage over branded suppliers – the ability to coordinate messaging along the entire span of the engagement funnel–from living room to POS. Retailers in the U.S. have so far seemed reluctant to take the shopper media initiative for their own brands. This is an enormous opportunity, and one where return on investment will be easily tracked from the transaction log.
Private label remains private label if you don’t promote so as to create a brand.
“Television advertising is still a key signal to U.S. consumers that a brand is legitimate.” Ben Ball’s comment reminds that a strong price is also a “key signal” that this is a legitimate, quality product. This is too long and important a subject to discuss here in detail, but one of the single most IMPORTANT functions of the price, in marketing, is clearly communicating to the shopper what the value is.
However, that statement of premium value MUST be backed up by one of three values. First, it is hard to distinguish a product on the basis of intrinsic value, since, for example, the nutrient argument may be hard to sustain. Second, added value is possible, based on packaging, other features or convenience. Third, brand value, is ephemeral, and is created by sustained image over a long period–usually. Obviously, TV is one tool for creating sustained image. But it isn’t just that mercantilist retailers are tight with their money. They are more prone to destroy brands by cut-price practices. People who have spent fifty years as termites eroding the infrastructure of brands, may not unlearn their nefarious ways so readily.
I don’t think there are but one or two retailers who have the ability to pull anything like this together. It has been my experience that most retailer marketing programs are developed by third party firms and then national brand manufacturers are asked to pay for them so they can be a part of this ground breaking marketing program. When I see 6 grocery retailers advertising in the newspapers every week and every ad has glaring errors in it; when I see retailers advertising specials and then go into the stores just to find 30%+ of the specials out of stock, then I think retailers might want to spend more time getting the basic business right, before they start thinking about developing and paying for advertising campaigns for private label product.
Private label…. I think the better approach is Private Branding. This is creating products that are not complete knock-offs of current branded products. Clearly, retailers should look at strong brands and create PL versions to deliver the all important “affordability” that consumers are demanding today. Private Branding gives the consumer an additional reason to shop the store…something they can’t get in a national and/or regional brand.
Lets also look at retailers such as Trader Joe’s. A vast array of unique, not-to-be-found-elsewhere products have the TJ label and this uniqueness is one of the reasons they are continuing to attract new customers. Affordability and uniqueness gives them tremendous marketing power.
Also, retailers may want to look at creating a brand that may not necessarily be the retailer banner. Whole Foods 365 brand is a good example. My informal polling of friends and business associates reveals that most of those polled don’t realize 365 is the WF Brand. They do purchase the brand for its uniqueness and affordability in the category.