The Changing Face of Private Labels

The key to success for today’s retailers is to understand the contribution and role of their private labels in the long-term business strategy and marketing mix of the retail store

By Sandeep Puri and Dr Kalyan De

Private label (PL) brands were traditionally defined as `me-too` products that competed with their national brand counterparts by means of a price-value proposition. Often the cheap alternative to the “real” thing, PLbrands carried the stigma of inferior quality and therefore, inspired less trust and confidence among customers. But over the last 3-4 years, private label branding has evolved significantly. The term does not adequately capture the extent to which PLs have progressed with time. Today`s retail marketers are managing their store brands with the same blend of care and innovation as done by the manufacturers of national brands. Many retailers have been redeeming themselves from the traditional definition of private label marketing as being the poor cousin of national brand, and, in doing so, opening up huge opportunities for private label branding all over the world. These opportunities necessitate the adoption of different marketing and branding activities to support and propel the growth of PL brands.

There is a need for retailers to have strategic brand management for P Ls to establish viable points of difference in each aisle and segment within the retail store. Retailers have started to diversify their offering beyond the expected, enabling them to compete more effectively in existing product categories and venture into new and different product categories that have traditionally been conquered by national brand players. In many cases, PL labels have out-shined the national brand’s capacity to deliver on visibility, customer interest, involvement, loyalty and appeal. This epitomizes a significant departure from the past: where there is an acknowledgment that today’s private labels have the ability to transcend the stigma of traditional store brands, creating unique, resounding benefit propositions for customers and retail marketers.

In this highly competitive retail scenario, with lots of pressure on the bottom line, retailers are beginning to identify that they cannot simply rely on national branded products to draw customers into their stores and sustain loyalty with good returns on investment. A private label strategy can enhance category profitability, increase the negotiation power of the retailer, enable better channel efficiency, and foster customer loyalty. In India there is an increasing trend towards acceptance of private label brands, and thus their penetration is on the rise especially in the Apparel, Consumer Durables, Home Care and FMCG segments. The private label market in India is estimated to be around Rs 1200-1500 crores. Overall, in India, private label brands constitute 10-12 percent of the organized retail product mix.

Paradigm shift in private label branding
Retailers have begun to describe their PLs as their “future” brands because these exclusive offerings are tools that represent momentous power and potential for the retailers in the coming future. Successful retail marketers have powerful private labels that they control and manage, and there is strong potential to gain bigger and better rewards by taking a closer look at the way they position these brand offerings in the eyes of customers in each product category. Private labels are articulated and developed in a way that they not only fit with the brand promise of the retailer, but if effective, they also enhance the overall retail brand proposition to keep customers coming back for more.
Many successful retailers in the west like TESCO, Marks & Spencer’s, and Trader Joe’s have created a new industry standard in their realm of influence and activity in private label branding. Their situations and strategies start to lend insight into a more compelling definition for private labels, and more importantly, a sense of how to optimize success as an exclusive, proprietary brand.

Way forward for PL marketers
We have discussed with the managers of private labels and national brands and suggest the following strategies to retailers to have a successful private labeled future:

Develop a strong private labels proposition
Private label brand promise should be defined as a holistic representation of resounding functional and emotional attributes and benefits to fulfill a salient customer need. By setting a differentiated value proposition, an effective private label marketer considers the approach that national brands practice to project a holistic benefit proposition. This approach can be very successful as it demonstrates a commitment to offer multiple options and varieties to customers with distinct attributes, benefits and price points.

Private labels proposition should start with the needs that are important to customers and offers a strong point of difference from other brands. This furthers the private label brand promise that has been informed by the competitors, but is obviously not a “me-too” communication.

Point of parities (POPs) and points of differentiations (PODs) between Private Labels and National Brands
POPs and PODs with the national brand are critical consideration for PL branding. Once the brand proposition of a particular PL is established in the mind of the customers, the brand architecture strategy can enable the retail marketers to promote this brand promise at the retail store level in order to create a sense of familiarity, recognition and trust among the customers.

Also the retailer can put its private labels in a broader set of aisles than national brands. This make it even more important to differentiate the private labels attributes and benefits on an aisle, category and product basis than the national brands. Good brand architecture and design expression of private label can help the prospective customer to navigate the breadth of the private label brand portfolio, and understand its depth of expertise in different areas of the retail store.

Packaging linked to quality
Many researchers have found that customers tend to link quality with the packaging. They consider good packaging as the first visible point of quality. Thus it becomes necessary for the retailers to consider how package design, nomenclature and product strategy can boost and support the sales of a PL. Successful marketing plans for PL often go hand in hand with packaging design and branding initiatives. These help to visualize and verbalize what the PL stands for, and demonstrate its POPS and PODs in various product categories.

Product quality and packaging are a necessary functional support for PL branding. Yet, decorative packaging and fancy brand names of PL are not enough for today’s sophisticated customers. Good packaging may be the reason that a customer picks a specific PL off the shelf, but if the product does not live up to his or her expectations in terms of quality or taste, then the customer may be less inclined to repurchase. By undertaking quality assessments, the retailer is able to ensure that its products live up to customers’ expectations, and that negative consumption experiences do not weaken the brand proposition.

Leverage and own the customer connection
Marketers of PL can often transcend specific product categories because they use a customer focus rather than a product focus as their brand foundation. A successful PL has the ability to own the customer connection. It has the capacity to strike a chord with customers in multiple product categories. PLs have the potential to be magnets that draw customers into a particular retail store over another. We can take examples from Big Bazaar’s success with its private labels like Tasty Treat, Care Mate and EasyDay’s success with its private labels like Mainstays, Great Value. These PLs inspire such trustworthiness and commitment from their loyal customers that Big Bazaar is their pre-decided retail store whenever they think of buying something in these categories.

The exclusive brands may be the reason that helps in getting the customers to a particular retailer, but once they are there, the retailer also gets the opportunity to encourage them to spend more on supplementary or impulse purchases, and this increases the share of wallet from a particular customer through up-selling or cross selling. Thus PLs not only reinforce enduring loyalty and positive feelings for the retail brand, but also enable the retailer to capture a more significant share of the customers’ wallet, heart, mind and lifestyle in comparison to national brands.

Tangibles in the store
Retail marketers are becoming more conscious about how the different aspects of their marketing mix work together to create a strong, consistent brand message to the customers. By developing store ambience, in-store messaging like signage, merchandising systems, and packaging as well as external messaging like catalogues and advertising in a harmonious manner, the retailer can create an enduring impression in-store, at shelf, at the time of purchase, and during usage.

Collaborative partnerships with manufacturers / suppliers of PLs
Develop a collaborative relationship with manufacturers and/or suppliers to strengthen the relationships for better and innovative private labels. Collaborative category management is critical for a retailer to realize its “private label” brand goals and aspirations.

There should be collaboration in understanding and deciding how to augment the product lines and SKUs that will increase the PL category as a whole, and determine plans and shelving scenarios to demonstrate the high degree of category interest and excitement among the customers. The retailer and trade partnership will become more about cooperation, and less about the retailer negotiating with the manufacturer or supplier on price. By following this strategy, both the parties can solidify their partnership, and ensure that the PL category as a whole remains profitable and appealing to the customer.

Sandeep Puri is Faculty in Marketing at IMT, Ghaziabad and Dr Kalyan De is Associate Professor at L M Thapar School of Management, Thapar University, Patiala