The Power of Your Brand
By Todd Maute*

How to make your private label brands move off the shelves.

It’s a tough world these days for food retailers. The traditional grocery business is being challenged by alternative retailers, mass merchandisers, club stores, convenience outlets and now, by the encroachment of successful European retailers. Even the Internet has become a factor; Amazon’s decision to sell groceries will undoubtedly be followed by other online retailers, if they can make the model work.

There is, in short, no end in sight to the battle for customer loyalty.

What can hard-pressed supermarket chains do to gain an edge in such a competitive environment? For one thing, they can polish up one of the most effective tools they have - their private label brands.

Retailers featuring the right product mix, on-target merchandising and appealing prices–all packaged well and focused on the consumer - can create a unique value proposition that cannot be easily replicated by competitors down the street. The result can be higher market penetration, which has proven to increase customer loyalty to the store.

Marketing Tool

What does is take to create a successful private label program? First, it requires a recognition that private label is a marketing tool, not just a brand alternative. Second, it takes a focus on the consumer. Third, it requires a clear commitment to delivering quality products.

Retailers own the most powerful marketing medium there is–the stores themselves. Statistics show that more than 70% of purchasing decisions are made in the store, therefore providing the retailer with an edge to drive private labels penetration.

If you think of private labels as a form of media, their power becomes clear.

To illustrate my point, consider a grocery chain with annual sales of $10 billion. Assuming that private label represents 20% of that total, the chain’s private label sales amount to 2 billion–a significant business in its own right. Then, let’s assume an estimated average unit price of $1.00; that translates to 2 billion units sold each year.

A retailer gets three impressions for every unit sold. The first is made on the shelf, stemming largely from the packaging and the merchandising. The second is the reason the consumer bought it, perhaps the price or the fact that it was organic. The third is the product’s value proposition; if the quality is right, the consumer will buy it again.

If you multiply our hypothetical chain’s 2 billion private label units by three, then, you can see that its private label products can make 6 billion separate impressions on a retailer’s customers–creating a powerful marketing tool. Imagine the cost of buying that much media and you can see the power of a successful private label effort.

Overcoming Clutter With Better Design

One very real obstacle to private label success is brand proliferation at the shelves. With shoppers hard-pressed for time, too much variety can become a shopping hindrance for the consumer as opposed to a differentiator for the retailer. Understanding the role a brand plays in a category is critical; many offer little or no value to the shopper and should be eliminated if clutter is to be overcome.

Packaging that focuses on building a brand is critical. A retailer might choose to create a design that tries to mimic a national brand, which is a ‘me-too’ strategy that will earn it the typical 10% to 15% category penetration. A better approach involves creating brands and packaging that are more relevant to shoppers and that help build the retailer’s overall brand image in the category and the marketplace.

Retailers MUST focus on the consumer and better leverage category dynamics, store environment, customer service and banner equity to build a successful private label strategy.

Unfortunately, many chains still have a basic approach to private label-a program that is more product focused than consumer focused. This go-to-market strategy lacks understanding of consumer shopping behavior and will limit private label’s relevance throughout the store.

Some retailers are now realizing that this ‘basic’ approach isn’t driving growth and that their private label is getting disconnected from the consumer and marketplace. A growing number of those chains are setting out to recreate their private label business and doing so successfully.

Revamping a private label program requires a multi-faceted approach. First, retailers must get senior management to endorse a comprehensive long-term brand approach. Then, set mandatory standards for insuring consistent product quality and develop brands that are relevant to today’s consumer. Follow up by educating employees and then leverage the store environment to build the brand - where most purchase decisions are made. To drive continued growth for the brand, create merchandising and pricing strategies by category and conduct more in-store product demonstrations to stimulate trial. And lastly, consider thinning out competition on the shelves. This will lead to overall category growth–not just in private label.

In the end, to create an effective private label program, you MUST have consumer focus, clear thinking and lots of discipline. But the benefits are clear. Those retailers that get it right can offer their customers an array of brands that their shoppers can’t get elsewhere. Add in appealing prices and an improved shopping experience, and you will convert shoppers to loyalists.

*Todd Maute is senior vice president and partner at New York City-based CBX, a strategic branding and design company. He is responsible for directing the expansion of the firm’s retail environment capabilities in marketing, retail brand development, market research and category management. Maute was previously vice president of marketing at food broker Daymon Worldwide. Todd Maute can be reached at Todd@cbx.com.