01Mar2011
Brand Your Private Label!
Shielding isn’t the best way for you to grow equity for your private label brands or your stores. Here’s why. By Craig Espelien.
Which is the better way to promote your private label brands: shielding, or branding?
For our purposes here, let’s call “shielding” the protection of store brands’ price image by reducing their shelf prices whenever a like item from a national brand goes on sale. Some say the like item should be placed alongside the advertised national brand in the circular and on display.
We’ll call “branding” the treatment of the private brand as a stand-alone with its own structured marketing and merchandising platform. In other words, it doesn’t rely on the national brand to dictate promotional windows. (Okay — I am a proponent of pre-empting the brand by putting the private brand in the ad and on display a week before the major national brand will appear.)
While neither approach is right or wrong, let’s explore how consumers shop and the impact each choice has on their purchase patterns.
SAME STORE SALES
Like it or not, the main success measure for retailers today is same-store sales — comparable sales for stores open at least a year. Gains here are driven primarily by increased store traffic and increased basket size. Given that, shielding is not the best approach for two reasons:
First, shielding presents the consumer with a choice of buying either the national brand or the private brand. Consumers aren’t likely to increase their basket size by buying one of each. It’s been proven that consumers expand basket size when ad and display options center around multi-purchase solutions.
For this reason, having private brand vegetables displayed with a center-of-plate protein will do more to boost basket size than a side-by-side display of national brand and private brand vegetables. (I saw an ad last week where the retailer was offering a national brand and private brand vegetable for the same price on sale, both in the circular.)
Second, shielding tends to push consumers to the lowest priced item in a category, hurting profitability. This typically happens when a brand offers an allowance to be in the ad and/or on display. By reducing the cost of the private brand to the consumer, you might be pushing shoppers to the lowest-margin item and not enhancing the overall image of the store or its private brand.
EMOTIONALLY CONNECTING
A basic goal of branding is the creation of an emotional attachment to the brand with the consumer, transcending item/price and delivers value. One of the best ways to do this is to give the consumer permission to mix their basket and meals with both brands and private brands. While this sounds obvious, this is not necessarily a focus for the retailer. Typically, the merchandising efforts for private brands are not blended with what is happening with the brands. This is similar to how circulars are still largely set up by department rather than by how consumers shop for meal solutions or eating occasions.
In order to expand this “emotional” connection, a retailer’s private brand program needs to connect on a level other than simply price. Unfortunately, the “shielding” concept focuses only on the value piece of the puzzle. Consumers need to see the brand as standing on its own as part of their overall need set — something that solves a variety of problems for them, including being a part of their meal solution choices. This is especially true with brands that appear in multiple categories (where most mid-price private brands play). Consumers make this connection with the brand (although perhaps not as a conscious thought) as they perceive the value choice in different ways across the store. An overall “brand marketing” approach for the retailer’s private brand can reinforce the value concept of the store while letting the “brand” gain traction for something other than just price. Private brand saltine crackers at regular price displayed next to a branded soup offering at a great value will both fill the cart and enhance the overall value perception, while potentially building profit — a trifecta for the store!
BUILDING LOYALTY
Just like any other merchandising strategy or tactic, branding or shielding should be used to help create loyal consumers that spend more of their food dollar in your stores. In my opinion, with store brands so top-of-mind with consumers today, the branding approach will serve this function better. Consumers are aware of the brand, and they are likely aware of the “value” component that retail brands offer. Now they need to trust that these products should be part of everything they buy.
Perhaps the best way to look at the branding side is to use it to expand the number of categories where consumers give themselves permission to purchase private brands. With their minds open to new value alternatives, expanding consumers’ understanding of how broad the private brand line is will help them expand their value perception of your stores. This increases the equity they have in your stores, and they’re likely to spend more there. Retailers and their private brand programs both win big here — helping consumers see their store as their destination of choice.
While each approach can work, in today’s market space with a much more value-savvy consumer, the branding approach to marketing and merchandising will provide more long term benefit to consumers. It will help them attach to the brand (and hence the store) while expanding their possibility list of categories where private brands are an acceptable alternative. All this will occur without negatively impacting profit or the quality perception of the brand. Is this the right path for every store or chain? Perhaps not — but it is the right path for the consumer and for the long-term brand strength of a retailer’s private brand program.
Craig Espelien ( cespelien@gmail.com ) is an independent consultant with domestic and international expertise in all facets of consumer goods. He has held senior executive positions at Crossmark and Supervalu.
