Retailers are shifting some of their conventional marketing spend–away from media to “shopper marketing.” This trend has been developing for while now, and lately it seems to be coming to the fore more and more.
Reason? According to a recent survey by Deloitte Consulting and the Grocery Manufacturers’ Association, shopper marketing gets “higher marks for return on investment than most conventional media”. This data was reported in an Advertising Age article titled, Brand Giants Weakened as Retailers Get Savvier.
In short, retailers are now devoting more time, attention and resources to developing their own store brands than ever before. In essence, they’re competing with CPG manufacturers’ national brands in a more significant manner. By hiring marketing talent away from CPG companies, retailers are fully on board brand management, dedicated advertising and sophisticated packaging for their private label brands now.
While store brands always competed with national brands in the past, there’s a huge difference now. Gone are the generic-looking products relegated to bottom shelves in the supermarket. Game on: store brands are working to appeal to consumers on many levels, whereas they used to be only price driven.
Now tools like Nielsen’s Prism that measure media and sales impact of in-store programs can be used to measure store brands as well as national brands. Traditional focus groups are being used by dedicated retail marketers to assess current store brand offerings and make changes to them as necessary. Ditto for adding new products to assortments.
Retailers are monitoring how consumers are experiencing their store environments and every touch point, making changes as necessary to improve customer experiences within their stores. Let’s face it: since the retailer is the developer and marketer for new products now, and they have ready-made environments for testing, new products can be brought to market and slotted fairly quickly if customer response is strong.
The benefits for retailers:
* The ability to truly create branded environments.
* A better understanding of the customer and how to improve the customer experience.
* A quantum shift from being purely distribution outlets to becoming marketers of products, and gaining significant expertise that enables them to innovate.
* By increasing private label sales share, this is one of the best ways to increase profitability.
These developments beg the question: where does this leave consumer product manufacturers? Perhaps, having to stay on their toes more, by sharpening their own marketing skills, and even their pencils a bit. After all, retailers are directly competing more and more for market and mindshare among consumers with national brands. It might be a signal that CPG companies will need to become more price competitive themselves, as a result.
Who’s the ultimate beneficiary of this? The consumer. Right?
Questions:
* How do you feel about store brands?
* Do you have favorite private label brands? If so, what about specific store brands appeals to you?
* Do you ever recommend store brands to friends and family?
I’d love to hear from you.
Ted, I think Trader Joes and Costco are probably two of the best examples of companies who are aggressively building out their own store brands. Whereas at Costco, sometimes Kirkland brands are side by side with big CPG names, Trader Joes usually gives you only one option – their brand. That said, some people probably go out of their way to buy the TJ’s or Kirkland brands and not just because of price considerations…
Ted,
Your post is timely and relevant to all of us trying to save a buck during these difficult times. Stop & Shop is now offering organic products under their brand name at less than traditional organic usually costs. There marketing campaign is in full swing, focused on now you can buy good food for less. My wife and I love it.
Thanks for adding some great comments, Paul. Agreed: the wholesale clubs are great examples of retailers that are building value through their store brands. Trader Joe’s is another strong example, and one that isn’t afraid to push private label in a very big way. As you rightfully point out: Trader Joe offers high quality selections to the consumer for their money. Many customers see TJ as a lower-priced but value-laden option to shopping at Whole Foods, albeit selections are more limited. Thanks, Paul, for weighing in here.
Yes, Lewis, I had noted those measures taken by Stop & Shop. It’s a great feeling to be able to buy nutritious organics at reduced cost, isn’t it?
In fact, S&S’s parent company, Ahold, has announced that it will add a designation of healthy food choice on packaging across all categories in its chains in the near future, as well. That represents additional value for the customer, as well. Thanks for adding your thoughts, Lewis. Always appreciated.
Ted,
Your article is very pertinent. I think CPG’s are definitely rushing to figure out how to compete with store brands that are increasing in quality and visual appeal in the current economy where price leads.
However, I do want to note that shopper marketing is more about using various media to engage the shopper in the store environment than it is about developing private labels. CPG’s and private labels would be wise to build stronger shopper marketing campaigns as evidenced by the GMA study and Nielsen’s investment in a new measurement system.
Alex,
Thank you for making these great observations. You’re right: shopper marketing has been extensively used to improve shoppers’ experiences within retail environments. Having said that, retailers have a keen interest in building their own brands, and they are using their observations as well as new campaigns to do just that. It’s an important development and I expect it will be expanded upon. Thanks very much for weighing in, Alex.
These companies are also using their “store brands” to help differentiate themselves from their retailer competitors. Lowe’s Home Improvement for example has spent a great deal of time, effort and money to develop their brands (Portfolio lighting and Kobalt tools, for example) in an effort to keep their customers coming back to the blue store instead of going to the orange store. In doing so, they are not merely retailers because they now have a vested interest in the manufacturing quality of the products on which they put their brand names, throwing them into the realm of product and brand management.
In some cases, the consumer doesn’t even realize the brand they are buying is actually owned by the retailer. They do know that in order to get the porch light that matches or coordinates with their Portfolio brand carriage light, they HAVE to go back to Lowe’s.
Great points, Julie, and I thank you for making so many solid observations. You’re absolutely right: private label brands have the power to build overall store brand images and that’s why so many retailers are engaging in building shopper marketing profiles now. The interesting thing is, that while numerous large retail chains are conducting shopper marketing and launching private labels, so are small chains and even independents. Every retailer has the power to carve out its own niche by doing this. Thanks, Julie, for weighing in. I appreciate it.
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I think, though I might be wrong, that store brand used to be equated with lower quality. Whether it was really lower quality is another question.
Now we know that often the store brand is just a private label of a brand we know and trust and is of equal quality often for a better price.
I am not a CFG expert but that is my impression of the shift in thinking. I think a lot of shoppers think “better value” not “cheap knock off of the real thing.”
Ted,
Good thoughts. I wonder though how activities at the shopper level are indicative or corollaries of shifting trends in the market at large? Is this actually hidden, time accelerated lead nurturing going on in the aisles of the grocery store? Has increased consumerization of product driven CPG, private labels, and store brands to such a level playing field that now this is differentiation? How many different market segments is this at play in, and what are the lessons. I think I see an entire other MP blog post here… Thanks Ted!
Absolutely right, Neil. Store brands used to be perceived as being lower in quality; and in fact, some of them were. Retailers have worked hard to improve quality, offer better assortments and respond to consumers’ requests and needs. In doing so, they have slowly built trust in their private label brands. That, in turn, has built the image of overall stores’brands in the minds of consumers. By focusing on the marketing aspects of their store brands, retailers are competing with consumer product manufacturers more strongly and effectively than ever before. The manufacturers, whose national brands are running for “election” with consumers every day vs the store brands they also manufacture, are concerned about the ascendancy of retailer brands. It will be interesting to see how they respond/counter the rise of store brands in the near future.
Thanks for weighing in, Neil. I appreciate your input, as always.