Retail Customer Experience: Five Ways to Win Back Private Label Switchers

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Feb 23, 2011
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Through a special arrangement,
presented here for discussion is a summary of a current article from Retail
Customer Experience
, a daily news portal
devoted to helping retailers differentiate the shopping experience.

Roughly 74
percent of almost 1,500 consumers recently surveyed by Epsilon Targeting said
they shifted to private label in both food and household products. A surprising
61 percent switched in personal care.

This move could indicate not only the fading
perception that purchasing store brands means sacrificing quality, but also
that consumers are becoming satisfied with the value of these alternatives.
Yet at the same time, Epsilon research shows national brands still wield influence:
in almost all segments, more than 65 percent of consumers said they would return
to their national brands, with a coupon.

For manufacturers of the nation’s
most enduring brands, this is a sobering shift, but they can rise to the challenge.
To recapture this shifting segment and, importantly, to prevent additional
brand switches, we offer the following suggestions:

1. Target the Former
Faithful:
While more than 65 percent of those surveyed
said they would return to their national brand if given the right offer, that
means roughly 35 percent are not likely to switch. Marketers should first identify
those consumers who would return to their national brand and then target them
with coupons, samples and similar incentives.

2. Reward the Savvy Shopper: These
days there is less of a stigma associated with store brands, coupons and other
efforts to save money. This includes “image” categories
such as hair and facial care. In addition to using coupons and samples, manufacturers
can increase their consumer connections with “Savvy Shopper” clubs
and similar loyalty programs tailored to the shopper’s lifestyle. Such
rewards also potentially result in powerful word-of-mouth marketing.

3. Track
the High-Risk Categories:
Our research shows more consumers
are switching to private label in high-quality categories such laundry detergent
and diapers. Consumers make these decisions based on two factors: price and
quality. Manufacturers must use their data to identify these price-conscious
consumers and then target them with tailored promotions that emphasize the
quality and value of the product.

4. Use Food for Thought: The Wall
Street Journal
recently reported that food prices will continue to rise,
meaning that the trend toward store brand foods will likely escalate. Using
this pricing knowledge, manufacturers can cross-reference those categories
with vulnerable pricing against the spending patterns of their best shoppers,
and then promote accordingly. This trend also presents an opportunity for non-food
marketers to develop cross-category promotions — “Buy
two cans of soup, get $1 off cold remedy.”

5. Channel Surf for Success: Access
to robust, actionable consumer data and shopper insight enables national brands
to identify what their best shoppers buy, where they buy it and when. Then,
they can use this intelligence to reach these shoppers where they are, applying
the “what, where, when” knowledge
across all channels, from direct mail to mobile phone. National brands have
the advantage of scale and can create a deeper emotional link with consumers
through the web, social media and other channels where private labels might
not venture.

Discussion Questions: What should and shouldn’t national brands be doing to recapture any customers that have shifted to private label options? What strategies mentioned in the article will likely have the most impact? Which options are missing?

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24 Comments on "Retail Customer Experience: Five Ways to Win Back Private Label Switchers"


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Bob Phibbs
Guest
10 years 2 months ago

#6 stop knocking yourself off. I had a chest cold and went to the cold remedy aisle. Robitussin $7.99 in green and black type. Same type, features, same size branded “Tussin” for $3.99. You want to gain more business for your brand, it starts in-house.

Paula Rosenblum
Guest
10 years 2 months ago

This is a tough one, especially if the quality of the private label product turns out to be equivalent to the national brand.

The only rational choice is to target the savvy shopper–offer promotions and quasi-loyalty rewards.

Also use Social Media to allow the value of your brand to spread virally. Offer contests for slogans, jingles, the best story…it’s important to be creative.

Having said all of that, with the price of fuel skyrocketing, I expect private labels’ percentage of market basket to continue growing.

Max Goldberg
Guest
10 years 2 months ago

Insightful article, Warren. When consumers don’t see a difference between national and store brands, they tend to purchase the lower priced item. National brands can fight back through product innovation, advertising (in all its forms), customer service and promotion. National brand managers have the budgets at their disposal to do all of these. Store brands do not. By staying ahead of store brands, national brands can keep their differentiation and justify their higher price to consumers.

John Boccuzzi, Jr.
Guest
John Boccuzzi, Jr.
10 years 2 months ago

Just when National Brands thought the economy was improving and shoppers would be less cost conscious, food prices start to rise. The 5 ideas in this article are great and can certainly be used to help slow or even reverse the trend of Private Brand acceptance in certain categories.

One additional thought related to “Use Food for Thought” is cross-category promote your National Brand with a non competitive complementary Private Label Brand. Instead of “Buy two cans of soup, get $1 off cold remedy.” Why not run a promotion of Buy two cans of National Brand soup, get Free Private Label Cold Remedy. This type of collaboration between a National Brand and retailer builds stronger retailer relationships and more importantly provides consumers with a great savings that gets them the National Brand item they love and a free trial on a PL item they may learn to like.

Ryan Mathews
Guest
10 years 2 months ago

I think, with all due respect, this may be a matter of “old think” versus “new think.”

In the “old think” days, private label meant cheap and nasty products supplied by some all but unknowable source. In the “new think” world, the retailer IS a brand, in many cases more locally powerful than a national brand.

It’s the retailer’s relationship with the consumer that’s driving the sales of what I prefer to think of as retailer-controlled brands. That four dollar difference in cough syrup isn’t attractive if you still have your cough.

So, what can national brands do to fight back? Start understanding the new drivers of brand loyalty and play catch-up as best they can.

Joan Treistman
Guest
10 years 2 months ago

With dismay I observed that the author of the article had no concrete reasons for consumers to buy national brands over store brands. If the marketers don’t have justification, it’s hard to expect more savvy shoppers to choose higher priced products. Couponing and sampling will only put nails into the national brand coffins as they proclaim comparability on pricing with no added value when the higher price reappears.

The longer-term strategy is what national brand marketers have always done as they have competed with other national brands…DIFFERENTIATE.

Competing with private label on the basis of price limits the potential for national brands. The message to consumers is that all brands are the same in terms of product attributes and benefits.

Joel Rubinson
Guest
10 years 2 months ago

I got off the bus when the first idea was based on targeting.

The issue is much more fundamental than the incremental lift you might get by giving 2 messages to one person and 0 to another. This is about finding a new rationale for national brands when the functional differentiation of national vs. store brands is diminishing and is, in fact, a non-sustainable competitive advantage.

The answer lies in turning your brand into a lifestyle that when adopted, greatly simplifies life. You must extend the brand experience with social media and digital environments as well. This is not about SKUs; it is about fundamentally rethinking the approach to the value proposition.

Ryan Mathews
Guest
10 years 2 months ago

Joan, I think the problem is less that manufacturers stopped trying to differentiate and more that they stopped trying to innovate.

Put more simply, line extensions are examples of “differentiation” for differentiation’s sake but, as I think most of us would agree, they aren’t innovative. Being different from (often defined by packaging) isn’t the same thing as being better than. Jello could introduce a vinegar flavored desert–which would clearly be differentiated–but I doubt it would sell.

The bottom line is that too many manufacturers continue to view the problem through their own filter (how do I grab shelf space/market share) and have steadfastly refused to see their products through the eyes of the consumer.

The other day I stopped in a drug store in Detroit (where one out of five people are unemployed) and see a razor blade replacement pack on sale for $38.00. Of course the manufacturer of those blades believes their product offers a superior shave (i.e. is technically differentiated from its competitors) but I didn’t see them flying off the shelf.

Bill Emerson
Guest
Bill Emerson
10 years 2 months ago

I think Max has it just right. Give the consumer a reason to purchase your brand over the store brand. After all, you are the manufacturer aren’t you? You’re supposed to be the one that has the experience in innovating new products and better solutions.

To paraphrase another Bill, “it’s the product, stupid.”

Ed Rosenbaum
Guest
10 years 2 months ago

We seem to have gone past the ill gotten belief that buying specific brands is the way to go and paying more is acceptable. The recession taught us if nothing else that the price of an item is equally as, if not more important than, the name on the label.

It is past time that we turn our attention to why we are buying in to the fact that it is OK to accept significant price increases on all items because of the price of oil.

Anne Howe
Guest
10 years 2 months ago
Joel hits it squarely on center here. It used to be that price promotion would prevent shoppers from trying generic brands. Then, as retailers developed better private label products (with the help of national brands, or not) the shopper was teased to trial based on similar functional benefits and packaging that gave the visual cue of “it’s the same thing.” Once shoppers begin to experiment and find quality, they don’t abandon that behavior because, fundamentally, part of the shopping pleasure is trying new things. As the economy tanked, more shoppers adopted this behavior out of need, and then found their tastes and preferences evolving based on satisfaction. Even those shoppers with full wallets are staying with products that satisfy. And that term means way more than price. My personal example is Meijer Organics. Satisfy, to me, means it offers a better nutritional profile at a better price. I can taste the lack of sodium. I can add my own spices for flavor. In many categories, it doesn’t matter what promotion the national brand offers. My… Read more »
Doug Garnett
Guest
Doug Garnett
10 years 2 months ago

Good comments. But fundamentally absent is your most powerful response: Communicate by telling consumers what is better about your product.

It doesn’t matter how many innovative features you add, if consumers don’t know about them then you might as well have saved your money. But when they are given a good reason to buy a brand, they will.

Of course, this also requires that your advertising talk about more than lifestyle or why you’ll like your man better if he would just use Old Spice. (That’s not value building communication.)

Camille P. Schuster, PhD.
Guest
10 years 2 months ago

What does your product offer for that $4.00 difference in price? A name? A pretty package? Added sugar? A fun color? Differentiation is critical, but differentiation for the sake of differentiation is not the answer. If the consumers perceive no extra value for the $4.00 they will not buy the branded product. Manufacturers need to add value that consumers WANT or they have lost the market.

Carol Spieckerman
Guest
10 years 2 months ago

Lots of talk about the shopper, but the only way national brands can differentiate is to manage their brand portfolios on a retailer-by-retailer basis. Context happens at the shelf and if a retailer is heavily invested in their private brands in a particular category, they can leverage any number of tactics (prominent placement, brand distortion, multiple placement, floor graphics, circulars…) to drown out national brands. Rather than fight an uphill battle, national brands must manage their brand portfolios based on each retailer’s total brand strategy. Surgical, not sweeping.

Joseph Howard
Guest
Joseph Howard
10 years 2 months ago

Offering brand promotions and reduced prices in the short term will cause long term pain. As private label producers and marketers improve, the only effective way to win the war is to go back to brand fundamentals: develop a winning position by understanding consumer and trade needs better than anyone else and then build your brand image around that new position. All of your marketing elements must create or support that one positioning. If you try to play the price/value game, you will lose; a good private label player will do that better.

John Karolefski
Guest
10 years 2 months ago

The short-term solution is to promote more via sampling, coupons, etc. The long-term solution is to innovate more. Product innovation in health and beauty categories can capture the consumer’s imagination and improve self image. That is a significant edge that will lead to more sales.

Ed Dennis
Guest
Ed Dennis
10 years 2 months ago
With regard to the five suggestions presented I have problems:1. Target the former faithful. Well how do you intend we do that? Retailers might have consumer information but manufacturers/marketers don’t. Besides, if you could target the former faithful, what about the vast majority of potential consumers who weren’t former users? The fact is that if you want a customer you have to give them a reason to buy your product. Try making it better, or cheaper, or eco friendly, or pet friendly. The product is what people are buying. Obviously the consumer is satisfied with the results provided by the private label or they would have come back to the national brand. 2. Reward the Savvy Shopper. Why? They are going to get their deal in spite of anything you do. 3. Track the High Risk Category. The categories you mention don’t seem to have many barriers to entry. It would appear that there are many competent chemical manufacturers and paper product manufacturers capable of producing comparable products. 4. Use food for thought – Suggest… Read more »
Craig Sundstrom
Guest
10 years 2 months ago

This would seem to hinge on how different one’s product is from a house brand: if there’s truly no difference at all–and in many cases of course this is literally true–then the answer is as simple as it is (likely to be) painful: lower prices; if there are differences–or at least people think there are–then one needs to advertise them…Marketing 1A anyone?

Herb Sorensen
Guest
10 years 2 months ago

My recommendation: Run, don’t walk, to get a copy of "How Brands Grow: What Marketers Don’t Know" by Byron Sharp of the Ehrenberg-Bass Institute. Then, read it three times, hoping to forget most of what you knew before reading the book.

Mark Burr
Guest
10 years 2 months ago
What seems to be missing in the discussion is why would retailers want to switch their customer back to a ‘brand’ when in most cases they have intentionally and successfully shifted the consumer to their own ‘private label brand’? They may be possibly better named ‘retailer brand’? That’s differentiation. Possibly one of the best successes is Target. In their stores, ‘branded’ products other than the ‘red circle – dot’ are secondary. Meijer was mentioned in the discussion and their are others. These products have been entirely transformed over time and are high quality and value priced items. Some are even of greater quality than ‘brand’ names. Sure, everyone can find one particular product that just doesn’t stand up. However, most do meet the level of quality satisfaction to the consumer. They cost less. The consumer is happy. They came from your store. They aren’t products you can buy anywhere else, for example, the ‘Target’ brand. They generally carry a significantly higher profit margin than ‘brand’ products. They create differentiation for the retailer. Possibly most important,… Read more »
Ralph Jacobson
Guest
10 years 2 months ago

Differentiation is a good start, however, what if the brand is no different than the private label? Then you should look outside the food industry to other lines of consumer goods that command loyalty. Fashion apparel brands, Apple (when was the last time someone bought an mp3 player other than an iPod?), airlines, hospitality. How do they drive loyalty? Brand cachet for apparel. Perks for airlines. The culture for Apple. What pieces of these can be translated to the food biz? ALL of them! Look at what the retailers like Trader Joe’s, Whole Foods Market and others have done. Then look at CPGers like Coca-Cola. The most valuable brand in the world of any kind. Loyalty. Culture. Perks. ‘Nough said. Problem solved. “Just do it”!

Warren Storey
Guest
Warren Storey
10 years 2 months ago

Great discussion on this topic–very insightful observations and recommendations!

I do agree with the vast majority of discussion–for national brands to truly re-capture store brand consumers, the long-term key will be product innovation–providing consumers a noticeably superior product vs. store brand to ‘justify’ the higher price point. My expectation is that this next ‘wave’ of national brand product innovations will be coming in the next 12-18 months. Until this time national brand marketers must rely on the vast amounts of consumer data to identify and target the consumers that have the highest propensity to either; (i) Remain loyal to the National brand, or (ii) Be willing/able to switch back to a national brand. Focusing on these consumers (utilizing available consumer data) and ensuring that you are communicating with the most relevant message and offer is essential for success (and the message will be equally important as the offers).

Thanks for the great discussion!

Odonna Mathews
Guest
Odonna Mathews
10 years 2 months ago

Consumers like choices and there are more choices than ever in today’s supermarkets and retail stores. Some consumers will always choose a national brand, but increasingly private label products clearly have the advantage with increased quality, variety, and price differential.

Christopher Quirin
Guest
Christopher Quirin
10 years 2 months ago

COUPONS! Not FSI coupons but in-store, at the point of purchase. Brand at the store level, placards, in store digital networks. Meet the consumer/shopper in the aisle.

Make it convenient. RFID kiosk with a customer loyalty program attached to a shopping list and discount program.

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