A compelling marketing article appeared in Brandweek titled “The Story of O” that was published on September 7th. It’s terrific because it also enables me to follow up on my recent post dubbed “Sharing the Wealth.”
The article centers on California supermarket chain Safeway’s O Organics private label food line, which generated $300 million in volume in 2007 and is expected to bring in $400 million this year. Safeway’s Eating Right private label line which debuted last spring, is expected to generate $200 million in sales this year, as well.
As you may recall in “Sharing the Wealth,” Safeway plans on offering supermarket chains across the country, including regional competitors, opportunities to purchase and distribute these brands, as well.
“We think we’ve hit on something magical with consumers,” said James White, SVP-Consumer Brands. Why magical? First of all, Safeway has successfully repositioned its “vast array of private label products under a unified brand message–one compelling enough for discriminating shoppers.. .not to mention retail competitors.. setting an example for the entire industry.” Hmmm… sounds like value to me.
Let’s face it: while all major retailers continue to position private label lines, some are doing it more successfully than others. In a nutshell: improving quality, packaging and advertising has been key to Safeway’s private label success. Ergo, it competes with national brands head to head quite favorably. Hmmm… sounds like value to me.
Moreover, Safeway President Mike Minasi, acknowledging consumers “are taking more visits to different types of outlets to fill their shopping needs,” is intent on changing that. “Our strategy is to build brand solutions so they no longer have to do that.” Hmm… sounds like value to me.
By operating like a CPG company within a retail environment, Safeway has taken a unique approach to supporting its private label lines by turning to extensive consumer research capabilities. Safeway also taps outside creative consultancies to create sophisticated package designs and agencies to develop consumer advertising.
Having a CPG mentality enabled Safeway to consolidate 70 store brands into 10 super brands instead. Sounds like a smart idea.
Here’s what Safeway learned in its research:
- When the store’s healthier frozen entrees’ flavor profiles were improved, consumers responded favorably.
- When packaging was redesigned to focus consumer attention on key attributes they specifically cared about: “low fat,” “high fiber” or “whole grain,” consumers responded.
- When packaging and advertising positioned organic offerings close to the point of origin: the earth and the farm; focused on the simple goodness of nature, or shown in their purest form, and the complicated aspects of “organic” were simply explained, consumers responded.
But here’s the most important point in all of this: while Safeway acknowledges the tremendous growth in private label food–these products account for one-fifth of all grocery sales at present and will continue to grow in a challenging economy–it isn’t just about price. Safeway: “The key to success in any economy, is giving customers the kinds of products and brands they crave.” Hmmm… sounds like value to me.
So, value in brands, even in a tough economy, isn’t just about price is it?
Questions:
- Why do so many marketers seem to equate “value” uniquely with price structures?
- Do you as a consumer equate “value” merely with price? If not, what other motivators besides price connote value to you?
- Which brands–that are not price driven–represent value to you, and why?
- Which “values” motivate your purchase decisions most?
I’d love to hear from you.
It seems to me, with so many dubious claims regarding what is truly organic, in addition to packaging, messaging and flavors, people are clamoring for a trusted brand. O gives them that.
You’re right, Paul. There is confusion at times about organic claims on food products. There are myriad certifiers with different definitions of “organic”, for one thing. This is another good reason for brands to be honest, transparent and authentic, isn’t it? Then, when they claim they have organic offerings, they are trusted.
Thanks for weighing in, Paul. I appreciate it.
Ted,
I don’t and have never related to value = price. Perhaps that has to do with coming out of the publishing world and then Starbucks, where value = brand, quality, experience, and meeting wants, needs and desires.
Like so much else in business, value is defined by the consumer not the company. For those who shop discount, value = price. For those who shop brand, value = perceived quality and experience.
The bottom line: Know your customer.
Thanks for your insights, Lewis. They’re always on the money and much appreciated. Yes, “value” does equate to much more than price. . .if only marketers understood that. In a challenging economy like this one, the first thought is to cheapen quality and price. What does that do to customer “value” perception?
Here’s the way I think of Value:
Value is a function of Quality and Price….and
Quality is a function of Benefits.
To me, marketers tend to you use Value and Quality so much that they mean nothing and consumers now use them to mean anything they want. If marketers want to understand what these words really mean, they should ask consumers. If they ask the right questions, they will likely find that consumers mean something other than value and quality..they are actually using them as words to indicate the benefits they are looking for.
Anyway, this is just my humble opinion.
* Why do so many marketers seem to equate “value” uniquely with price structures?
Because, all things being equal, people assume high price = high quality. It is true some of the time; other times it is not true. But since we cannot possibly sort out the information in the market, we HAVE to rely on cues provided by marketers. Price is one. Otherwise, shopping would be a full-time job.
* Do you as a consumer equate “value” merely with price? If not, what other motivators besides price connote value to you?
Not merely but I must confess that if presented with a product with with a well written story of health and well being against a cheaper product with no story, well, I pick the more expensive. I suspect I pick the better product much of the time but I simply do not have time to be sure. I do read labels, though.
* Which brands–that are not price driven–represent value to you, and why?
Amy’s dinners seem reasonably priced, quality, and good for a divorced guy (is that a bachelor or is a bachelor or is a bachelor someone who has never been married?) like me who can only cook four things so falls back on frozen food more than I like to admit.
* Which “values” motivate your purchase decisions most?
Healthy. Environmentally sound though I suppose frozen dinners do not really support this.
BTW, grocery shopping seems to me to be a classic case of asymetric information — the seller knows more than the buyer.
We rely heavily on trust when we walk into a grocery store.
When that trust is breached in minor ways it merely hurts a brands’ reputation. We find out that something calling itself healthy is not not so healthy.
When trust is breached in major ways, people die. Case in point: an industrial chemical intentionally added to milk from China to boost its protein level test results thus increasing the perceived value and real price of the product on the market.
The consumer trusted that the milk was not going to have added chemicals to make their kids very, very sick (the long term effects are not known yet for those who consumed this milk) or, in some cases, kill them. To breach that sort of trust is beyond the pale. Inexcusable.
Allen,
“If they ask the right questions, they will likely find that consumers mean something other than value and quality..they are actually using them as words to indicate the benefits they are looking for.” I agree. When it comes to consumer products, value goes well beyond a correlation of price to quality. . .or price comparisons among products in a specific category. It also goes beyond features and benefits when so many category products are so similar, it’s often hard to distinguish much of a difference among them.
The intangibles of brands are the real determinants of value, I believe. For example: there are many brands that offer quality motorcycles. Many of these brands offer various price points and are price competitive. So why is it that the brand Harley Davidson has such meaning among cyclists? What are the intangibles that translate to consumer value in a brand like that? There are emotional connections made here, that transcend everything else.
Thanks for weighing in on my post, Allen. I appreciate it.
Neil,
Thanks for taking the time to answer the questions I’ve posed here. I appreciate it. There are times when we’re willing to pay more for products that have a perceived higher value–if that value correlates to the things we ourselves value. To your point: quality is important, but so are healthy and environmentally sound options to you and to many other consumers like you.
Amy’s is an interesting brand, Neil. It was founded by a husband and wife team in California who are vegetarians and who could not find frozen foods that were healthy, meat-free and containing as many organic ingredients as possible in the marketplace. They saw a void and they filled it, naming their brand after their newborn daughter, Amy. Many consumers are devotees of Amy’s because they identify with the values of the company. That supersedes price, doesn’t it?
Ted, yes it supersedes price if I think I am getting a good value.
I am paying for a quality product and the story helps sell the idea that it is a quality product so, yes, I will pay a premium only insofar as I perceive it to be worth it.
But I study the ingredients and so on and do try and compare brands. Yes, I admit it, I am something of an oficiando of frozen dinners.
What’d I’d really like to do is learn to cook as that really jives with my values. Throw away packaged food is a stop gap solution for a guy who can only cook four things all of which I am bored with or save to cook if visiting friends and it is my turn.
I need to get moving with operation “Learn to Cook.” People tell me you turn on that stove or oven thing and just do it. They tell me you follow these formulas called recipes. They say the output beats frozen dinners and take out. I will have to look into getting one of these books they speak of. It sounds a promising way to get many hot, nutritious meals.
In the mean time, Mr. Microwave is here to help me…
Too funny, Neil. There’s no doubt about it: home-cooked meals are best. We all know that if we select fresh, good ingredients we can whip up the healthiest meals. But let’s face it: we’re all pressed for time these days and not everyone is Julia Child, so we all choose convenience foods; some of us more than others. Given that we’re going to do that, some choices are far healthier than others. Again: it’s really important that consumers learn all they can about nutrition so we can all make informed choices.
Kudos to you and Mr. Microwave, Neil. You have the right idea here. . .
Yes, my microwave is a Cuisinart and makes for a very tidy roommate. My roommate does almost all the cooking, which is great. While the cleanup has fallen to me, I have found it to be very easy.