In marketing, loyalty is everything. Loyalty turns consumers into repeat customers, brand ambassadors and lifelong patrons—all things a brand needs to stay on top for the long haul.
But in the consumer packaged goods industry, loyalty is changing.
As big-box stores, national supermarkets and pharmacy chains have overtaken small neighborhood stores and targeted specific groups of consumers, shoppers have shifted their loyalty away from branded products and onto branded stores. Consumers today are more likely to identify themselves as Target, Kroger or CVS shoppers than buyers of Kraft, Tylenol or Tide.
The result for packaged goods companies is troubling: Loyalty to branded products is down, and private-label sales—those “generic” products manufactured and sold by the stores themselves—are up. Over the past decade, sales of private-label products have increased 40 percent in supermarkets and 96 percent in drug chains.
Historically, private labels perform better during recessions. But this time around, national brands are competing with more than a price point: Generics are using marketing methods that only premium brands have employed in the past, such as TV ads, social media and targeted Web marketing. Previously, these awareness and engagement activities provided an edge to national brands.
Now, they’re fueling lower-price competitors’ success. Today, 80 percent of consumers judge the store brand to be equal to or better than national brands, according to a 2011 study by GfK/Roper for the Private Label Manufacturers’ Association.
It’s created a tough environment for CPG companies. ComScore research shows national brands are bleeding market share in every consumer packaged goods category, from toothpaste to dairy products to apparel. So what’s a national brand to do? How can brands start to recapture customer loyalty and regain ground on their private-label counterparts?
Five words: It’s time to get creative.
Rising Up, and Up
Not so long ago—say, in the 1980s—generic products were pretty, well, generic. The packaging simply read “beer,” “milk,” or “formula” in plain black lettering, and when shelved next to colorful brands like Budweiser, Prairie Farms and Enfamil, they held little appeal other than price. That changed once discount stores and supermarkets recognized the influence of their brand on a growing customer base.
“The core reason private-labeled products are becoming popular is consumers’ relationship with the store—if we know, like and trust Target, we will trust their products as well,” says Larina Kase, a marketing psychologist
and author of Clients, Clients and More Clients: Create an Endless Stream of New Business with the Power of Psychology (McGraw Hill Companies, 2011).
Chain stores then began stamping generics with their brand name—Safeway, Walgreens, Wal-Mart. They expanded the type and number of products they sold and, over time, started treating these “generics” more and more like professional brands, with logo development, strategy, internal brand managers and agency-designed packaging.
Today, private-label products are brands in their own right. They’re no longer generic, but individually named and marketed according to product category.
And there are lots of them. Wal-Mart Stores, Inc., for example, carries dozens of store brands at each of its 9,700 locations worldwide: George for apparel, Equate for pharmacy items and Parent’s Choice for baby products. Jewel-Osco, a Midwest grocer, carries Wild Harvest for organic foods, Culinary Circle for prepared foods, and an entire brand, Stockman & Dakota, just for beef. Each has its own identity, look and target market.
Retail giant Target provides one of the most poignant examples of the evolution from generic label to store-marked packaging to separately branded and marketed product lines. In 2009, Target, which has
1,750 stores nationwide, launched a complete rebranding of its private-label products, most significantly converting much of its CPG line to a new brand, up & up. The store switched out the Target name and bullseye trademark for a colorful arrow and lots of white space.
“We wanted up & up to stand out on our shelves and capture the attention of both our current Target brand guests as well as guests who have never tried the brand,” says Annie Zipfel, director of owned brands for Target. “The name up & up reinforces the core qualities our guests believe about Target—an optimistic brand that’s always looking up.” (Read an expanded Q&A about up & up with Target’s Zipfel at orange.imaginepub.com/target-interview.)
The up & up brand now spans more than 900 products and 45 categories. What’s more interesting, though, is how Target and other stores like it are turning their brands into household names.
Turf Wars
While the ad spend on private-label marketing is not surveyed or measured, there is at least anecdotal evidence that stores are increasingly pushing their own products through marketing. In July 2009, Target’s private labels started showing up in its TV commercials.
One such commercial showed products (next to low price points) solving a mother’s problems throughout her day, from $1 Vitamin Water to $1.99 Orbit gum to—and here’s the point—$3.29 up & up toilet paper.
A year later, Target started airing commercials exclusively on its store-branded products under the “Life’s a moving target” campaign. In one commercial, a husband walks into his kitchen with dozens of jars of barbecue sauce—the wife stands in shock, wondering what she’ll do with all that sauce, when all of a sudden a bag of Market Pantry boneless chicken breasts appears on the screen, next to a price tag of $6. (Market Pantry is Target’s primary private-label food line.)
Walgreens too has launched TV advertisements, as well as print and online banner ads, to push its store-branded health and wellness products. Some of the ads even compare, side by side, prices of national brands vs. the Walgreens brand. All of this, arguably, is to foster loyalty among consumers and connect with them on an emotional level—advancing the idea that spending less on everyday products translates to more money in their pockets.
And generic brands are echoing that mantra on social networks. Jewel’s Wild Harvest brand has more than 13,000 fans on its own Facebook page, which takes informal polls,
provides recipes with Wild Harvest ingredients and answers shoppers’ questions about products. (A recent one: “Where do you obtain your concentrate for your apple juice?”)
Kroger’s Comforts for Baby line, which covers diapers, formula, and other baby items, has its own Facebook page and Twitter feed that are clearly professionally designed and managed. Though each channel has only a few hundred followers so far—the campaign launched in June—the pages link back to a robust microsite with an online community for parents. With a more established social media presence, Wal-Mart’s Parent’s Choice brand has more than 19,000 Facebook fans and nearly 1,000 Twitter followers in addition to its microsite.
Perhaps where store brands have more of an advantage is circulars. While in the past chains collaborated with national brands to showcase their products, stores are now devoting entire spreads to their own brands. In one of Target’s February circulars, for example, an entire page pitted up & up brands next to their nationally branded counterparts—Jergen’s lotion vs. up & up lotion, for example—and noted the cost savings to customers. Target labeled the page “Side by Side Savings.” And circulars are very, very important: 84 percent of shoppers say circulars affect their purchasing decisions, according to a survey by Acosta Sales & Marketing.
Standing Out
If you’re a brand manager or marketing executive, now’s the time to take a deep breath. Yes, private labels are turning into a new breed of competitors and they have clear advantages in pricing, distribution and access to consumers. But national brands have weathered recessions, fads and competition before.
They’ve done so by adapting their own marketing.
“Existing brands are going to have to find a niche—where they want to occupy the minds of consumers—and be very clear with that in their marketing,” says Kase, the marketing psychologist and author.
Here is the strategy to accomplish that.
Go retro. Big brands are still around for a reason, Kase says, and can boost sales by reminding consumers which brand “has been at it” the longest. For many brands, retro packaging and “historical” marketing campaigns have helped rekindle consumers’ feelings about the products their mothers (and grandmothers) used to buy.
Pepsico, for example, recently repackaged its Doritos chips with a 1960s design and introduced Pepsi Throwback, which uses real sugar instead of corn syrup, as the product was made pre-1990s.
In 2009, Pepsi’s market research showed more than 50 percent of people who purchased the retro product bought more than they normally would have, or they were new customers, a Pepsi marketing executive told the Wall Street Journal in May.
Make quality matter. While most shoppers consider the quality of private-label brands to be on the same level as national brands, many CPG companies know that simply isn’t true. To convince consumers quality matters more than price, national brands should invest in creating newer and higher-quality products—and emphasize how much time and effort goes into product development in their marketing, says Jasmine Bina, owner of public-relations agency JB Communications in Los Angeles.
“I’m an Apple person, and though their products are more expensive [than other electronics manufacturers], they’re frankly more superior,” says Bina, whose professional experience includes managing brands for national CPG lines. “Apple’s best marketing is their crazy, die-hard fans.”
Be the “category captain.” Private labels may reach more consumers by spanning so many products—900 products at Target fall under the up & up label—but in doing so they dilute the message of quality.National brands, on the other hand, can own a niche. “Huggies needs to show how they’re purposely not trying to do 5 million other things, because they want to be the best at what they do,” says Kase. Adds Bina, “It’s about
owning your territory and never letting anyone get near—private labels that mainly compete on price have little recourse if you approach it that way.”
Offer the widest variety of products within your category. This is a strategy employed by Campbell Soup. “In the soup aisle, Campbell is clearly the category captain—no other soup maker offers such a wide array of products,” says John Faulkner, director of brand communications for Campbell Soup Co. “[Stores] offer their shoppers a much more limited set of soups that compete primarily on price. Given the recent economic condition, there is a lot of price sensitivity among consumers, … but our answer is to provide greater variety, higher quality and added value.”
Make up consumers’ minds before they get to the store. According to Matthew Egol, partner at consulting firm Booz & Co. in New York City, shoppers spend about 30 to 40 minutes before each trip engaged in activities like looking for deals, visiting websites, social media and reading e-mails. That means it’s more important than ever to connect with consumers before they step foot in the store (and are convinced by in-store marketing to purchase the store brand).
How do you do that? Provide valuable content. “Social influence is really important—offer testimonials, endorsements, stories, problem-solvers, always showcasing people who fit your target consumer,” Kase says.
Doing so, of course, creates loyalty, which is achievable in this economy and beyond.
“I think things will swing back again,” Bina says. “It might take longer this time, but people have short-term memories. People will look again to premium brands and the emotional value that comes with them.”