Posted by: Anthem | Date added: Mon 07 Mar 2011
It wasn’t long ago that Private Brands (PB) were considered to be the ‘poor relation’ to well known brands, but a prolonged double dip recession has seen further erosion of the value gap between brands & PBs
So why have Own Label Products proved so popular?
The economic downturn has led consumers to be far more price conscious, which has resulted in more consumers purchasing PBs.
PBs traditionally worked because they mimicked their brand counterparts (in format, quality, name, graphic design, variants, sizes etc) and undercut on price. Traditionally retailers had many ‘labels’ which were built independently in silos and had limited to no marketing support. Recently, driven predominantly by cost and need to streamline processes, we have seen retailers steadily recognise the need to create a more manageable portfolio. The first step undertaken by retailers was to establish a price tier portfolio which had a heavy dependency on the ‘me too’ strategy. The use of a ‘good, better, best’ tier system then maximises the consumer base reach and minimises the PB gap in comparison to branded products.
However it’s not just consumers who are driving the growth of private brands. The big retailers are going head to head with their PB offer as leverage for market share which in turn improves PB quality, choice and availability.
Big brands are having to compete with own label products on both quality and price.
The rise in popularity of own brands, coupled with portfolio optimisation and improved product quality means big brand products have to work harder to compete.
41% of respondents in a recent Mintel report admitted that the recession has made them think about whether brands are worth paying more for. However it is important to note that whilst some consumers have down traded to OLPs this isn’t necessarily because they believe that branded products do not offer better quality. It’s more they believe the quality of the own label product is good enough and therefore represents better value.
So does this indicate the demise of big brands?
The recession has created a more level playing field, but it’s clear that consumers continue to trade up when the opportunity arises. That’s because consumer purchasing behaviour is complex and takes into account much more than functional benefits and price to include:-
• Heritage – the brand is recognised, accepted, trusted and considered part of the family.
• Affinity – the consumer shares values with the brand.
• Kudos – It’s ahead of trend and has the right advocates.
• Uniqueness – it’s different, no-one else has done this yet.
And it’s here that brands have the advantage.
What PBs cannot compete with is the financial investment brands have made to create a connection with the consumer that goes beyond the tangible. The smaller marketing and technological budgets of PBs are no match in comparison
For PBs to close the gap further on brands they have to give shoppers more reason to buy than just being a cheaper imitation. Retailers are beginning to recognising that their portfolios of PBs have the potential to be strong revenue generators and attract new customers if treated and marketed more closely to that of national brands. Acting like a national brand will and can build equity and create destinations. In addition retailers have the distinct ability to launch trend-based brands that may have a shorter life span, but that can grab top and bottom line growth for the organisation. The PB market is showing some movement toward promotions, cause marketing and sustainability initiatives but to achieve parity they must go further and act like a brand, lead and not follow.
Recession or no recession what is clear is that today’s consumer still want the latest, must have product and they want them now.
With this endless race ahead, brands are still in the best position to constantly evolve and stay ahead. But they must ensure that enhancements to their brands actually add value and make them fitter, leaner and faster if they’re not to be caught by PB.
Article by: David Timothy - Senior Account Director Anthem Worldwide
Image: © Monkey Business at Fotolia
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