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Differentiation Opportunities May Lay in Private Brands
Private brands have long been a staple of food and general merchandise retailers’ strategy. They’ve come a long way from the generic “acme-esque” packaging that was prevalent up until the 80s. Now many private brands (also known as proprietary or owned products) may be perceived as higher quality or more aligned with customer values than national brands. At CLUTCH, we believe this evolution has created new opportunities for retailers in both food and agriculture who value differentiation and have the organizational infrastructure to support these private brands.
Private brands provide a range of benefits to retailers, from increased purchases to enhanced margins. The offering typically seeks to emulate the leading national brand, often referred to as National Brand Equivalent (NBE). A successful NBE tier can deliver incremental margins while helping the retailer hold the line on price increases and encourage trade support from national brand partners. As the general reputation for private brands has improved, retailers can use them to differentiate from the competition by providing unique product varieties or added attributes. For example, many retailers have adopted an NBE+ strategy – like offering a non-GMO alternative where the national brand doesn’t – which can drive increased purchases.
It’s not unusual for private brands to provide as much as 15 additional margin points to a retailer versus the national brand competitor. Given the incremental margin, it can be tempting for retailers to quickly follow a national brand’s success; however, without enough time passed, the national brand can be undermined, and innovation can potentially be stifled.
There are two schools of thought in NBE branding:
- The product and store both share the store brand.
- The product brand is distinct from the store brand.
Historically, retailers branded their owned products with the same name as their stores. Today many are separating the two to differentiate between product and store as a way to create new branding opportunities, and also to insulate the store from any customer satisfaction or product recall issues related to the product.
Retailers are also looking at multiple tiers of product choices. This can help add variety to enhance customer choice; where premium tiers can include additional innovations or attributes to reinforce the retailer’s brand, and economy tiers can offer value-focused solutions.
The underlying pro and con of private brands are this: Strategically deploying private brands can help retailers drive incremental sales and margin but can strain relationships with branded manufacturers. Private brands can also enhance the reputation of the store itself or be used to deliver unique equities to consumers. Weigh these carefully before investing in a private brand strategy for your business.
Looking to add private brands to your portfolio, or have a private brand that needs some fresh positioning? Reach out to CLUTCH so we can help you take a page from the consumer packaged goods marketing playbook and apply it to your business.
CLUTCH is a hybrid consultancy and agency focused on helping B2B businesses find and realize their peak potential. As business acceleration experts, everything the firm does is designed to drive the growth of revenue and opportunity. The firm combines a mix of strategic consulting, marketing communications and lead generation, and learning and development services to consistently produce business results for clients.
For more information visit clutchperformance.com.