Retailers – Are They Leveraging the Strongest Brands?
By Al McClain
What brand has the strongest equity with American consumers? Reynolds Wrap.
No kidding. As reported in Ad Age, a just-released Harris Interactive
study involving 25,666 consumers ranks Reynolds Wrap as the strongest brand
of over 1,000 measured. Assessments of brand health included equity, familiarity,
quality, purchase consideration, overall relevance, and distinctiveness.
The top ten brands, in order, were Reynolds Wrap, Ziploc Food Bags, Hershey
Bars, Kleenex Facial Tissues, Clorox Bleach, WD-40 Spray, Heinz Ketchup, Ziploc
Containers, Windex Glass Cleaner, and Campbell’s Soups. A Reynolds spokesperson
noted that Reynolds Wrap is not just plain aluminum foil anymore, and that Reynolds
Release, a non-stick foil, has been a big seller. Alcoa now makes a variety
of products under the Reynolds name, including several foil bags used in the
oven and for grilling.
Interestingly, ad spending did not correlate to making the top ten list as,
according to Ad Age, Reynolds Wrap received only $7.5 million in media
support last year. Meanwhile, mega-brands such as Coke, Pepsi, McDonald’s, Nike,
Mercedes and the iPod failed to crack the top ten. Other top ten brands spent
even less than Reynolds Wrap – with WD-40 spending only $25,000, and Heinz Ketchup
spending only $414,000.
Moderator’s comment: Is there an opportunity for retailers
to improve merchandising and promotion of little advertised brands that have
high brand equity?
For retailers, this may present an interesting opportunity.
While private label has recently been growing by leaps and bounds, retailers
tend to promote brands where trade and ad spending is high. (When is the last
time you saw a display of WD-40 or Ziploc bags?) Put another way, could retailers
spend less time chasing trade funds and devote more effort to creative merchandising
of brands that consumers think highly of?
Grilling has been on the increase in recent years, and
I count a minimum of four of the top ten brands listed that could be a key part
of grilling lifestyle. Maybe there is something to be said for the old fashioned
idea of building creative displays and executing themed in-store events. Just
a thought. –
Al McClain – Moderator
Reynolds is still known for Reynolds Wrap, a category it thoroughly dominates. If an upstart competitor came after them, or, say, WD-40, I am sure ad and promo expenditures would change. Right now, they can coast and rake in the cash. As to retailers and taking funds, slots, etc., it’s how the industry has operated for a long time, and if you suddenly decide to jump off the cliff and go “pure,” you’re going to be badly hurt in an already tight margin business. But there has to be balance here, in what goes on your shelf, in terms of satisfying the shopper and giving yourself some differentiation. That means taking on innovative new products whether there’s big trade funding or not. More retailers are recognizing that, and marketing themselves like a brand. It’s tricky, and takes time, and it has to be a slow evolution. Outraged purists can hyperventilate about eliminating slotting and street money “right now!” but if it were their wallets on the line, I suspect they’d sing a different tune. The dilemma of supermarket trade practices is a bit like having a wolf by the ears. You don’t like it, but you’re afraid to let go.
Maybe I’m missing the point of all this – hey, someone has to, right? – but doesn’t it make sense that a brand w/ high equity doesn’t advertise (?)…..IT DOESN’T HAVE TO.
As for the actual question asked (pertaining to cross marketing), I can’t imagine any retailer being able to make much of stocking either RR or WD40 (or whatever); the fact that they’re well known/respected has much to do with the fact that they’re widely used, which, in turn, also means they’re widely distributed. No competitive advantage here (other than price, of course).
I suspect a subtle, but common, influence on the research results here. Certain brand names become synonyms for the category by virtue of being first and often exclusive in the market for a long period. Kleenex Brand Tissue is the most widely discussed example, but I note similarity in many of the brands that surfaced as “top 10” in this research. For example, what brand of aluminum foil can you name other than Reynolds off the top of your head? How about a competitor to WD-40?
Can retailers leverage these icons? Certainly they can. But the most leverage may be in enjoying a healthy level of much needed full margin sales off the shelf.
Many of the top brands cited in this study have been proving for years exactly what the advertising community fears most – that brand equity can be sustained over time by consistent in-store activity supported by relatively modest messaging in the traditional media.
This is not uniformly true for all products, of course. But it’s apparent that conventional media spending may yield a poor ROI for some brands, relative to in-store activities such as displays, TPRs and coupons.
This begs the question, are Reynolds Wrap and WD-40 resting on their laurels at the expense of future brand power? Proponents of traditional advertising might argue this is so. I suspect the stewards of these brands have a different view of the meaning of brand equity.
There are many ways to leverage high brand equity and recognition/use by the consumer. The fact that the suppliers of these brands don’t spend big advertising $$ to drive that recognition is not the most valuable element to focus on. The smart retailers understand the value of high usage brands, and use them to build “share of basket” by theme-ing their purchase intent around ancillary products that support that usage. I’m sure you’ve seen Reynolds foil displays in summer that include BBQ sauce and other outdoor cooking impulse purchase products. The same concept holds true for Thanksgiving; another high index for foil sales.
They key is to understand the “core products” purchase indexing and usage occasion, and then build complementary purchases around that theme to increase basket sales. Ask any retailer, and they can give you several examples that support this promotional mindset.
This is really a dangerous subject, and it isn’t an “apples to apples” comparison in terms of media spent in a year to support the Brand.
Retailers must understand that Brands’ shopper loyalty occurs over time. No Brand gains 75% awareness from media against its target user in one year, nor builds a gigantic business in sales and repeat purchases.
This list is baffling for it doesn’t include Coke, Pepsi, any P&G products. What’s up? What you are asking is, what Brands ignite traffic?
Here is where the “partnering” approach of retailer and Brand supplier comes into play to generate added sales from the Brand’s current users and new triers. Hmmmmmmmmmmmmm
Two points:
1) You seem to be conflating trade funds and “advertising”. Ad Age reports that Reynolds Wrap got only $7.5m in support, but Ad Age considers only national advertising. My guess is that Reynolds got A LOT of trade support — so maybe what this survey demonstrates is the role of trade spending in creating/maintaining a brand image.
(Side note: Ad Age is terrible with regard to trade promotion. They don’t understand it at all. An article last week about P&G referenced their $2 billion trade budget in the headline. P&G has sales of $70b — does anybody here really believe that their trade budget is under 3% of sales?)
2) Don’t take interactive surveys seriously. They are not a cross-section of the public.
Reynolds Wrap has the highest brand equity among consumers. Theoretically, that means that there has been consistent advertising for the brand to establish a unified, consistent image that resonates with consumers. This position is not necessarily related to the most money spent; it is related to a consistent image over time with consistent advertising that has rings true with consumers. Spending more advertising on a brand that consumers don’t know would increase awareness. However, the alternative brands will only see increased sales if the advertising or promotion demonstrates how it solves a consumer need better than Reynolds Wrap. The competing brands would be more effective if they tried to establish themselves as doing something new. However, Reynolds Wrap brand execs have apparently been keeping in touch with their consumers so they would know what would happen and would have an opportunity to counterattack.
It is not surprising to me that many of the products with the highest equity with consumers are those that are used quite frequently in the kitchen and home, particularly by women. You relate to what’s helpful to your daily life and duties. (Hershey bars are probably in-home sneak treats.) Such products do not need much promotional support since they are regulars on today’s shopping lists … albeit we do see lots of Heinz Ketchup displays.
When items have a regular “built-in demand” pattern that is rather predictable, why expend extra dollars to try to push more usage when the need for greater usage isn’t there? Food retailers are in business to sell more products and to increase margins. That leads to a constant search to find and sell products that are not currently “essential” to one’s day-to-day usage and consumption patterns.
Warren is right, it’s all about managing the margin. It’s an interesting list if you think about it with some high replenishment items (ketchup and bleach, for instance) and some less frequent purchases (WD 40). And, if by some chance these items became “hot” merchandising offers, what makes anyone think the discounters and mass merchants wouldn’t suddenly promote them, gut the margins and turn the items into commodities?
This study, like so many studies, appears to be distorted. How do we truly measure the strength of a brand? Perhaps the true question is what impact does familiarity have on brand purchasing behavior. This study does not seem to measure the true strength, otherwise we would have seen easily recognizable names like Coke, McDonald’s, Apple, Intel, Ford, Toyota, etc. in these ranks. Instead the study has many subjective measurements, which really don’t appear to rank products based upon familiarity, advertising and their actual sales. This casts some concern about the study, since devices like the iPod are the largest-selling, highest impact devices in the CE industry. Perhaps Mark Twain said it best when he proclaimed, “There are lies, damn lies and statistics…”
It doesn’t pay to leverage someone else’s brand unless you can make money doing it. Supermarkets, like any retailers, need to protect their margins while they drive sales volume. It’s a key challenge, because it’s much easier to drive sales on no-margin items. Furthermore, whether margins are measured on a “net” basis (after allowances, free goods, value of extra dating, etc.) or not, it’s hard to be distinctive promoting well-known brands that almost every competitor carries. And if you do make money doing it, it’s extremely easy for your competitors to copy quickly.
It’s a given that brands do their own research to understand the value that they hold in the eyes of the consumer. I would assume that these brands know that they are held in high regard by the consumer and thereby do not need to spend large budgets on merchandising. If so, the opportunity is for the retail merchants to capitalize on these highly regarded products with effective cross-promotions such as the one mentioned by Al. As we know, some retailers are better than others at such activities.
What also comes to mind is the opportunity to better understand what about these products trigger the strong brand devotion and emotional connections. Based on the insights and good ethnography, uncover what products have similar attributes that the consumer might find useful and use them for behavioral merchandising. Clearly, Kroger is cracking this nut with the dunnhumby resources and approach. I think all of us would love for our grocers to proactively suggest products that they feel we’ll love as much as those that we’ve openly acknowledged.
Silly me, I find this topic a little confusing. Harris is saying that consumers perceive these brands to be the most familiar, distinctive, high-quality, and useful. Right? And then are we asking: can retailers use this strong positive perception of the less-advertised of these brands to increase sales of them? If I see the question clearly, I can’t think of any reason to say no. But what are we really after here? Using these low-advertised brands to promote store traffic? To increase sales (of the same or other brands)? Maybe I’m missing something, but this seems like trying to lift a truck into the air by attaching a little balloon to it — this seems to be such a small detail in an overall situation that has a number of very big weaknesses. Shouldn’t retailers focus on the bigger issues in this area? Just asking.
Bob Houk makes a worthwhile point above. We’ve known for years that CPG marketers spend on average twice as much on trade marketing as they spend on advertising. P&G’s ad budget is $2B – which should lead us to a hand-waving estimate of $4B at least in trade spending (~5% of sales?). I’ve heard from other sources that trade marketing reaches or exceeds 10% of gross revenues at the largest CPG firms. Nobody spends that kind of money without expectation of a positive return.