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Unit 13: Private Label Brands

The key to successful marketing management for today’s retailers is to understand the contribution Notes
and role of their proprietary or “own” brands in the long-term business strategy and marketing
mix of the retail store and consider both the supply side and the demand side of the equation.
Effective category management can enable retailers to solidify and optimize supply-chain
relationships. Strategic brand management goes hand in hand with these endeavors to establish
sustainable points of difference in each aisle and segment within the store. It also spurs decisions
about how to appropriately define the retailer’s “own” brand portfolio in order to galvanize
consumers to connect and reconnect with its franchise in a compelling manner.

13.1 Historical Marketplace Dynamics

Private label brands were traditionally defined as generic product offerings that competed with
their national brand counterparts by means of a price-value proposition. Often the lower priced
alternative to the “real” thing, private label or store brands carried the stigma of inferior quality
and therefore inspired less trust and confidence. Yet, they still grew and prospered by providing
consumers lower priced options for what was often a low involvement purchase decision.
Retailers continued to push more and more private label products into different categories of
the marketplace because they represented high margins and the promise of profitability with
little to no marketing effort.
Over the years, this proliferation of private label offerings perpetuated a myopic approach to
private label brand management. Previously successful yet, currently flailing private label
brands clued today’s retailer into some important pitfalls to avoid in proprietary brand portfolio
management. Most importantly, these examples underscore a need for private label marketers
to be cognizant of how their initiatives play a role in the overall marketing mix and the
long-term definition and impact of their portfolio.
Historically, private label retailers appreciated that it was important to tout certain category
and product benefits to incite consumers to purchase. Yet, rather than look at the consumer
directly to understand his brand and product selection criteria, they took their cues from the
national brand competitors that had already identified and manifested some of the category’s
salient attributes and benefits through advertising, packaging and other brand messaging. The
result was often a series of “me-too” private label positioning that strived to emulate the
category leader.
This approach to private label management had resounding impacts on a category as a whole as
well as the individual product offerings within it. By commoditising their private label products,
retailers undermined and commoditised a category’s overall potential. They adopted the role of
the omnipresent, cheaper choice and often forced branded competition to lower their prices to
compete, thereby erasing margins for national products and private label alike. It also created
missed opportunities for all category players (manufacturers, suppliers or retailers), since they
were not considering latent or untapped consumer needs that their category had the ability to
fulfill.

Self Assessment

State whether the following statements are true or false:
1. Private Brands generally had high quality products.
2. By commoditising their private label products, retailers undermined and commoditised a
category’s overall potential

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